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Stuartwantstoknow


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unclaimed liability- double entry
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Hi,

I'm doing a distance university accountancy degree and only in into stage but has got me wondering regarding the business I work in.

The business I work in is an employment agency and every year some staff do not take their holidays which then lapse as per their terms and conditions (like most works you don't use them you lose them). The business always give a little respect though and allows staff to carry forward holidays after the lapse date as a gesture of goodwill but even after that there is still a value that does not get redeemed. What would be the journal adjustment for the accrued expense that has not lapsed? Where would it go next? Seems wrong just to manually put to revenue though as a staffing agency this Holiday pay accrual is charged to clients so possibly that should be where it is adjusted to?



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Leger


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Would it even need an entry?

Salary 30k a year.  5.6 weeks holiday due.  Staff free to take whenever needed, even if, as you generously allow, them to take after the holiday year end.

No holiday taken salary still 30k a year, client is billed whether staff take holiday or not.



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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
GCW


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Although you are correct Leger, the situation can be different if holiday years are different to financial years.

For example, my employer has a financial year April - March, but a holiday year Sep-Aug.

Each financial year end, I have to calculate the proportion of holiday not taken by employees at that date. I then multiply that by their day rate, and accrue the expense in staffing costs.

The thinking is that If all employees left on 31st March, what would your liability be to them for holidays owed.

Always found it such a spurious notion myself, but one that is necessary under FRS102

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Cameron43


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<< nope >>



-- Edited by Shamus on Saturday 16th of May 2020 11:14:44 AM

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kingston
Leger


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GCW wrote:

Although you are correct Leger, the situation can be different if holiday years are different to financial years.

For example, my employer has a financial year April - March, but a holiday year Sep-Aug.

Each financial year end, I have to calculate the proportion of holiday not taken by employees at that date. I then multiply that by their day rate, and accrue the expense in staffing costs.

The thinking is that If all employees left on 31st March, what would your liability be to them for holidays owed.

Always found it such a spurious notion myself, but one that is necessary under FRS102

I'm struggling to see what FRS102 has to do with it, as there is no physical cost to the Company

Whilst I understand maybe including something for management accounts I'm struggling to see the need to include the holiday costs in the statutory accounts.  For simplicity lets suppose I'm on £30k a year and I have taken 4 weeks holiday at the end of March.  Presumably you would accrue £392.86 to the next financial year?   Can I ask why?   The staff expenses for (say) 2019-20 are £17500 and for 20-21 are £12500 and that remains the same regardless of when I take my holidays or even if I don't take them at all.



-- Edited by Leger on Saturday 16th of May 2020 02:05:15 PM

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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
GCW


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We only do it because the annual leave year and the financial year dont align. The cost that we accrue (around £100k) does go through the I&E for year end stat accounts.

Auditors do recognise though that if the value was not material then it wouldnt be necessary.

It only actually affected the first year we did it- subsequent years see the accrual reverse out in the first period, and a new accrual posted in the final period of the new financial year. So that £100k reversed out and then at the end of the next financial year we post a new accrual - as the value is always around £100k a year there is minimal impact on the I&E (apart from that first year)

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