ANSWER ID:9281On some occasions employees purchase goods or services from their employer and have the purchase amount deducted from their wages. The business deducts the amount AccountEdge Pro and Network Edition, Australia only If one of your employees buys something from your business, you can: - record a sale to account for the income and any GST collected, and
- deduct payment from the employee's wages to pay
and enters an invoice for the sale. The sale income, employee payments, and GST collected need to be recorded. This support note explains how to do this in your accounting software.Setting upThere are 3 tasks required to prepare your company file: 1. Create a contra cheque account 2. Create a payroll deduction category 3. Create an employee purchases card - Go to the Accounts command centre and click Accounts List.
- Click the Asset tab then click New.
- Enter a new number for the account in line with your account list.
- Select Bank in the Account Type field.
- Give the account an appropriate name, such as Employee Purchases.
- Click OK. See our example account setup below.
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- Go to the Payroll command centre and click Payroll Categories.
- Click the Deductions tab then click New.
- Complete the deduction fields as shown in the example below, making sure the Linked Payable Account is the account created in Task 1 above.
Note: When you select the asset account for the Linked Payable Account, a warning may be displayed advising that this should typically be a liability account. Disregard this warning. Image Removed - Click Employee and select the employees to whom this category is applicable, in other words the employees who will be paying for purchases from their paycheques.
- Click OK to the Linked Employees and Deduction Information windows.
Note: This deduction will only reduce the reportable gross wages for the ATO if the deduction is selected under the "Gross Payments" field when preparing Payment Summaries. For more information see our support note Preparing and printing Payment Summaries. - Go to the Card File command centre and click Cards List.
- Click the Customer tab then click New.
- Create a customer card called Employee Purchase. Alternatively you can create a customer card for each employee that purchases goods/services from you.
- Click OK.
Recording an employee purchaseThere are 3 tasks involved in recording an employee purchase: 1. Enter the sale 2. Close the sale 3. Enter the employee's paycheque Firstly you will need to enter a sale of the goods and/or services as you would normally do with any customer. Enter sales to employees using the Employee Purchases card as created in Task 3 above. Allocate the sale to your normal income account and apply the applicable tax code. You can print a tax invoice for your employee if required. See our example sale below. Image Removed Note: The GST liability is reported at this stage if you are reporting using the non-cash (accruals) method. As the employee will be repaying you out of their paycheque, you will need to close the sales invoice. - Go to the Sales command centre and click Receive Payments.
- Choose the Employee Purchases account in the Deposit to Account field (the account created in Task 1 above).
- Apply the payment to close the sale. See our example Receive Payments window below.
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Note: GST is reported at this step if you are reporting GST using the cash method. If your employee is making part payments, only enter the value of the payment being made. Enter your employee paycheque as normal. Enter the amount to be deducted from the employee's wage in the new Employee Purchase category created in Task 2 above. Make sure you enter the amount to be deducted as a negative amount as shown in the following example. Image Removed Employee Purchase displaying as unpaid on liabilities reports and the Pay Liabilities windowThe process outlined above will result in the Employee Purchase deduction displaying as unpaid on liabilities reports and on the Pay Liabilities window. In this case, there are three options to work around this issue: To filter Pay Liabilities reports- Select the report you'd like to run.
- Click Advanced Filters. In some versions this will be Customise.
- Click the dropdown arrow next to the Payroll Categories (or Categories) field.
- Deselect the Employee Purchases category and click OK.
Image Removed - Click Run Report or Display (based on your software version).
To filter the Pay Liabilities windowOn the Pay Liabilities window: - Click the dropdown arrow next to the Payroll Categories field.
- Deselect the Employee Purchases category.
- Click OK.
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To process the liability and create a general journal entry- In the Pay Liabilities window, select the employee deduction to be paid.
- Go to the Edit menu and choose Recap Transaction.
Image Removed - Take note of the accounts being affected and the amounts being debited and credited.
- Record a journal entry (Accounts command centre > Record Journal Entry) with the reverse debits and credits of the Pay Liability transaction.
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How will this technique of recording employee purchases affect my accounts?Entering the required transactions will result in: - An amount in your income account indicating a sale has occurred. This will include a GST amount collected.
- Your trade debtors account will have increased and decreased - net effect zero.
- The Employee Purchases Account will have increased and decreased - net effect is zero.
- Your employee will have received the goods/services and consequently their pay reduced as payment for those goods/servicesfor it.
Let's take you through the details. UI Expand |
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title | 1. Set up for the employee purchase |
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| There are 3 things you need to set up in your company file to make this happen: - an asset account (where the funds deducted from the employee's pay will be temporarily held prior to paying for the purchase)
- a payroll deduction category (so you can deduct payment from the employee's pay)
- an "Employee Purchases" customer card (you need a customer card associated with the sale)
Here's what to do: - Create an asset account (Accounts > Accounts List > Asset tab > New) and set the Account Type to Bank. Here's our example account which we'll call "Employee Purchases":
Image Added - Create a payroll deduction category called "Employee Purchases" (Payroll > Payroll Categories > Deductions tab > New).
- For the Linked Payable Account, select the asset account you created earlier (ignore the warning about the type of account you've selected).
- For the Calculation Basis, select User-Entered Amount per Pay Period.
- For the Limit, select No Limit.
- Click Employee to assign this to the employee who's making the purchase.
Here's our example: Image Added - Create a customer card called "Employee Purchases" (Card File > Cards List > New). Alternatively, if you have several employees who are buying from you and you want to track their sales separately, create separate customer cards for these employees. Image Added
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| OK, you're now ready to sell the goods or services to the employee. Like any normal sale, you're going to: - record an invoice, and
- apply payment to the invoice.
Don't worry that the funds haven't been deducted from the employee's pay yet - that happens next. For now, let's get the sale out of the way. - Create an invoice for the sale (Sales > Enter Sales).
- For the Customer, select the "Employee Purchases" customer card.
- Enter details of what's being purchased, including the applicable income account and tax code. Check with your accounting advisor if unsure.
Here's our example: Image Added UI Text Box |
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| Do you report GST on an accruals basis? If so, the GST liability is reported when you record this invoice. |
- Apply a payment against the invoice (Sales > Receive Payments).
- Select Deposit to Account and choose the "Employee Purchases" asset account created earlier.
- For the Customer, select the "Employee Purchases" customer card.
- Enter the payment amount (or part-payment amount, if applicable) in the Amount field and in the Amount Applied column against the open invoice.
Here's our example which closes the invoice: Image Added UI Text Box |
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| Do you report GST on a cash basis? If so, the GST liability is reported when you record this payment. |
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title | 3. Deduct payment from the employee's pay |
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| Now it's now time for the employee to pay up... - Process the employee's pay as normal (Payroll > Process Payroll).
- Enter the amount to be deducted as a negative value against the Employee Purchases deduction category.
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Once you've finalised the employee's pay, you're done. Their payment is deducted and it gets allocated to the "Employee Purchases" asset account to balance everything off. |
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<h2><i class="fa fa-comments"></i> FAQs</h2><br> |
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title | How does the employee purchase affect their payment summary? |
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| To reduce the employee's Gross Wages by the deduction amount, you would select the deduction category under the Gross Payments payment summary field. For clarification about what to include or exclude from your employee's Gross Wages on their payment summary, check with your accounting advisor or the ATO. |
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