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Change from manual to automatic payroll journals

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Summary

Changing journals from manual to automatic in Sage Accounting

Description

If you subscribe to both Accounting and Payroll, you can automatically create journals in Accounting with details of wages. This happens each time you complete a pay run.

If you have previously migrated your data from Sage 50 or another provider, integrate Payroll and Accounting.

Here we'll tell you:

  • How to set up the integration with Payroll
  • How your system records salary details, wage payment, and pension payments

Resolution

How the integration with Payroll works

Once set up, a journal creates every time you complete a pay run in Payroll.

The journal always records using the default ledger accounts set up in Accounting.

You can record the journal using your own ledger accounts. You may need to continue creating the journal manually. You may need to do this if you want to run more detailed reporting or you want to use a different set of ledger accounts.

Switching from manual to automatic journals

Before you set up the integration:

  • Make sure you have completed manual journals for your previous pay periods.

Once the integration is set up:

  • A journal is automatically created each time you complete a pay run
  • Make sure you don't complete a manual journal for the same pay period

Before we can record the automatic journal:

  • We need to set up the default ledger accounts used to create the journal

Once you allow the integration and complete a pay run, we create the required ledger accounts for you.

If any of your ledger accounts use the same code, we'll use the next available code number. For example: You already have a ledger account that uses 2214. We'll create a ledger account for Student Loans using 2215.

Set up the integration

  1. From Settings, then Business Settings. Select Payroll & Accounting Integration Settings.
  2. Select Allow Payroll to create journals in Accounting.
  3. Choose whether to record your net wages as bank payment or to your net wages liability account.
  4. Save your changes.

Record net wages as bank payment

You can choose to record employee net wages as a bank account. The system creates a bank transaction every time you complete a pay run.

The bank transaction will show all your wages in a single payment.

You can pay your employees in separate groups or from more than one bank account. This may not suit you so consider recording your net wages as a liability. Create your bank payment separately.

The bank transaction creates for the amount you need to pay to HMRC. This happens when you select Record Payment / EPS from the Summary page in Payroll.

Don't forget, you still need to send the money to HMRC.

Bank feeds

If you use a bank feed:

The bank payments for both your wages and HMRC payments will also be imported via your bank feed.

To avoid creating duplicates, either

  • delete the transactions imported through the bank feed, or
  • match the imported transactions to the bank payments created by Payroll

Record net wages in a liability ledger account

You may not want to automatically record the bank payment. In this scenario, the system records your total net wages against the 2220 - Net Wages ledger account. Choose Post employee net wages to liability account.

You will also need to

  • Create a bank transaction to show that you have paid your employees,
  • Create a bank transaction to show that you have paid HMRC

How your payroll journals record

When you turn on the integration and complete your pay run in Payroll, it creates a journal.

Each time you complete a pay run, we create the following journals in accounting.

CodeLedger AccountDescriptionDebitCredit
Bank account specified in the
Total value of your net wages.
Credit
2210

PAYE

Total tax deducted.

If you’re due a tax refund, it's recorded as a debit. The credit for net wages includes it.


Credit

2211

Other taxes to pay HMRC

Total employee and employer National Insurance contributions.

If you’re due a National Insurance refund, the value posts as a debit. It’s included in the credit for net wages.


Credit

2214

Student LoanTotal value of student loan deductions made.
Credit

2215

AttachmentsTotal value of attachments deducted from employees’ net pay.
Credit
2250Net Wages

Total value of the employees' take-home pay.



Credit

2250

Net Wages

When the bank payment creates, the net wages ledger account debits for exactly the same value as the credit. This shows your paid wages.

Debit

2230

Pension

The total employee and employer pension contributions.

If you use more than one pension scheme, we show separate entries for each scheme.


Credit
7000

Employee Costs

Total gross wages for all employees, not including statutory payments.Debit

7006

Employer's NI ContributionTotal employer National Insurance contributions.Debit

7007

Employer Pensions

Total employer pension contributions.

Debit

7009

Other DeductionsTotal of any remaining employee deductions, excluding attachments and student loans.
Credit

7010

Statutory Sick PayTotal Statutory Sick Pay paid.Debit

7011

Statutory Maternity PayTotal Statutory Maternity Pay paid.Debit

7012

Statutory Paternity PayTotal Statutory Paternity Pay paid .Debit

7013

Statutory Adoption PayTotal Statutory Adoption Pay paid.Debit

Manage existing ledger accounts

You may have made manual payroll journals before. In that case, enabling payroll integration creates extra ledger accounts in Accounting.

On your reports, you'll see values in the old and the new ledger accounts. To report on the total wages over the year, add up the totals of both ledger accounts.

You can keep both sets of ledger accounts or move the values from the old to the new ledger accounts using a journal.

If you keep both sets of ledger accounts, hide the old ledger accounts so they don't get selected when new transactions creates.

Hide ledger accounts

  1. From Settings, then Business Settings, select Chart of Accounts.
  2. Open each ledger account and clear the Visibility check boxes.

Manage your settings

You can manage the connection between your Payroll and Accounting subscriptions at any time. Go to Payroll & Accounting Integration Settings in Accounting.





Related Solutions

Manual salary journals

Payroll and Accounting integration