Vehicle received in lieu of leave

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Vehicle received in lieu of leave

Hi community,

I'm interested to know how you would record this in payroll and the general ledger.

 

The business changed hands and an employee's position was changed from full time to part time. Their annual leave balance was to be paid out at the time.  Also, all parties had agreed that the employee could purchase a work vehicle from the company. So the agreed price of the vehicle is to be deducted from the amount of leave that will be be paid to the employee (and the vehicle registration transferred to the employees name).

 

I am unsure how to record this correctly.

Does the full unused leave balance have to go through the payroll,which will create a credit in the bank account for the full amount payable?

After this, debit the bank account and credit the motor vehicle account for the agreed price of the vehicle?

 

What about the electronic payments account? I need to create a payment file that pays the employee the net balance.

 

Can I somehow do the adjustment for the car before processing the payroll, so that the aba file has the correct amount to pay the employee?

 

Thanks for any advice you have about this.

 

 

 

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Re: Vehicle received in lieu of leave

HI @NikArs 

 

You might need the assistance of your accountant with regards to how to handle everything as they may have their own thoughts on how to handle this.

 

Given the annual leave payout is going to cover the cost of the car, you may need to use a clearing account to amalgamate the two figures into the necessary amounts for what the employee is receiving and cover the cost of the vehicle

Regards,
Neil

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Re: Vehicle received in lieu of leave

Thanks @Neil_M


  Sorry if this is a naive question but what is a "clearing account"?

 

(The accountant just said, just do a general journal as if the employee had purchased the vehicle, process the employees leave balance as normal through the payroll and then pay the employee the net amount.)

 

The main thing that wasnt discussed at all was whether the PAYG was calculated on the net amount or the initial amount of total leave. If they have to pay PAYG on the full leave balance,that will be news to the employee as it will effectively mean paying 25% more for the car than they were told.  Vice versa it will be news for the employer as the books will show that they sold the car for less than the agreed value.  I'm wondering if there is a way to enter the car transaction at the agreed price.   Then pay out leave for the amount the employee is expecting.  This could work if the employee physically gave the business the money for the car first......... oh is that what you mean by clearing account? Sort of like a loan account for the employee so they dont have to come up with the cash?


 

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