ReconcilingReconciliation is the process of comparing account balances to identify any financial inconsistencies, discrepancies, omissions, or even fraud. Your payroll tax expense as a debit must equal the total of your tax liabilities. Debit payroll tax expense for the total of all payroll taxes that employer pays.

Check the numbers against the data you gathered from your payroll system. Does the total gross wage expense entry tie to your total payroll expense for the period? When you or your bookkeeper goes to close the books for November, $700 will need to be recorded as a credit to be paid in your accrued payroll account. When you pay the full $1,000 balance on Dec. 3, you’ll clear the balance by debiting the account for $700. Your initial payroll entry may not cover all your wages, despite how comprehensive it appears. That’s because – in some cases – you’ll still have wages to pay after an accounting period closes.

Pay all your deductions and record the payments.

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Such taxes could include federal and state income taxes, FUTA, SUTA, and FICA. The most basic payroll entry involves crediting cash and debiting wage expenses. The cash account decreases, and wages are an expense account that decreases equity. Manual payment entries are simpler than payroll accounting initial recordings since there’s no liability stage. Initial recordings are the most common types of entries you or your accountant will create when doing your payroll accounting. These are the entries you saw in the examples that create the expense and then track each payment.

Examples of Payroll Accounting

If you use QuickBooks for accounting and another service to run payroll, you still need to keep track of those paychecks in QuickBooks. We call paychecks made outside of QuickBooks with services like ADP or Paychex third-party paychecks.

• T4 journal entries are the only entries that have transactions involving multiple currencies and conversions.
• When you actually go to deposit your tax payments, these payroll liabilities come off your books.
• Incorrect setup of nontaxable benefits or accruals that were processed in the journal entries step.
• The entry to record net pay debits Net Payroll Payable and credits Cash.