holiday leave in profit and loss

an employee has left and I paid out his annual leave entitlements. When I look at profit and loss the YTD the holiday leave is showing with a negative. Is that right. I have checked all the hours and they are correct

Best Answer

  • Bruce
    Bruce Member Posts: 439 Professional Partner Professional Partner
    Answer ✓

    It may be correct.

    If you accrue holiday pay each pay with a debit to the P&L "holiday leave account" and the corresponding credit to the Balance Sheet "Accrued leave account", then when you then pay out leave the reverse should occur.

    If the amount of leave paid out is greater than the current year's accrued holiday pay then the P&L holiday leave account will show as a negative. Typically this will occur if the amount paid is quite large and is more likely to occur earlier in the financial year when the ytd accrual is relatively small.

Answers

  • Acctd4
    Acctd4 Accredited Partner Posts: 3,317 Reckon Accounts Hosted Expert Reckon Accounts Hosted Expert

    Hi Jenny

    W you say it’s showing as negative, are you referring to the $ amount showing on the P&L or the employee’s hours ?

    Shaz Hughes Dip(Fin) ACQ NSW, MICB

    *** Reckon Accredited Partner (AP) Bookkeeper - specialising EXCLUSIVELY in Reckon Accounts / Hosted ! ***

    * Regd BAS Agent (No: 92314 015)* ICB-Certified Bookkeeper* Snr Seasonal Tax Consultant since 2003 *

    Accounted 4 Bookkeeping Services

    Ballajura, WA

    [email protected]

    https://accounted4.com.au

    (NB: Please give my post a Like or mark as Accepted Answer if I have been able to resolve your query as this helps others when seeking solutions!)
  • Jenny Byrne
    Jenny Byrne Member Posts: 61 ✭✭

    amount showing Shaz. the hours have been cleared on chart of accounts and leave annual summary

  • Acctd4
    Acctd4 Accredited Partner Posts: 3,317 Reckon Accounts Hosted Expert Reckon Accounts Hosted Expert

    It sounds like you may have a (deducting) Payroll Item incorrectly linked to this expense account then.

    Check your Payroll Item List & look at which account each one is mapped to.

    Shaz Hughes Dip(Fin) ACQ NSW, MICB

    *** Reckon Accredited Partner (AP) Bookkeeper - specialising EXCLUSIVELY in Reckon Accounts / Hosted ! ***

    * Regd BAS Agent (No: 92314 015)* ICB-Certified Bookkeeper* Snr Seasonal Tax Consultant since 2003 *

    Accounted 4 Bookkeeping Services

    Ballajura, WA

    [email protected]

    https://accounted4.com.au

    (NB: Please give my post a Like or mark as Accepted Answer if I have been able to resolve your query as this helps others when seeking solutions!)
  • Acctd4
    Acctd4 Accredited Partner Posts: 3,317 Reckon Accounts Hosted Expert Reckon Accounts Hosted Expert

    @Bruce This is on the P&L though not the Bal Sheet so wouldn’t be impacted by payruns, only if a specific GJ was being entered which - if so - is typically posted to a separate liability & expense account eg EOFY to track leave liability movements 🤔

    Shaz Hughes Dip(Fin) ACQ NSW, MICB

    *** Reckon Accredited Partner (AP) Bookkeeper - specialising EXCLUSIVELY in Reckon Accounts / Hosted ! ***

    * Regd BAS Agent (No: 92314 015)* ICB-Certified Bookkeeper* Snr Seasonal Tax Consultant since 2003 *

    Accounted 4 Bookkeeping Services

    Ballajura, WA

    [email protected]

    https://accounted4.com.au

    (NB: Please give my post a Like or mark as Accepted Answer if I have been able to resolve your query as this helps others when seeking solutions!)
  • Bruce
    Bruce Member Posts: 439 Professional Partner Professional Partner
    edited November 2023

    Shaz

    Way back the dark ages, I had client who used to accrue holiday pay every pay period by expensing it on the p&l and accruing on the balance sheet. When leave was taken everything was reversed leading to the occasional -ve leave expense on the p&l.

    I never handled their payroll so cannot advise how they processed things but it may have been done by journal as you have described. (I can't double check how it was done as the client sold the business many years ago, and I don't have a copy of the data file.)

    Background was that this client was very fastidious about liabilities and wanted to have continuously up to date accruals, rather than relying on the more common holiday pay expense provided as an end of year journal by many accountants/auditors.

    Obviously I have no idea how Jenny's accounts are being managed so can't comment on whether or not this is the answer to her query.

  • Acctd4
    Acctd4 Accredited Partner Posts: 3,317 Reckon Accounts Hosted Expert Reckon Accounts Hosted Expert

    @Bruce There's no other way to track the accrual liability other than by GJ (as payroll figures are based on amounts paid only) so yes, they would have had to have done it by GJ ... every single pay run ... for every single employee 😯

    Geez .. that sounds like a nightmare tracking-wise - Their payroll process would have been very time-consuming & due to the complexity of manually checking, calculating the amount(s) & entry, there would have to have been plenty of discrepancies too - If the figures were right, it would have reflected correctly - not shown as a negative - as the reversal was only reflecting when amounts were actually paid out of the entitlement 😬

    

    Shaz Hughes Dip(Fin) ACQ NSW, MICB

    *** Reckon Accredited Partner (AP) Bookkeeper - specialising EXCLUSIVELY in Reckon Accounts / Hosted ! ***

    * Regd BAS Agent (No: 92314 015)* ICB-Certified Bookkeeper* Snr Seasonal Tax Consultant since 2003 *

    Accounted 4 Bookkeeping Services

    Ballajura, WA

    [email protected]

    https://accounted4.com.au

    (NB: Please give my post a Like or mark as Accepted Answer if I have been able to resolve your query as this helps others when seeking solutions!)
  • Jenny Byrne
    Jenny Byrne Member Posts: 61 ✭✭

    Bruce, yes the amount is a lot more that has been actually accrued this financial year so that makes sense it is in negative. I have checked the annual leave owing at time of resignation and it is correct so now when boss asks for a please explain I will be able to tell him this. I have never done a bookkeeping course so I just rely on Reckon Hosted to be correct although I have found some issues with annual leave after updating in July.