How Do I Journalize Payroll?
Payroll involves compensating employees for their work. A payroll system involves making journal entries, which shows payroll data for the pay period and the employer's liabilities. If you use payroll software, you can generally make journal entries in the system. Otherwise, you can buy a journal from an office supply store and make manual entries.
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Instructions
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Payroll Entry
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1
Put the payroll date at the top of the page and create the following headings: Account, Debit and Credit.
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2
Create rows under the Account heading for salaries and wages; each type of mandatory deductions you are required to withhold, such as Medicare and Social Security taxes, federal and state income taxes, and wage garnishments; and each type of voluntary deduction you withhold. On the last line, create a row for Payroll Account.
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3
Enter the total gross payroll amount for salaries and wages under the Debit heading. Total gross is the amount you pay employees before making any deductions.
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4
Go through each row under the Account heading and put the total amount withheld for all mandatory and voluntary deductions under the Credit heading.
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5
Put the total net payroll on the last row of the Credit heading, on the same line as Payroll Account. Total net payroll is your employees' gross salaries and wages minus all deductions.
Employer Liabilities Entry
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6
Create the following headings: Account, Debit and Credit.
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7
Make rows under the Account heading for each employer liability, such as state and federal unemployment taxes, and Social Security and Medicare taxes.
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8
Put the amount for each liability under the Credit heading.
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9
Add all your credits and put the total amount under the Debit heading.
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Tips & Warnings
If you prefer, you can make separate entries for hourly paid workers and salaried employees.
