This chapter contains these topics:
To understand how the system applies accounting instructions
To learn how to set up accounting instructions for your company
When journal entries are created the system uses instructions from the Automatic Accounting Instructions (AAIs) to assign an account number to each journal entry. An account number is made up of the following elements:
Business Unit . Object . Subsidiary . (Subledger)
Each journal is also assigned the following:
Document Type
Journal Type
GL Date
Automatic Accounting Instructions (AAIs) assign account numbers to the journal entries created in the Payroll or Time Accounting systems. During the payroll cycle, the system creates a journal entry of every calculation for every employee. These calculations include salary and wage expenses, burden, cash disbursements, and liabilities. As an option, you can create journal entries for labor and equipment billings and accruals for payrolls that cross accounting periods. The AAIs control the account to which each journal entry is assigned. After the journals are created and assigned account numbers, the system summarizes them and passes them to the general ledger.
You can establish AAIs separately for each company and general rules for the default Company 00000. The rules are flexible and, in addition, are changeable within the payroll cycle. For example, labor distribution account numbers can be assigned by company, business unit, group (union), job type, job step, and pay type. If some employees do not follow general rules, you can specify instructions for labor distribution at the employee level.
You can set up rules to summarize journal entries. As full detail exists in payroll or time accounting history, you might not need full detail in the general ledger. You can set up rules to summarize account ranges and business units.
You can post the journals either automatically or manually for each payroll.
Journal entries are created by the payroll system using the Automatic Accounting Instructions. Each timecard transaction creates several journal entries and the AAIs are used to assign account numbers to those journal entries.
The system can create journal entries at three stages in the processing:
During a regular payroll cycle
While processing interim checks in either an interactive update or regular payroll cycle
During a special timecard post
The system initially creates pro forma journal entries during the payroll journal entries step of the payroll cycle. The pro forma journal entries are created in the Payroll Journal table (F06395) and at that point they become part of the Payroll system.
During final update, the system creates actual journal entries in the Account Ledger table (F0911). At this point, the journal entries are part of the General Accounting system.
When you generate timecard journals during a special timecard post, you create pro forma journal entries. The system creates the actual journal entries when you post journals to the general ledger.
The system uses the standard business unit.object.subsidiary and subledger account structure. The general ledger account structure is composed of two parts:
Where - business unit
What - account number
Business unit is a 12 character, alphanumeric field that is the lowest level of organizational reporting. Each business unit is assigned to a company and can be associated with 20 category codes for higher level reporting. For example,
Department
Branch
Asset (revenue and maintenance expense)
The account number identifies whether the account is an asset, liability, or expense. It contains two parts:
Object account, a 6-character, alphanumeric field that is required on all journal entries
Subsidiary, an 8-character, alphanumeric field that is optional on journal entries. For example, use this field to identify an employee number, equipment, number, or asset number.
The following definitions are important in understanding payroll journal entries:
When journals are created in the payroll cycle, the system assigns a general ledger date using a date associated with the payroll, such as pay period end date or payment date. You specify the general ledger date to be used for labor distribution and burden journals (T2, T3, T4, and T5) in the payroll journal entries step of the payroll cycle. Cash disbursement and liability journals (T1 and T7) use the payment date as the general ledger date.
The Pay Cycle Review tracks your choice of general ledger date for labor distribution to reference when you submit the next payroll.
You can specify an override date when you submit the journal entry creation job. The override date you specify becomes the general ledger date for all journal entries created for all document types.
When you use the special timecard post to create journals, you specify the general ledger date to use.
Example: Payroll Journal Entry
The following example of a Payroll Cycle Journal is based on the following simple payroll:
Employee: Home Company = 1, Home Business Unit = 25, Union = 1000
Time Card: 01/28/17 (Pay Code 001) $1,000
Payroll Taxes and Insurance (P.T.I.): FICA (Tax Type D & E) $70
Payroll Taxes and Insurance (P.T.I.): UIC (Tax Type CC & CD) $70
Deductions: Savings Bond (Ded Code 2000) $50
Benefits: Union 1000 (Ben Code 6000) $30
Payment Date: 02/05/17
| Date | Account | Description | DR | CR |
|---|---|---|---|---|
| Labor Distribution Journals
Labor Distribution Journals |
||||
| 01/28/17 | 1.4205 | Wages Payable | 1000 | |
| 01/28/17 | 25.8115 | Labor Expenses | 1000 | |
| 1000 | 1000 | |||
| Actual Burden Journals | ||||
| 01/28/17 | 25.8146 | Union Fringe | 30 | |
| 01/28/17 | 25.8135 | FICA Burden | 70 | |
| 01/28/17 | 25.8135 | UIC Burden | 70 | |
| 01/28/17 | 1.4333.FR | Burden Clearing - Fringe | 30 | |
| 01/28/17 | 1.4333.TX | Burden Clearing - Tax | 70 | |
| 100 | 100 | |||
| Disbursement Journals | ||||
| 02/05/17 | 1.4205 | Wages Payable | 1000 | |
| 02/05/17 | 1.1110.PAY | Cash in Bank | 880 | |
| 02/05/17 | 1.4316 | Savings Bonds | 50 | |
| 02/05/17 | 1.4332 | Union Fringe | 30 | |
| 02/05/17 | 1.4212.EE | FICA Employee | 70 | |
| 02/05/17 | 1.4212.ER | FICA Employer | 70 | |
| 02/05/17 | 1.4212.EE | UIC Employee | 70 | |
| 02/05/17 | 1.4212.ER | UIC Employer | 70 | |
| 02/05/17 | 1.4333.FR | Burden Clearing - Fringe | 30 | |
| 02/05/17 | 1.4333.TX | Burden Clearing - Tax | 70 | |
| 1100 | 1100 |
When the system creates a journal entry for the general ledger, it codes the journal entry with a document type and reference number. The document type is a two-character code that classifies payroll journal entries into one of seven document types:
Type T1 - Payroll disbursement journal entries
Type T2 - Labor distribution and flat burden journal entries
Type T3 - Actual burden journal entries
Type T4 - Labor billing distribution journal entries
Type T5 - Equipment distribution journal entries
Type T6 - Payroll accruals and deferrals
Type T7 - Payroll voucher journal entries
The reference number, composed of journal type and general ledger date, further identifies the source of each journal entry within a document type.
The journal entry reference number becomes the Reference 2 value in the actual Account Ledger table (F0911).
See Appendix I, "AAI Setup Reference Guide" for more information about journal entries and automatic accounting instruction tables.
Document type T1 contains all journal entries associated with the writing of payments. The journal entries include cash-in-bank, relief of accrued wages, deduction, tax and benefit liabilities, and burden clearing entries.
The system creates T1 journals in the payroll cycle only.
All T1 journals carry the same general ledger date, that is the payment date or the override date.
The specific journal types used for these journal entries include:
| Entry | Description |
|---|---|
| AL | Accrued liabilities (Deductions, Benefits) - Credit entry |
| AT | Accrued liabilities (Taxes) - Credit entry |
| AW | Accrued wages - Debit entry |
| CF | Burden offset (Clearing) - Fringe - Debit entry |
| CT | Burden offset (Clearing) - Taxes - Debit entry |
| DP | Disbursed amount (Printed computer checks) - Credit entry (In the payroll cycle) |
| DA | Disbursed amount (Auto deposit) - Credit entry |
| DC | Disbursed amount (Currency) - Credit entry |
| DM | Disbursed amount for interim manual checks - Credit entry |
| DI | Disbursed amount for printed interim checks - Credit entry |
| IC | Intercompany Settlements |
The system creates journal entries for document type T2 directly from timecards for labor expenses and associated offsets for accrued wages. You can also generate journal entries to allocate an estimated or flat burden expense.
The system creates T2 journal entries during the payroll cycle or during a special timecard post.
Four possible general ledger dates exist for journal entries created during the payroll cycle:
| Date | Description |
|---|---|
| Work date | The general ledger date is the work date on the timecard. |
| Period ending | The general ledger date is the pay period ending date. |
| Cost period | You can use the cost period with the creation of payroll journal entries for a transition period. The system assigns a general ledger date equal to the last day of the preceding accounting period for journal entries for those timecards with work dates falling into the preceding accounting period. The system assign a general ledger date equal to the pay period ending date in pre-payroll processing for journal entries for those timecards with work dates in the succeeding period. |
| Override date | You provide an override date when you submit the journal entry creation job. The date you specify becomes the general ledger date for all journal entries. |
You specify which general ledger date to use for T2s in the payroll journal entry step of the payroll cycle. When you generate timecard journals during a special timecard post, enter the general ledger date in the processing options.
The specific journal types used for labor distribution journal entries are:
| Type | Description |
|---|---|
| AW | Accrued wages - Credit entry |
| FB | Flat burden expense - Debit entry |
| FC | Flat burden offset (Clearing) - Credit entry |
| LD | Labor distribution straight time - Debit entry |
| PR | Labor distribution premium time - Debit entry |
| IC | Intercompany Settlements |
The system calculates company-paid payroll taxes, insurance, and benefits on an employee-by-employee basis. These expenses are collectively referred to as burden. Actual burden journal entries are created when the employee burden expenses are allocated to expense accounts based on individual timecards entered for each employee.
The system generates journal entries for document type during the payroll cycle or a special timecard post.
Actual burden journal entries carry the same general ledger date as the associated labor expense.
The specific journal types used for actual burden distribution journal entries are:
| Entry | Description |
|---|---|
| BF | Fringe burden (Benefits and Accruals) - Debit entry |
| BT | Payroll tax and insurance burden (PTI) - Debit entry |
| CF | Burden offset (Clearing) - Fringe - Credit entry |
| CT | Burden offset (Clearing) - Taxes - Credit entry |
| IC | Intercompany Settlements |
Document type T4 journal entries are for labor billings, also known as recharge, and associated revenue offsets.
You use T4 labor billings for:
| Billing | Description |
|---|---|
| Billing internally | For example:
|
| Billing externally | For example, service billing for consulting services |
The system creates these journal entries from the billing rate value. To create T4s for an associated timecard, you must set the Record Type field (originally set up in Employee Master) on the timecard to one of the following settings:
2 (Payroll and recharge processing)
3 (Recharge processing only)
The system creates journal entries for labor billing distribution from timecards during the payroll cycle or a special timecard post.
Four possible general ledger dates exist for journal entries created during the payroll cycle:
| Date | Description |
|---|---|
| Work date | The general ledger date is the work date on the timecard. |
| Period ending | The general ledger date is the pay period ending date. |
| Cost period | You can use the cost period with the creation of payroll journal entries for a transition period. The system assigns a general ledger date equal to the last day of the preceding accounting period for journal entries for those timecards with work dates falling into the preceding accounting period. The system assign a general ledger date equal to the pay period ending date in pre-payroll processing for journal entries for those timecards with work dates in the succeeding period. |
| Override date | You can provide an override date when you submit the journal entry creation job. The date you specify becomes the general ledger date for all journal entries. |
You specify which general ledger date to use for T4s in the payroll journal entry step of the payroll cycle. During a special timecard post, enter the general ledger date in the processing options.
The specific journal types used for labor billing distribution journal entries are:
| Entry | Description |
|---|---|
| RD | Labor billing (recharge) distribution - Debit entry |
| RO | Labor billing (revenue) offset - Credit entry |
| IC | Intercompany Settlements |
Document type T5 journal entries designate billings associated with the use of equipment and the offsets for equipment revenue.
The system creates journal entries for equipment distribution from timecards. They can be generated during the payroll cycle or a special timecard post.
Four possible general ledger dates exist for journals created during the payroll cycle:
| Date | Description |
|---|---|
| Work date | The general ledger date is the work date on the timecard. |
| Period ending | The general ledger date is the pay period ending date. |
| Cost period | You can use the cost period with the creation of payroll journal entries for a transition period. The system assigns a general ledger date equal to the last day of the preceding accounting period for journal entries for those timecards with work dates falling into the preceding accounting period. The system assign a general ledger date equal to the pay period ending date in pre-payroll processing for journal entries for those timecards with work dates in the succeeding period. |
| Override date | You can provide an override date when you submit the journal entry creation job. The date you specify becomes the general ledger date for all journal entries. |
You specify which general ledger date to use for T5s in the payroll journal entry step of the payroll cycle. For a special timecard post, enter the general ledger date in the processing options.
The specific journal types used for equipment distribution journal entries are as follows:
| Entry | Description |
|---|---|
| ED | Equipment Billing Distribution - Debit Entry |
| EO | Equipment Billing (Revenue) Offset - Credit Entry
Set up the credit entry in Equipment AAIs. |
The Payroll system allows you to specify an accrual factor for transition pay periods instead of using the cost period option of creating payroll journal entries. Through the use of this feature, you can use the accrual factor to accrue a portion of payroll expenses in the previous month and defer the expense in the following month. Prior period entries are made to the last day of the prior accounting period.
The journal types for T6 are the same as T2, T3, T4, and T5.
The system creates journal entries for document type T6 during the payroll cycle. Enter the accrual factor (percentage) in the journal entries step of the payroll cycle.
The accrual entries have a general ledger date that is equal to the end of the prior accounting period. The Reference Number is equal to the journal type plus the original general ledger date.
The deferred entries have a general ledger date that is equal to the date of the original entries.
Document type T7 journal entries designate accounts payable vouchers.
Document type T7s are created during the payroll cycle. All T7 journal entries carry the same general ledger date. This date is the payment date.
The specific journal types used for payroll voucher journal entries are:
| Type | Description |
|---|---|
| AL | Accrued Liabilities - Credit Entry |
| AT | Accrued Taxes - Credit Entry |
There are no AAIs for T7s. The account numbers are assigned the same way T1 account numbers are assigned.
Example: Journal Entry with Document and Journal Types
The following example of a payroll cycle journal is based on the following simple payroll:
Employee: Home Company = 1, Home Business Unit = 25, Union = 1000
Time Card: 01/28/17 (Pay Code 001) $1,000
P.T.I.: FICA (Tax Type D & E) $70
P.T.I.: UIC (Tax Types CC & CD) $70
Deductions: Savings Bond (Ded Code 2000) $50
Benefits: Union 1000 (Ben Code 6000) $30
Payment Date: 02/05/17
| Type | Journal Type | Date | Account | Description | DR | CR | Menu Sel. |
|---|---|---|---|---|---|---|---|
| Type T2 - Labor Distribution Journal | |||||||
| T2 | AW | 01/28/17 | 1.4205 | Wages Payable | 1000 | 7 | |
| T2 | LD | 01/28/17 | 25.8115 | Labor Expenses | 1000 | 2 | |
| 1000 | 1000 | ||||||
| Type T3 - Actual Burden Journal | |||||||
| T3 | BF | 01/28/17 | 25.8146 | Union Fringe | 30 | 3 | |
| T3 | BT | 01/28/17 | 25.8135 | FICA Burden | 70 | 3 | |
| T3 | BT | 01/28/17 | 25.8135 | EI Burden | 70 | 3 | |
| T3 | CF | 01/28/17 | 1.4333.FR | Burden Clearing - Fringe | 30 | 7 | |
| T3 | CT | 01/28/17 | 1.4333.TX | Burden Clearing - Tax | 70 | 7 | |
| 100 | 100 | ||||||
| Type T1 - Disbursement Journals | |||||||
| T1 | AW | 02/05/17 | 1.4205 | Wages Payable | 1000 | 7 | |
| T1 | DA | 02/05/17 | 1.1110.PAY | Cash in Bank | 880 | 4 | |
| T1 | AL | 02/05/17 | 1.4316 | Savings Bonds | 50 | 5 | |
| T1 | AL | 02/05/17 | 1.4332 | Union Fringe | 30 | 5 | |
| T1 | AT | 02/05/17 | 1.4212.EE | FICA Employee | 70 | 5 | |
| T1 | AT | 02/05/17 | 1.4212.ER | FICA Employer | 70 | 5 | |
| T1 | AT | 02/05/17 | 1.4212.EE | EI Employee | 70 | 5 | |
| T1 | AT | 02/05/17 | 1.4212.ER | EI Employer | 70 | 5 | |
| T1 | CF | 02/05/17 | 1.4333.FR | Burden Clearing - Fringe | 30 | 7 | |
| T1 | CT | 02/05/17 | 1.4333.TX | Burden Clearing - Tax | 70 | 7 | |
| 1100 | 1100 |
Company 00000 is the default company in all of the AAI tables. Always start by setting up generic entries in Company 00000. Such entries provide a source for default accounts for all of the various types of journal entries. After you complete table entries for Company 00000, you can enter other companies. Entries for other companies should only be exceptions to the generic rules established under Company 00000.
Every AAI table includes the Journal Type field, which contains one or more codes identifying the type of journal entry. Each table has a hard-coded set of journal types. Rules for some journal types must be set up. Other rules are optional.
Each time the system creates a journal entry, it follows a hierarchy of search criteria to determine which distribution account to debit or credit. The system begins the search with basic data related to the type of accounting entry, referred to as the search argument. The system creates a search argument from the system data, such as the timecard, and searches the accounting rules tables for the table entry that best matches the search argument information.
On the first search, the system uses data appropriate for that table and looks for a match on all fields in the search criteria section of the form (the entire search argument). Then, one by one, the system drops elements from the search argument until it finds a matching table entry. At the lowest level, the system tries to match only the journal type. In addition, you can have a line in an accounting instruction table that has no search criteria other than the journal type. This is the default line.
The system first searches the rules for a specific company. If it finds no applicable rules (matches) for that company, it continues with the rules for Company 00000.