Tracking Leave Accruals as Liabilities

Hi Jen65 

If you're tracking leave accruals as liabilities, then this account needs to be changed to a liability account as per the steps in the help article as it will reduce the account balance when you pay the liability. If it's set to a wage expense account, paying the leave will not reduce the account balance. 

Let us know if you have additional questions on this. 

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

Hi Jen65 

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 ?

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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.

 

 

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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

I cant find my previous post, so here it is again. There are 2 scenarios where the 2nd scenario is I journaled on EOY the paid LSL to debit the expense account and credit the liability account

(I work at school, so EOY is December. LSL accrual is 10weeks after 8years)

The 2nd scenario gives accurate expense and liability accounts.

Hi Yane_Emma 

If you don't override that employee expense account on the linked wage category to be the liability account then a journal entry would be required to manually create the journals when the employee takes leave. This journal entry can be completed when the leave is taken or when completed at another time such as the end of the month or end of the payroll year. Typically, this journal entry would be crediting the expense account (reducing it) and debiting the liability account (reducing it).

Im sorry i really need help again on this one Steven M

Now on my second month when i run the entitlement balance and then do the journal entry for the change in figures my liability account balance is showing a lower amount than the expense account.

Yet the expense account reconciles with the leave entitlements balance, amount for the end of the month and the liability account is a lower amount???

Hi Jen65 

When setting up provisions of leave as per Help Article: Tracking leave accruals as liabilities, the liability account would be designed to show the total outstanding leave available i.e. the value that would be appearing on the Entitlement Balance reports.

Using this process, when a user comes to re-valuating those leave liability, the user does need to determine the amount used at the last re-valuation and work out the difference from that to the current period. That difference would be what is recorded for the journal entry. This difference is the amount that leave has increased by (decreased by if a negative) and would need to look at recording a journal to account for that. With increases it a debit to the expense account (expense is increasing) and a credit to the liability account (liability is increasing).