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How to Record Salary Payments in Brightpearl

Salary Payments in Brightpearl

When running a business, salary payments can be one of the biggest expenses that you have to pay. You have to record the salary details correctly in Brightpearl to ensure that your Profit and Loss and Balance Sheet reports are accurate and giving you useful information.

In the UK, an employee has a gross salary from which both tax and National Insurance contributions are deducted. The amount that remains after these deductions have been made is paid to them by the employer as their net salary. The employer must then pay the tax and NI that has been deducted from the employee to HMRC. In addition, the employer also has to pay an employer’s National Insurance contribution to HMRC.

Recording the salary payments on Brightpearl to reflect this is done in two parts.

The first part is to record what has been calculated in the payroll run. To do this you need the ‘Employer’s Summary’ report from the payroll system or from your accountant. This report shows you the gross salary for each employee, the deductions that have been made, the net salaries to be paid and the employer’s National Insurance that is due. This information is then used to create a salary journal on Brightpearl.

On the debit side of this journal goes the total gross salary figure and the employer’s National Insurance figure – both in codes that are in the ‘overheads’ section of the profit and loss report. Gross salary is often found as the ‘7000’ code and employer’s National Insurance as ‘7030’. Together, these give the total cost to the company.

On the credit side of this journal goes the net wages figure and also the tax and National Insurance figures added together, in codes that are in the ‘current liabilities’ section of the balance sheet report. Net wages is normally found as the ‘2220’ code and tax (PAYE)/National Insurance as the ‘2210’ code. These give the company’s liabilities to pay net wages and also the liability that is due to HMRC.

The second part is then done when the salary payments are actually made. When salary payments are made to employees these get recorded as payments against the net wages ‘2220’ code. This means that this code should go to having a balance of £0 – all the net salaries that were due and were previously recorded as a liability have now been paid.

When HMRC are paid, the payment gets recorded against the PAYE/National Insurance ‘2210’ code. This should give this code a balance of £0 – all the money due to HMRC has been paid and the liability has been cleared.

Still not sure how to record salary payments in Brightpearl?  Give us a call and we’ll get you back on track. We also offer 1-2-1 Brightpearl bookkeeping training.

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