1. Developed by Lisa Swallow, CPA CMA MS
Payroll Accounting 2013
Bernard J. Bieg and Judith A. Toland
CHAPTER 6
ANALYZING & JOURNALIZING PAYROLL TRANSACTIONS
Developed by Lisa Swallow, CPA CMA MS

2. Learning Objectives Record payrolls in appropriate records
Understand various deductions taken from employees’ gross pay
Journalize entries to record payroll and payroll taxes
Post to general ledger
Explain recording of payroll tax deposits
Understand need for end-of-period adjustments

3. Accounting for Payroll Transactions
Payroll requires entering data (in order) in the following places
Payroll Register
Employee Earnings Records
General Journal
Journalize gross wages and withholdings
Journalize payroll taxes and workers’ compensation
Journalize period-end accruals
Post to General Ledger
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4. Recording Gross Payroll & Withholdings
Enter information into accounting system
Gross payroll is debited
Each withholding tax is credited to a liability
All other payroll deductions are liabilities as well
LO-1

5. Methods of Paying Wages & Salaries
Check
Sometimes separate payroll account maintained to make bank reconciliation process easier
Electronic payment methods
EFTS (electronic funds transfer system)
Electronic records created showing bank, account # and net pay
Pay cards allow employer to deposit payroll into prepaid card
Card utilized like debit or credit card
Many employees who do not have bank accounts use these
Electronic paystubs alleviate need for paper paystubs
Final pay
Many states set time limit between termination and final wage pay out (depends upon whether worker left voluntarily)
CA and MI require immediate payment if employee is fired
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6. Journal Entries to Record Payroll
Journal Entry #1 - Record gross wages, withholdings and net pay
Journal Entry #2 - Record employer’s payroll tax expense
These two journal entries are always the same
in format. You must make both of them every time
you issue any paycheck (even if cutting a check
for one day’s wages, for example).
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7. Journal Entry #1 Journal entry #1 Debit Wage Expense for gross payroll
Credit each withholding account - they are all liabilities
Credit cash (or wages payable) for net payroll
Journal entry #1
Wage Expense ,845.00
FICA Taxes Payable - OASDI
FICA Taxes Payable - HI
Employees FIT Payable
SIT Payable
Group Insurance Payments W/H
Cash ,325.76
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8. Journal Entry #2 Journal entry #2
Debit Payroll Tax Expense for total of all payroll taxes that employer pays
Credit each account - they are all liabilities
Calculate all employer taxes utilizing varying wage bases and percentages
Journal entry #2
Payroll Tax Expense
FUTA Taxes Payable
SUTA Taxes Payable
FICA Taxes Payable - OASDI
FICA Taxes Payable - HI
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9. Recording Deposit of Payroll Taxes
Look in general ledger for amounts due
Deposit 941 taxes
Deposit SIT
Deposit SUTA
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10. Workers’ Compensation Insurance
Workers’ compensation is an expense for the employer, who is required to purchase insurance to protect employees against work related injuries/disabilities
Laws differ by state
Premiums often calculated based on employment classification – stated in terms of $100 per payroll
Pay premiums in advance based on projected wages
Then, at year-end, report actual wages and pay additional premium or may receive credit towards next year
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