2. TRANSCRIPT Payroll

Net Pay

The amount of income an employee takes home after all deductions, including taxes and National Insurance.

Payslip

A document issued by an employer to an employee detailing wages earned and deductions made.

Payroll Ledger Accounts

Accounts that record payroll transactions and the payment of wages and other payroll-related liabilities.

HM Revenue & Customs (HMRC)

The UK government department responsible for tax collection, payment of some forms of state support, and the administration of other regulatory regimes.

Statutory Deductions

Mandatory amounts deducted from an employee's gross pay, such as income tax and National Insurance.

Non-Statutory Deductions

Voluntary deductions that an employee can choose to have deducted from their pay, such as pension contributions and charitable donations.

Gross Salary

The total amount of salary earned by an employee before any deductions.

National Insurance Contributions (NIC)

Deductions from earnings to fund state benefits and the National Health Service in the UK.

Tax Code

A code that indicates the tax rate and tax-free allowances for an individual for the fiscal year.

Employer's NIC (ER's)

The National Insurance Contributions that employers have to pay on behalf of their employees.

Wages Expense Account

An account that records the total wages that a company has incurred for its employees.

Wages Control Account

A holding account used until employee payments and payroll liabilities are settled.

Pension Liability Account

An account that records the employer's obligation to contribute to employee pension schemes.

Income Tax (PAYE)

The system of paying income tax as you earn income, known as Pay As You Earn.

Liability

A financial obligation; in payroll, it refers to amounts owed to employees or tax authorities.

Deductions

Amounts subtracted from an employee's gross pay, including taxes and other contributions.

Pension Contributions

Payments made by employees to a retirement savings plan or pension scheme.

Give As You Earn (GAYE)

A scheme allowing employees to give to charity directly from their pay.

Debits in Payroll Accounting

Debits generally include expenses such as wages, payroll taxes, and employee benefits, indicating an increase in expenses.

Credits in Payroll Accounting

Credits typically involve liabilities such as amounts owed for payroll taxes, National Insurance, and any deductions from employee wages.

Wages Payable

A liability account that is credited when payroll is processed, reflecting amounts owed to employees.

Compensation Expense

An expense account debited when wages and salaries are incurred, representing an increase in expenses.

Employer's NIC Payable

A liability account credited to record the employer's National Insurance obligation.

Deductions Payable

A liability account credited for amounts withheld from employee paychecks for items like income tax and pension contributions.