Control Accounts

Control Accounts allow the automatically generated G/L activity to be aimed at the appropriate G/L accounts. When you transact payables, payroll, or receivables, dollar amounts are distilled from their source records and posted to control accounts set up to track specific amounts. Control accounts serve a number of purposes. One benefit is to simplify payouts.

Example 1: When employees volunteer to have charitable amounts deducted from their paycheques, the amount indicated in the charity field on their cheque is recorded in the charity control account. The total amount in the charity control account is the amount that should be paid to the charity drives the employees have selected.

They also collect and categorize amounts in a way to make CRA claims and payments easier.

Example 2: Each time payroll is transacted, the amount of CPP calculated for each payroll cheque is posted to the control account set up to track CPP. The amount in the CPP Payable control account represents the amount of CPP to remit to the Canada Revenue Agency.

Example 3: GST is extracted from payables and posted to the control account for GST recovery. Abio also uses GST recovery rules to estimate the GST paid on payroll timesheet subsistence payouts. Those amounts are also posted to the GST recovery account. The amount in the GST recovery account is the amount to claim as input tax credits on the GST rebate.

Real world amounts, such as your current bank balance, are also maintained as control accounts.

Example 4: Writing cheques reduces the amount currently posted to the G/L account associated with your bank account. Receiving revenue increments the bank account. Journal entries can also be posted to the bank account to record other deposits and withdrawals. The amount in the bank account should match the amount in the G/L account associated with the bank account control account.

Control Account Entry

To review or adjust the control accounts, navigate to [d] General Ledger, then [u] Set Up, then [f] Control Account Entry.

This entry screen has no list, just three tabs that organize the control accounts by subsystem.

Payroll

[d] General Ledger | [u] Set Up | [f] Control Account Entry
Bank Account

The net pay on payroll cheques are deducted from the bank account, unless the cheque is for a subcontractor. Those amounts are posted to the subcontractor owing control account.

[c] Payroll | [h] Cheque Entry
Advance/Repay

If you’re hiring someone new, they might have to buy safety equipment or move to a new location before they can start work. If they can’t afford to, you can advance the money and deduct it from their pay. This control account monitors the total amount of advance payments outstanding.

The first step in advancing an employee money is to record it on the cheque you want to include the advance on. In this example, the net pay is $789.73.

[c] Payroll | [h] Cheque Entry

If we advance Greg $1,000, then his net pay is $1,798.73.

[c] Payroll | [h] Cheque Entry

When cheques are issued the $1,000 advance is recorded on Greg’s employee record.

[c] Payroll | [a] Employee Entry

When payroll is transacted and the G/L updated, Greg’s $1,000 advance is also recorded in the G/L.

[d] General Ledger | [a] Account Entry

Greg is the only employee who’s been advanced money. If there were more, the G/L account would show the total amount of all advances.

On the next payroll, Abio will attempt to recover the advance within the limits of the cheque.

[c] Payroll | [h] Cheque Entry

You can change the amount repaid on each cheque to a reasonable amount.

Vacation payable, statutory payable

Craft workers will often have vacation and statutory paid on each cheque. Staff, on the other hand, will bank their vacation pay and take it as time off. These control accounts monitor the amount of vacation and statutory pay outstanding.

[c] Payroll | [h] Cheque Entry
cpp payable, ei payable, employee income tax,

These control accounts represent amounts deducted from pay that will be remitted to the Canada Revenue Agency.

[c] Payroll | [h] Cheque Entry
insurance payable, security deposit

Insurance costs and security deposits can be added to a cheque manually. The amounts recorded on cheques are posted to these G/L accounts.

Example 5. Greg was issued a security pass coded to allow access to the job site. The client wants to ensure all passes are returned when work is complete. $25 is deducted from Greg’s pay, and will be returned when the pass is returned.

[c] Payroll | [h] Cheque Entry

The $25 is posted to the security deposit control account.

[d] General Ledger | [a] Account Entry

In other examples it’s been obvious that the amount is posted to the G/L account. In this case, there are several expenses posted to the ‘other deductions’ account. To illustrate that the security deposit is included in the accounts total, we can drill down to see more detail. The $25 shows on the cheque summary.

If there were more than one cheque in the run, you could drill down even further to see each cheque.

Drilling down on this report brings you to the original cheque.

RRSP PAYABLE, CHARITY

Employees can request RRSP and charitable donations be deducted from each cheque. For craft employees, their union has to have an RRSP program set up. In this case, their contributions will be in addition to what the union agreement dictates. In the below example, Coraline is a staff employee who is putting $200 towards her RRSP each cheque. She’s also contributing $50 to the company’s United Way campaign.

[c] Payroll | [a] Employee Entry

When her cheque is approved, those amounts appear as deductions.

[c] Payroll | [h] Cheque Entry

And when her cheque is transacted and updated to the G/L, the amounts are posted to their respective control accounts.

The RRSP is the only posting in its control account.

[d] General Ledger | [a] Account Entry

Her United Way contribution is posted to the charity control account, along with her fellow employee’s contributions.

[d] General Ledger | [a] Account Entry
misc deductions

You can pay amounts on an employee’s behalf through accounts payable. Those invoices are posted to the specific employee, and monitored through employee purchases.

Example 6. Frank Smith has been ordered to pay family support of $200/cheque. Set up an invoice for the garnishment order. They will be payable to the agency managing the garnishment, and posted it to Frank’s employee number. Each payroll, Abio will look for the invoices and deduct the amount from Frank’s pay. Set the garnishee? flag on Frank’s employee record to have Abio remind you to set up the garnishment.

Example 7. Barry Goldman requires welding equipment to start work, but can’t afford it. You buy the welding equipment for him, and post the invoice to his employee number. Abio will attempt to deduct the total amount of the invoice from Barry’s pay each cheque. You can manually reduce the reduction on each cheque to a manageable amount. Abio will attempt to recover the balance on future cheques.

personal safety, group safety, production bonus

If your union has negotiated safety pay, you’ll receive extra hourly amounts for each hour you work, barring a safety incident. Likewise, if you meet your production goals, you’ll be paid a production bonus.

Greg Campbell works for this union, so the safety and bonus amounts are showed as earnings on his cheque.

And when the cheques are issued, they’re added to his employee record.

When payroll is transacted and the G/L is updated, these amounts are posted to their control accounts.

Recall that when cheques are approved, you can choose whether to release safety amounts, hold on to them, or lose them, either because the employee quit or there was an incident. Losing them removes them from the employee’s record and posts that amount to the overhead recovery control account.

recruitment

If you work with recruiting agencies to help you find workers, you can record the recruitment agreement on the employee’s record.

The recruiting agent will receive a fee based on the hours the employee works. This only applies for the first year of employment. The hourly recruitment amounts are recorded as an extra cost on each timesheet.

and on the earnings tab of the cheque.

The recruitment cost is posted to the recruitment control account.

The recruitment amount is paid to the recruiting agent indicated on the employee’s record. A payables invoice is created when payroll is transacted, also posted to the recruitment control account.

When the invoice is paid, the recruitment cost will be cleared from the recruitment control account.

retention

If skilled tradesmen are in high demand, you may have to counter recruitment efforts by other companies by offering a retention incentive to your craft workers.

Retention incentives can be set up on a union by union basis. They can apply to all jobs, or to specific jobs.

Like the recruitment amounts, the retention is calculated right on the timesheet and shown as an additional cost. While recruitment amounts are paid to an outside agency, the retention goes directly to the employee. It’s not paid out automatically. It accrues until you choose to release it. If the employee doesn’t stay for the duration of the period agreed on, the retention will be lost. In this case, the retention accrued to that point will be recorded as lost and posted to overhead recovery.

OTHER SAFETY, SMALL TOOLS, INCENTIVE

Several incentive programs specific to staff members are tracked through these control accounts.

Example 8. John Smith is a Millwright and requires precision tools to do his work accurately and efficiently. Buildomo pays him an additional 7% over and above his regular earnings to help him maintain and purchase small tools.

Example 9. Millie Jackson is tasked with overseeing a high profile project. She has been offered a 20% incentive bonus if she can complete the project before the year ends.

These incentives can be released or lost depending on circumstances. Other safety can be fractionally released, either 1/4, 1/2 or 3/4 of the accrued amount.

Training

Do you contribute to an employee training program? Individual employees can earn training for the hours they work. To set this up, navigate to the Incentive & Accrual tab on the employee’s record.

[c] Payroll | [a] Employee Entry

In this example, Greg’s company will put aside an amount equivalent to 5% of everything he earns towards job training. The amount is calculated when you approve the cheque. It displays on the Earn & Loss tab.

[c] Payroll | [h] Cheque Entry

Training isn’t tied to a fiscal year, so when you issue the cheques, it’s added to the current balance recorded on the Incentive & Accrual tab.

[c] Payroll | [a] Employee Entry

When payroll is transacted, G/L transactions are created for the training amounts from all the cheques are posted to the training control account. When you update the G/L, the training control account will show the accumulated amounts.

[d] General Ledger | [a] Account Entry

In this example, the posting to G/L account 310820 matches what is recorded in Greg’s employee record. In real life, there would be many employees earning training, and the G/L posting would include all those amounts.

When you arrange for training for employees who’ve earned it, you can post payment against this G/L account to clear the amount accrued.

Fringe Recovery

Fringe costs are employer-paid payroll expenses such as payroll taxes, pension plans, and worker’s compensation expenses.  Abio includes the following in the calculation of fringe costs:

  • Vacation pay
  • Statutory pay
  • Canada Pension Plan (CPP)
  • Employer’s portion of Employment Insurance (EI)
  • WCB
  • Training
  • Employer-paid Registered Retirement Savings Plans (RRSPs)
  • Personal, Group and Staff Safety bonuses
  • Production Bonuses
  • Small Tools Allowances
  • Incentive Bonuses
  • Provincial Education Tax

How do you recover fringe costs? If the fringe costs were incurred in a subsidiary company, you can invoice them to your parent company.

Subcontractor Owing

You can treat subcontractors as though they are legitimate employees. Input their time on timesheets as you would for actual employees. When cheques are approved, contractors won’t have EI, CPP, WCB, or income tax deducted from theirs.

When payroll is transacted, subcontractor amounts will be posted to the subcontractor owing control account. Additionally, Abio will create a payable invoice for the contractor so they can be paid out of accounts payable rather than payroll. When their invoice is approved and paid, the amount of the cheque will be taken out of the subcontractor owing control account.

Overhead Recovery

Previously, we’ve talked about safety bonuses and incentives, with the unspoken assumption that people will successfully earn them. Unfortunately, that’s not always the way. If Millie didn’t finish the project on time, her incentive bonus is forfeit. Likewise, if Greg fell in a hole and had to be taken off to emergency, his personal safety bonus, and his crew’s safety bonus, are no longer on the table. Sad for them, but a little bit of a windfall for the company. When that happens, we record the amounts they lost as overhead recovery.

Companies have the potential to recover the following overhead costs, either when employees quit or when they don’t meet the stated requirements:

  • Vacation,
  • Statutory,
  • Personal, group, and staff safety,
  • production, incentive and retention bonuses, and
  • small tools allowances

General Ledger

[d] General Ledger | [u] Set Up | [f] Control Account Entry
Retained Earnings

At year-end, the current earning G/L account, and all the earnings accounts, are rolled into the retained earnings G/L account. If you post a journal entry to a prior year, this account will be adjusted to include the new amounts.

Current Earnings

Used for reporting purposes, and is rolled into retained earnings at year end.

Accounts Payable

[d] General Ledger | [u] Set Up | [f] Control Account Entry

As vendor invoices are processed, the amounts from the invoices and their payments are posted to the G/L, or ‘transacted’. The amounts are allocated between either job costs, equipment, or the G/L the invoice was posted to. Balancing amounts are posted to these accounts.

Bank Account

This bank account G/L is used for both payables and receivables. When cheques are generated for payable invoices, the payment amount is debited from the bank account G/L.

When payments are received on receivable invoices, the payment amount is credited to the bank account.

Net Payable

When a vendor invoice is received and recorded, the net amount of the invoice is credited to the net payables liability account.

When that vendor invoice is approved and paid with a cheque, the net amount of the cheque is debited to the net payables liability account.

holdback payable

When a vendor invoice is received and recorded, the holdback amount of the invoice is credited to the holdback payables liability account.

When that vendor invoice is approved and paid with a cheque, the holdback amount of the cheque is debited to the holdback payables liability account.

gst recovery

Later in this course, we look at GST rebates. You can claim GST expenses as input tax credits on your GST return. To assist you with this, the GST amounts from payables are recorded in this G/L account.

hst recovery

As with GST, HST is recorded in this G/L account.

Accounts Receivable

[d] General Ledger | [u] Set Up | [f] Control Account Entry

When receivable invoices and their payments are posted to the G/L, or ‘transacted’, the amounts are allocated between either job costs, equipment, or the G/L the invoice was posted to. Balancing amounts are posted to these accounts.

Net Receivable

This account is credited when a net amount is invoiced, and then debited when that net amount is received on a payment.

Holdback Receivable

This account is credited when a holdback amount is invoiced, and then debited when that amount is received on a payment.

GST Payable

The GST recorded on receivable invoices is credited to the GST Payable liability account when invoices are transacted.

HST Payable

The HST recorded on receivable invoices is credited to the HST Payable liability account when invoices are transacted.

Job Costing

[d] General Ledger | [u] Set Up | [f] Control Account Entry

Job costing is the heart of Abio. Timesheets, materials, equipment and revenue can be posted to jobs. The amounts posted to jobs are summarized in the following accounts.

Revenue Labour, Material, equipment, subcontract

Receivable invoices can be allocated to labour, material, equipment, and subcontract.

When the invoices are posted to the G/L, or ‘transacted’, the amounts are credited to their respective control G/L accounts.

Costs Labour

Every time a payroll timesheet is posted to a job, this control account is recorded as the G/L account to post the time to. When payroll is transacted, the payroll amounts are posted to this control G/L account. Labour dispersions are also posted here.

Subcontractors that provide job-related labour are paid with accounts payable invoices posted to cost type ‘L’. Those amounts, less GST/HST, are also recorded in this control G/L account.

Costs Material, equipment, subcontract

Amounts from job-related invoices posted to these cost types are recorded here, less GST/HST.

Equipment Rentals

[d] General Ledger | [u] Set Up | [f] Control Account Entry
Equipment Revenue

When you bill clients for the use of your equipment, post their invoice to the unit of equipment they’re renting. When receivable invoices are posted to equipment units, the labour, material, equipment and subcontract amounts will be posted to this control G/L account.

Labour Cost

If you have one of your paid workers spending time maintaining, repairing, setting up, or taking down equipment, post their timesheet to the unit of equipment they’re working on. When payroll timesheets are posted to equipment units, the total cost of the timesheet will be posted to this control G/L account.

Repair Cost

If you have to send a unit of equipment in for repair, post the payables invoice to the unit of equipment, with cost type ‘R’ for repair. The amount of the invoice will be posted to this control G/L account.

mob/demob Cost

If you have an outside vendor set up or take down your equipment, post the payables invoice to the unit of equipment, with cost type ‘M’ for mobilize/demobilize. The amount of the invoice will be posted to this control G/L account.

Fuel Cost

Fuel purchases can be posted to the equipment the fuel is for, with cost type ‘F’ for fuel. The amount of the invoice will be posted to this control G/L account.

Other Cost

If you are paying an outside vendor to do something with your equipment that isn’t covered above, post it to ‘O’ for other. The amount of the invoice will be posted to this control G/L account.

Depreciation Expense

Abio will automatically generate depreciation journal entries for your capital assets, including equipment, and post it to this G/L account.