How to Record Entries Into Payroll Journals
Payroll is an intricate task that requires the employer to pay his employees’ wages on time and accurately. He must also withhold and pay taxes to the government. Furthermore, payroll consists of other transactions, such as retirement benefits and vacation and sick/personal time. A payroll journal helps to streamline the many different activities that occur within the payroll system. This process is commonly called “payroll accounting.”
Other People Are Reading
Instructions
-
-
1
Create headings for the payroll journal. Typical headings include date, account type, debit and credit.
-
2
Enter total salaries and wages—the employees’ gross amount (before deductions amount)—as a debit. Include a labor expense column for administrative cost, engineering labor, manufacturing labor, or contract labor. Record these as a debit.
-
-
3
Enter all deductions as a credit. Deductions include federal and state taxes withheld, retirement contributions and benefits payments, such as medical and dental. The total is the net payroll amount.
-
4
Create a separate journal entry for liability payments. Use the same headings as outlined in Step 1. Under account, list all liability payments, such as taxes withheld and retirement contributions, as a debit. List the total payroll payments made (net payroll) as a credit.
-
1
Tips & Warnings
Once the entries are recorded into the payroll journal, record the actual payments made to the employees into a payroll disbursement journal. This includes listing the check numbers, accrued (gross) amount, withholding amount, net pay, and comments such as hours worked.
Record entries into the payroll disbursement journal periodically, such as weekly or monthly. This makes it easier for you and auditors to review each employee’s pay status and record.
Have a separate checking account for Payroll. This allows you to detect lost or stolen checks via the payroll disbursement journal.
Accounting/payroll software often has a payroll journal/payroll disbursement journal module for you to record entries. The software usually has the ability to immediately detect missing checks. If you do not have software, you can create your own journal using a spreadsheet program, such as Microsoft Excel.
References
- Photo Credit Comstock Images/Comstock/Getty Images
