The chart of accounts page consists of 2 sections:
- Primary accounts
These accounts are required and are the accounts that will be used if no location specific accounts are mapped.
- Location specific accounts
These accounts are used to override the primary accounts for transactions at a given location.
Mapping accounts to transaction types
Journals are produced based on the GL account that is mapped to the transaction type. The transactions are created based on a transaction hierarchy. The hierarchy is defined as follows:
Default Account Mappings
Pay Category Mappings, Deduction Category Mappings, Expense Category Mappings
Location specific default account mappings
Location specific Pay Category Mappings, Deduction Category Mappings, Expense Category Mappings
Transactions are matched to the GL account from the lowest level to the highest level.
Default transaction types
The following transaction types are mapped at the default level:
Payment Account: This account is often called the "payroll clearing" account and is used to reconcile the net payment amount of the payroll to the transaction from your bank account.
Wages Expense Account: This account is used to record the gross wages expense for the pay run.
Default Payroll Liability Account: The account specified here will be where all the deductions get journaled if there is no specific liability account set up.
PAYE Liability Account: Sometimes called the PAYE clearing account, this account will track your PAYE liability transactions.
Employer Pension Expense Account: This account is used to track your Pension expense transactions.
Employer Pension Liability Account: Sometimes called a clearing account, this account will track your Pension liability transactions.
Employee Pension Liability Account: This account will track the Employee Pension liability transactions.
Employee Expenses Account: This account is used to record any employee expenses processed within the pay run. Expenses are not deemed part of employee wages.
Employer Liability Expense Account: This account is used to record any employer liabilities recorded against an employee within the pay run.
Employer Liability Account: This account will keep track of your general employer liability transactions.
NB. there won't be an option to map Employee Expense or Employer Liability Accounts if you haven't created any Categories for these types of transactions (under the pay run settings heading on the payroll settings tab)...
NOTE for Quickbooks users: QBO doesn't allow us to write transactions to bank accounts directly so the recommended way is use a "clearing" account and then reconcile the bank transaction against the clearing transaction in the journals.
Pay category transaction accounts
Pay category transaction accounts are used to allocate specific wage expenses to different GL accounts. For example, you may want to track bonuses, leave paid or allowances paid to different GL accounts. To do this, you would map a different GL account for the specific pay category.
If you don't specify a pay category transaction account, the default Wages Expense Account will be used.
Deduction category transaction accounts
Deduction category transaction accounts are used to allocate specific deductions to different GL accounts. If you don't specify a deduction account, the Default Payroll Liability Account will be used by default.
Expense category transaction accounts
Expense category transaction accounts are used to allocate specific expenses to different GL accounts. If you don't specify an expense account, the transactions will be posted to the Employee Expenses Account by default.
Employer liability category transaction accounts
Employer liability category transaction accounts are used to allocate specific employer liabilities to different GL accounts. If you don't specify a liability account, the transactions will be posted to the Employer Liability Account by default. Additionally, if you don't specify an expense account, the transactions will be posted to the Employer Liability Expense Account by default.
Splitting by location
When you map your default GL accounts, you'll notice that there is an option to "Split by location". This allows you to write a transaction line per location to the journal for the same account. This is particularly useful if you're using locations, classes or tracking categories in your specified accounting package.
Location Specific Accounts
If you want to split your GL by location and allocate the transactions to a different GL account, you can define location specific accounts. These accounts will work in exactly the same way as the primary accounts, however they will only apply to the location they are specified for.
Exporting the Chart of Accounts
For users with multiple sets of location specific accounts, if they need to change a particular account, it can be difficult to find all the places that an account is used.
The 'Export Configuration' feature adds an excel spreadsheet export so that the user can see which accounts are used across the whole Chart of Accounts.
Additionally, you can export your Chart of Accounts configuration via Payroll Settings > Data Extracts:
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