Any employee who works in an establishment must provide the experience and skills he possesses in order to contribute to achieving the establishment’s goal. He works there during a specific and agreed-upon time, and in return, the institution’s policies determine his salary or wage, which is due to him on a specific date. To calculate this type of transaction, accounting entries for salaries and wages are used, but how can these entries be made and their mathematical accuracy be guaranteed? Why should we abandon paper books and resort to an electronic accounting system when donating and organizing them? This is what we explain in detail in our article.
What are the accounting entries for salaries and wages?
Salaries or wages are financial entitlements that an employee receives from the organization in exchange for his work there during a specific period. These salaries come from a variety of sources, including additional salaries, incentives, bonuses, insurance, and so on. They may also include deductions, whether continuous or added in certain circumstances only. Accounting entries for salaries and wages represent a regulatory process that calculates these salaries, adds excess items, and deducts various deductions.
Therefore, it is evident that the accounting entries for salaries and wages organize financial values in paper or electronic records, aiding in the calculation of each worker’s salary and its due date within the organization. It encompasses the advances and deductions made from it, the additions the employee receives, and other factors that contribute to an increase or decrease in their salary.
Salaries entries are part of institutions’ financial statements, and in the past they were recorded in the “ledger,” but now they are recorded electronically through the Qoyod accounting system, where the values are recorded twice a day. The existence of a credit and debit account is crucial for this type of entry, as it adds sums of money withdrawn from other accounts, necessitating the recording of this process on a reliable, safe, and accurate system.
The difference between salary expenses and wage expenses
Though they may look alike, salaries and wages are different. In the following table, we explain how salary differs from wage in many ways:
| Comparison | Salary | wages |
| the definition | An amount of money paid by an organization in exchange for an employee’s work there. | An amount of money paid by the organization in exchange for the employee’s work. |
| Due date | Periodically (typically every month),. | It is payable only if the employee provides a service or product to the organization. |
| Continuation | It is a stable source of income. | As long as the employee provides work for the organization, he deserves remuneration. If he does not provide anything, he will not be paid or required to attend. |
| The amount of money | After subtracting deductions and adding basic sources, the percentage remains fixed, albeit slightly varying. | Variable depending on employee productivity. |
How are accounting entries for salaries prepared?
Books that organize accounting operations, which include basic salary items and rely on periodic recording for their accounts, prepare accounting entries for salaries and wages.
- Entitlement.
- Withholding.
- Salary disbursement.
To enable the smooth use of these processes for all employees of the facility, the following steps must be adhered to:
- Preparing comprehensive lists of all the organization’s employees, indicating their financial grades, working hours, and the departments in which they work.
- Add salary items for each employee.
- Determine the attendance and departure times of each worker throughout the month.
- If there are any deductions recorded for employees, they must be recorded, and then salaries for each individual must be calculated.
- Salary entitlement, deductions, and salary payment entries must be filled out to proceed properly with the process.
The following is a simplified way to explain the salary entitlement entry or the additional entry that records additions:
| Due date | Statement | Debt | Creditor |
| 27 Jumada al-Akhirah | deserved wages | 200 thousand Saudi riyals | |
| Basic | 135 thousand riyals. | ||
| Call allowance | 10 thousand riyals. | ||
| Transfer allowance | 25 thousand riyals. | ||
| Extra work | 30 thousand riyals. |
This entry shows the total salaries owed to the organization’s employees, which amounts to 135 thousand riyals, without taking into account deductions, advances, and applicable deductions. At the same time, working hours, allowances, etc. have been calculated in this entry.
As for recording deductions, they are entered in other boxes, which are as follows:
| Due date | Statement | Debt | Credit |
| 27 Jumada al-Akhirah | Salaries | 200 thousand riyals | |
| Deductions | 25 thousand riyals | ||
| advances | 20 thousand riyals | ||
| Penal Deductions | 7000 riyals | ||
| insurance | 15 thousand riyals |
This entry is added to the accounting entries for salaries and wages to clarify the reason for the decrease or increase in salary, in addition to enabling the specialist in the institution to follow up on what entered its accounts and what came out of them, because, as we mentioned, what is added to one account is deducted from another account.
Disbursement entry:
| the date | Statement | Debt | Credit |
| 27 Jumada al-Akhirah | Total entitlements in salaries and wages | 200 thousand riyals | |
| Wages | 110 thousand riyals | ||
| Deductions | 25 thousand riyals. | ||
| Extras | 65 thousand riyals. |
Periodically, we pay and use the salary under this entry.
An example of registering salaries and wages
As previously explained, the monthly salary record in Saudi riyals for all employees of the organization takes the following form:
| the name | Salary | General Deductions | Allowances | Net salary | |||||
| Absence | Today’s wages | Special Deductions | |||||||
| Fines | Insurances | Loans | Total Deductions | ||||||
| a. F | 22 thousand | 0 | 733 | 0 | 400 | 500 riyals | 900 | 400 | 21500 |
| KH | 18 thousand | 1 | 600 | 200 | 300 | 0 | 500 | 350 | 17250 |
| M. g | 17 thousand | 3 | 566 | 300 | 300 | 0 | 600 | 350 | 15052 |
| H. s | 15 thousand | 2 | 500 | 250 | 250 | 700 | 1200 | 300 | 13100 |
| B. Sh | 13 thousand | 0 | 433 | 300 | 200 | 250 | 750 | 300 | 12550 |
| Total | 85 thousand | 0 | 2832
| 1050 | 1450 | 1450 | 3950 | 1700 | 79452 |
Types of advances that employees receive
Sometimes, an employee may have to request an advance for himself, which is part of his salary that he receives before the due date. When the due date arrives, they deduct it once more, and the employee receives their salary less the advance amount. But the employee may also receive an advance to complete his work, and then it will be paid. Differently, the employee does not bear the responsibility for payment in this scenario. There are various types of advances, including the following:
Advance according to time.
Is it requested in specific amounts, and is it called temporary or permanent according to the period during which it is paid or according to the need for it by the institution? Its types are:
Permanent advance
They are small amounts that are disbursed to the competent employee from the organization’s accounts department on an ongoing basis for specific purposes, and they are compensated at later dates, whether their full value or part of it is deducted every month. They are related to the operation of the business and are spent on parties that do not need large financial capacity. If it is an advance to the employee himself, it requires paying part of it every month from the salary until it is fully recovered.
Temporary advances
These are the amounts that an employee receives to complete a specific job once, or that he obtains for himself before the salary is due due to his own circumstances. They are neither continuous nor permanent, and they are compensated on the date of receiving the salary.
Advances according to purpose
The employee often obtains it for himself, and the payment period is longer or shorter depending on its value in relation to the employee’s salary. It is divided into several types, including:
- Travel advance.
- Marriage advance.
- Delegation advance.
How to process salary entries with advances
If we assume that an employee (KH) received a temporary salary advance in the amount of 700 Saudi riyals, the accounting treatment will be according to the following table:
| Payment destination | Payment required | Statement |
| 700 riyals | From/temporary advances | |
| 700 riyals | To/Treasury |
Therefore, we pay it at the end of the month by deducting it from the employee’s salary or, if it’s an advance for the continuation of work, from the temporary advance account.
If the advance is permanent, it requires repayment over more than one month, and then it is treated as follows:
If the employee (KH) takes an advance of 5,000 riyals from his salary, it will be distributed over the following months according to the company’s policy, and here he cannot be allowed to pay for a period longer than 6 months (hypothetically), so the accounting restrictions for his salaries and wages are as follows:
| Statement | Payment required | Right side |
| From / receivable (k-e) | 5000 riyals | |
| To/Treasury | 5000 riyals |
Here, the form of its exchange entry is as follows:
| the name | accruals | Deductions | net salary | ||||
| basic salary | Allowances | Total | Permanent advance | Temporary advances | Total | ||
| k.H | 4000 riyals | 1000 riyals | 5000 riyals | 833.5 riyals | 700 riyals | 1533.5 riyals | 3467 riyals |
How does the Qoyod accounting program assist in calculating salaries?
The Qoyod accounting system helps you record accounting entries for salaries and wages and calculate the salaries of your company’s employees with complete ease and reliable accuracy. It helps you list all your accounting operations easily while mentioning additions and deductions clearly and transparently by following the following steps:
- Go to the Qoyod accounting program from here.
- From the side menu that appears, choose “Salaries,” and then click on Activate Features.
- You will find an interface that includes details of employees’ salaries and deductions imposed on them, in addition to bonuses, incentives, etc. Fill it out in accordance with the regulations of your company.
- After that, click on Settings from the side menu.
- Choose Payroll Settings.
- You will find an interface through which you can specify how to calculate time, payment value, and salary. Choose the salary components and click the edit mark next to them.
- After clicking on edit salary settings, start selecting the options therein according to your organization’s management.
- If you need to add a new account for expenditure entities or an increase in your employees’ salaries, you can do so by returning to the Payroll section from the side menu and clicking on Add Account.
- You can also do this by going to the accounts section and, from there, going to the account tree and choosing to add a new account.
- Return to the payroll components and choose the due salaries as a credit account. As for the direct cost, you must choose salaries and wages.
- In the indirect cost item, we will click “Salaries Account” from the available options. However, if the organization provides its employees with bonuses, they will be listed in the rewards item under the title “Commissions and Bonuses.
The deduction items imposed on employees, whether insurance, taxes, or other items, are then clarified. To create an electronic book capable of calculating all transactions related to their salaries. Discover the benefits of the Qoyod Accounting Program I Payroll, which provides a comprehensive guide on implementing the book of accounting entries for salaries and wages simply and straightforwardly.
Conclusion
We gained knowledge about the definition of accounting entries for salaries and wages and the techniques for executing them in files and via the electronic accounting system. All you have to do now is move to the Qoyod accounting system to benefit from the free trial for 14 days and various packages that suit you and provide you with many benefits. It is a reliable, professional system that does not require installation on your devices and works with unprecedented efficiency, so try it now and benefit from all the services available to your company and track your investments.
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