Forum Discussion

Jen65's avatar
Jen65
Trusted Cover User
4 years ago

Tracking Leave Accruals as Liabilities

Hi All,   I have been asked to set up our leave accuals as liabilities.   Reading the following link: https://help.myob.com/wiki/display/ar/Tracking+leave+accruals+as+liabilities#expand-2Linkyou...
leave
Payroll
  • Steven_M's avatar
    Steven_M
    4 years ago

    Hi Jen65 

     

    As has been indicated, overriding that wage expense account on the linked wage categories is recommended as it will reduce the balance of that liability account when that leave is paid out. As this does reflect what is happened in real life i.e. paying that leave out as reduced the liability of the business.

    A real-world example would be to say my leave liability sits at $200. My employee is being paid $20 an hour for 8 hours of annual leave ($160). If I pay that out to the leave, my liability is reduced 160. When you have that override option set up it will automatically reduce that liability to be $40 after the pay. If it wasn't set up it would remain at $200 even though I have paid it out.

     

    Now, in theory, you don't have to override that expense account and rely solely on journal entries to manage the leave liability. However, it's not the best practice as it doesn't accurately reflect that leave liability in real-time as you could have paid it out but not updated the leave liability account.

     

    You also mentioned annual leave and long service leave is one amount. There is nothing stopping the user from setting it up like this or with multiple setups one for each leave type. It's solely how you wish to capture that information and report on it.

Jen65's avatar
Jen65
Trusted Cover User

Thanks - question is this going to cause a problem with reconciling wages paid for the end of financial year reconciliation ?

Komal_S's avatar
Komal_S
MYOB Staff
4 years ago

Hi Jen65 

 

If you are referring to STP reconciliation for the EOFY, this doesn't involve the liability or expense accounts so won't be affected. STP reconciliation is based on payroll categories and ATO reporting categories.
 
Additionally, you do need to follow Step 5 Regularly update your accrued liabilities in that linked help article to ensure your expense and liability accounts have the correct values.
  • Jen65's avatar
    Jen65
    Trusted Cover User
    4 years ago

    thanks Komal

     

    I dont know why this is confusing me so much I called myob to discuss but no one could help me.

     

    Entering everything as mentioned on myob webiste is clear it really was just overriding the wage expense account that threw me.

     

    Do you think it would be a problem if i had annual leave and long service leave as one amount or do i need to separate these ?

    • Steven_M's avatar
      Steven_M
      Former Staff
      4 years ago

      Hi Jen65 

       

      As has been indicated, overriding that wage expense account on the linked wage categories is recommended as it will reduce the balance of that liability account when that leave is paid out. As this does reflect what is happened in real life i.e. paying that leave out as reduced the liability of the business.

      A real-world example would be to say my leave liability sits at $200. My employee is being paid $20 an hour for 8 hours of annual leave ($160). If I pay that out to the leave, my liability is reduced 160. When you have that override option set up it will automatically reduce that liability to be $40 after the pay. If it wasn't set up it would remain at $200 even though I have paid it out.

       

      Now, in theory, you don't have to override that expense account and rely solely on journal entries to manage the leave liability. However, it's not the best practice as it doesn't accurately reflect that leave liability in real-time as you could have paid it out but not updated the leave liability account.

       

      You also mentioned annual leave and long service leave is one amount. There is nothing stopping the user from setting it up like this or with multiple setups one for each leave type. It's solely how you wish to capture that information and report on it.

      • Yane_Emma's avatar
        Yane_Emma
        4 years ago
        Steven_M wrote:

        Now, in theory, you don't have to override that expense account and rely solely on journal entries to manage the leave liability. However, it's not the best practice as it doesn't accurately reflect that leave liability in real-time as you could have paid it out but not updated the leave liability account.

         

         

        I agree that overriding the expense account (and debiting instead the liability account) reflects the liability in real-time. But I think we are missing one more step to be done at EOY journals: that is to debit the expense account and credit the liability account with the total paid leave during the year . I have explained this on detail on my other comment, but please correct me if I am wrong. But if Im right, I think the MYOB procedure should be revised

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