Leave entitlements

Kris_Williams

Is it law that you must enter leave balances and entitlements for business owners, the accountant never shows leave liability on Balance sheet

Bruce

I think that it is not so much a matter of law rather than than accounting standards that apply to a company.

As I understand it, if the accounts are public then yes the accounting standards mean that these liabilities should appear on the balance sheet. However if the accounts are not public then there is no specific standard requiring (or not requiring) the liability to be recorded.

Sorry I can't be more definitive

Kris_Williams

Thanks Bruce, I’m sure that’s all I needed to know

John Graetz

Kris and Bruce, I think that there is likely to be another factor which comes into play. Firstly, my experience has been that untaken annual leave is accrued when using Accrual Accounting. However, if Cash Accounting is used, it is highly unlikely that such leave would be accrued.

John L G

John Graetz

As I understand it Kevin, the initial question has nothing to do with Fair Work as it focused on whether or not leave accruals should show on the balance sheet.

John L G

Bruce

Zappy

You've misunderstood the original question. This issue is not a workplace law issue. Fairwork Australia dictate what goes on pay slips but they don't have any involvement with the preparation of company balance sheets.

Kris_Williams

Thanks for that John, bottom line is my son’s electrical business has just moved to Reckon One Payroll, and I didn’t think it was necessary to carry over the leave balances or even enter entitlements. Just wanted to be sure I wasn’t doing anything wrong

Kris_Williams

Not in my books there aren’t, that’s why I want to be sure. I care about anybody I have any input with

John Graetz

Kris. This now involves two related aspects, which both now arrive at the same conclusion. In days gone by (probably in both of our eras) there was a requirement for accrued leave to show on pay slips. Fair Work no longer requires this to be done as detailed on their website:

Should leave balances be on a pay slip?

While it's best practice to show an employee's leave balances on their pay slip, it’s not a requirement. Employers do need to tell employees their leave balances if they ask for it.

You can find this information at the following address:

https://www.fairwork.gov.au/pay/pay-slips-and-record-keeping/pay-slips

That means that leave accruals do not need to be entered into payroll.

As to whether they should be entered as accruals is a separate matter, depending on who is keeping the books. As stated by Fair Work, a record needs to be kept somewhere, but it is not their job to direct as to where that should be.

John L G

Kris_Williams

Thank you so much John, I appreciate your effort. As an aside I meant to say I was only referring to my son and his wife, not his employees, they are all entered exactly as they should be and appear on payslips

yes I read your link, very informative. Thanks again

John Graetz

Not a problem, Kris. My answer covers their situation too. Cheers.

John L G

Acctd4

@Kris_Williams Agree with John & Bruce … Larger companies tend to have unused leave reflected as a liability on the Balance Sheet but it’s not a general “requirement” for small operators ☺️

For leave balances, employees are entitled to have their these balances available so I find the easiest way to do this is to have it setup accruing correctly in payroll in order to show it via the payslip.

If your son & his wife are not on the payroll, presumably they’re not “employees” of their entity in which case the FW leave provisions don’t apply anyway 😬

Kris_Williams

Thanks Shaz, they are on the payroll but I couldn’t see any point entering their leave balances and accruals in Reckon One and just wanted to check, mainly for the balance sheet. I do the preparation for accountant and final journals when he has finished and he never puts leave liability on the Balance Sheet. The other employees are entered correctly and balances show on payslip.

thanks to you and also Bruce and John, I am satisfied now