Payroll Accounting: Concepts, Duties, and the Process under Circular 200

Vũ Khôi

Author at Wotech Electronics Blog

Payroll accounting in a business plays a key role in managing the company's budget and wage fund, as well as ensuring that wage obligations to employees are met. So what does payroll accounting actually involve? Read the following article for a complete understanding of the concept, duties, methods, and payroll accounting process in line with accounting standards under Circular 200.

What Is Payroll Accounting?

The Concept of Payroll Accounting

Payroll accounting is the bookkeeping of wages based on timesheets, overtime hours (extra hours or work on public holidays), allowance and subsidy regimes, rewards and penalties, labor contracts, and so on. In payroll accounting, the business also has the obligation to pay the costs prescribed by the Labor Code, such as health insurance, social insurance, unemployment insurance, and trade union fees. In addition, payroll accounting must balance employees' income levels to sustain the company's wage fund. This allows the business to manage its finances accurately and efficiently, and lays the groundwork for long-term HR planning.

Duties of Payroll Accounting

The job of payroll accounting is to handle all matters related to employee wages. Payroll accounting duties are therefore diverse and demand a high level of professional expertise. Specifically, the payroll accountant's workflow at a company includes the following tasks:

• Managing and monitoring daily attendance

• Preparing timesheets for tracking and management

• Ensuring the attendance process is complete and accurate

• Compiling and recording changes in employee headcount, absences, and staff performance

• Managing salary advances

• Receiving and approving salary advance requests

• Creating salary advance tables and advance vouchers according to the prescribed salary percentage

• Preparing statistical records of the number of employees and the amount of salary advanced during the month, for archiving and as the basis for the official payroll period

• Managing the payroll period: Building the payroll accounting table and salary-based deductions with all the wage calculation items for employees (days and hours worked; allowances; rewards or end-of-period deductions)

• Making payroll accounting journal entries

• Building detailed payroll tables for each employee based on timesheets, the provisions of the Labor Contract, and company policy

• Calculating advances, allowances, payroll accounting, social insurance and health insurance, tax settlement, and so on

• Completing the payroll table and submitting it to the chief accountant to await the director's approval

• Paying employees on time, ensuring wages, trade union funds, and insurance contributions are calculated and allocated accurately

• Handling other related administrative documents

• Preparing periodic payroll reports, personal income tax settlement reports, and social insurance reporting forms as prescribed

• Updating salary coefficients after each employee evaluation period to apply in payroll calculations

• Controlling and managing the implementation of wage, insurance, and trade union fee policies and regimes, as well as the use of the company's wage fund

• Coordinating with relevant departments to understand and prepare analytical reports on headcount changes and work performance quality

• Archiving documents and books related to payroll accounting as prescribed

Payroll Accounting Methods

Guide to Payroll Accounting under Circular 200

• Use accounting software to book wage expenses

Periodically at month end, the accountant must fulfill the duty of calculating employee salaries based on timesheets, the provisions of the Labor Contract, and the company's regulations on wages, bonuses, and allowances. Before booking wage expenses, the accountant must determine the wage details (which employee, which department, what salary level?) and ensure compliance with the Circular's provisions so that each expense item is booked accurately.

• Calculate wages and allowances payable to employees

Debit Accounts 241, 622, 623, 627, 641, 642: Wages payable to employees.

Credit Account 334: Total wages payable to employees.

• Bonuses paid to employees: Determine the bonus amount drawn from the company's fund.

Debit Account 353: Bonuses payable to employees.

Credit Account 334: Total bonuses payable to employees.

• Accrued vacation wages for employees

Debit Accounts 622, 623, 627, 641, 642: Accrued vacation wages.

Credit Account 335: Total accrued vacation wages.

• Actual vacation wages payable to employees:

Debit Account 335: Actual vacation wages arising.

Credit Account 334: Total actual vacation wages arising.

• Booking insurance deductions based on wages

Each month, the business must pay the social insurance agency 32% of the total wage fund payable to employees (social insurance, health insurance, unemployment insurance, and occupational accident insurance), of which 21.5% is charged to business expenses and 10.5% is deducted from employees' wages. In addition, if a trade union has been established, the business must pay the district-level Labor Federation 2% of the wage fund payable to employees (trade union fees).

• Charged to business expenses

Total insurance the business must pay = 21.5% x Total wage fund covered by insurance

Debit Accounts 241, 622, 623, 627, 641, 642: Total insurance + trade union fees the business must pay

Credit Account 3383 (Social insurance): 17.5% x Total wage fund covered by insurance.

Credit Account 3384 (Health insurance): 3% x Total wage fund covered by insurance.

Credit Account 3386 (Unemployment insurance): 1% x Total wage fund covered by insurance.

Credit Account 3382 (Trade union fee): 2% x Total wage fund covered by insurance (if any)

• Deducted from employee wages

Total insurance employees must pay = 10.5% x Total wage fund covered by insurance

Debit Account 334: Total insurance employees must pay.

Credit Account 3383 (Social insurance): 8% x Total wage fund covered by insurance.

Credit Account 3384 (Health insurance): 1.5% x Total wage fund covered by insurance.

Credit Account 3386 (Unemployment insurance): 1% x Total wage fund covered by insurance.

• Booking wage deductions

• Salary advances

If an employee receives a salary advance during the period, the accountant needs to look up the actual amount advanced to deduct it from the wages payable to the employee.

Debit Account 334: Actual advance amount arising.

Credit Accounts 111, 112: Actual advance amount arising.

• Personal income tax

If an employee incurs personal income tax in the payroll period, the accountant needs to determine the tax amount to deduct it from the wages payable to the employee.

Debit Account 334: PIT amount withheld.

Credit Account 3335: PIT amount withheld.

When remitting personal income tax for taxable employees, based on Tax Declaration File 02/KK-TNCN and the payment voucher to the state budget, the accountant books:

Debit Account 3335: PIT payable.

Credit Accounts 111, 112: PIT payable.

• Booking wage payments

• Based on the payroll payment table, salary payment vouchers, or bank wage payment documents, the accountant books:

Actual wages paid = Total wages, allowances, and bonuses – Insurance payable – Wage deductions (advances, PIT)

Debit Account 334: Actual wages paid.

Credit Accounts 111, 112: Actual wages paid.

• If wages are paid to employees in products, the accountant needs to issue an invoice recording internal sales revenue and book it as follows:

Debit Account 334: Wages payable to employees.

Credit Account 5118: Other revenue (selling price of goods).

Credit Account 3331: VAT payable.

• Booking insurance payments

Each month, the business sets aside social insurance, health insurance, unemployment insurance, and trade union fees (if any) on the total wage fund payable to employees. The accountant books:

Debit Account 3383 (Social insurance): 25.5% x Total wage fund covered by insurance.

Debit Account 3384 (Health insurance): 4.5% x Total wage fund covered by insurance.

Debit Account 3386 (Unemployment insurance): 2% x Total wage fund covered by insurance.

Debit Account 3382 (Trade union fee): 2% x Total wage fund covered by insurance (if any).

Credit Accounts 111, 112: Total insurance + trade union fees payable.

• Booking social insurance benefits payable to employees

If employees fall ill, go on maternity leave, and so on during the period, the business must calculate the insurance benefits payable to them.

Debit Account 3383 (Social insurance): Benefit amount receivable.

Credit Account 334: Benefit amount receivable.

After the business submits the employee's social insurance benefit claim (sickness, maternity, and so on) to the Social Insurance Agency and receives the money transferred back, the accountant books:

Debit Account 112: Amount received.

Credit Account 3383 (Social insurance): Amount received.

When the business pays the social insurance benefit to the employee, the accountant books:

Debit Account 334: Benefit amount receivable.

Credit Accounts 111, 112: Benefit amount receivable.

Payroll Accounting Diagram

To help you understand better, the payroll accounting process and the booking of salary-based deductions can be summarized in the following diagram:

Together with the payroll accounting guide under Circular 200, we hope the diagram above has helped you grasp the basic steps for booking wages completely and accurately.

Summary

It is fair to say that payroll accounting is a highly specialized task that requires staff with extensive payroll accounting experience to perform completely and accurately. That is why using supporting accounting management systems and software is an indispensable investment that makes payroll accounting in a business easier and more effective. If you'd like to learn more about payroll accounting solutions, don't hesitate to post your questions in the comments section or contact us right away for answers!

Related Articles