Ledger accounting

In this lesson

1. 0:00 Ledger accounting for wages overview
2. 0:18 Wages control account setup
3. 0:37 Recording wage payments and deductions
4. 1:46 Classifying direct versus indirect labour
5. 2:50 Transferring costs to production accounts

About this lesson

You'll discover how to set up a wages control account, record gross wages and deductions like income tax and national insurance, and then allocate costs between direct labour (transferred to work in progress) and indirect labour (transferred to production overhead). This foundational technique underpins cost accounting and prepares you for Absorption Costing, making it essential for papers like MA and PM. The video walks through the double-entry mechanics step by step. When paying net wages, you debit the wages control account and credit the bank. Tax and national insurance deductions are also debited to the wages control account (as they remain a cost to the business) but credited to liability accounts, since these amounts will be paid to the authorities later. Once recorded, wages are analysed and split: direct labour costs move to work in progress to build up product value, while indirect costs like supervisor salaries move to production overhead. Understanding this distinction is crucial for accurate costing and will support your later study of how overhead is absorbed into production.

Duration: 3m