ENTERING PAYROLL INFORMATION INTO QUICKBOOKS^® FROM PAYROLL SERVICE REPORTS.

Payroll Services make two (2) withdrawals from your checking account:1) for the net amount of the payroll checks and 2) for the taxes. Therefore you want to make two entries in QB so that it will match with your bank statement.

A General Journal entry is cumbersome, but necessary if the payroll is highly complex. (see reverse side)

• FIRST ENTRY: NET PAYROLL COST AND ALL SALARY/ WAGE INFORMATION.

  Open the Check window in QB [on banking menu] If you have a separate Payroll Bank Account, be sure the check is written on that account. Choose it in the box at top of check. Set the date for the date of the PR and make the payee “Payroll”. There is no check #, as it is an electronic debit. Call it DM##, the numbers being significant to you.

  Amount of the check is the NET payroll. This can be found in Paychex Reports either on the page which details the checks (gross, all w/h and net) for each employee, or on the Cash Requirements Page, the withdrawal that is NOT the tax withdrawal. (It could be called “Direct Deposit” or Checks Net ). The two are a good cross-check.

  On the Expense Tab below, break up your payroll into the accounts you need. ( You may track Officers Salary in a different account than staff, or you may break– up your staff into departments.) Enter the GROSS amount in each account to show the proper expense to your business.

  Now choose your Payroll Liabilities account on the next entry line and enter as a negative number the total amount of all withholding (this can easily be found on the Cash Requirements sheet: it is labeled “total Tax Withholdings”. The results will equal the amount of the check because, logically, the Net is only gross minus withholdings. If you have a number showing on the next line when you tab down, you need to check your entries for errors.

• SECOND ENTRY: THE TAXES PAID

  Make another check; this time the payee is “Payroll Taxes”. The amount for the check is the total withdrawal for both the tax withholdings and the employer tax expenses on the Cash Requirements Sheet.

  On the Expense Tab, enter the “Total Tax Withholdings” number into the Payroll Liabilities account, this time as a positive number. It zeros out your previous entry because now you have paid that tax and have no more liability. The amount in your payroll liabilities account should always end up being Zero.

  Notice the items listed after the Withholdings. The label is: “Employer Tax Expenses”. If you are tracking Social Security and Medicare expenses in separate accounts, enter them into those accounts on the Expenses Tab below the picture of the check. If you just have one account for FICA, you can add them together right in the amount column in QB. Enter the SS amount, enter the “plus” sign and you immediately get a picture of a calculator tape. Enter the Medicare number and hit “Enter”.

  You should have separate Expense accounts for FUTA (the Federal Unemployment Tax) and SUTA (the State one), so enter those amounts in their separate accounts.

  The total will equal the amount of “Employer Tax Expenses” that you entered as the check amount.

  Most Payroll Companies will have reports similar to Paychex. If not, you can probably figure out what the comparable numbers are on their reports, as long as you understand the logic.

When The Payroll Is Complex

In this case COMPLEX means large payrolls where

• Some employees get checks, but some get direct deposit and/or
• The business has departmentalized its payroll.

BEST WAY TO HANDLE THIS IS WITH A JOURNAL ENTRY.

First step is to make an Expense account named PAYROLL EXCHANGE in the Chart of Accounts.

Go to the Chart of Accounts on the Home Page.

At the bottom of the screen, click on ACCOUNT, and choose NEW from the list. Enter the information required. This will be a clearing account for all the payroll information.

FIRST CHECK:
Enter the lump sum of the Direct Deposits into the payroll checking account (if you have a separate account for payroll – otherwise use the business checking account). I make the payee: Payroll Direct Deposits. Post to the Exchange Account.

SECOND CHECK:
Enter the total amount of the taxes which the payroll company takes from your account. I make the payee: Payroll Taxes. Post to the Exchange Account

NEXT BATCH OF CHECKS:
All the individual checks made out to employees. No need to put in their names—I use NET PAYROLL CHECK as the payee (entry goes faster). What is important to get correct is the check number, as this is the only way you can ID checks on the bank reconciliation which did not clear. Post to the Exchange Account again.

NOW MAKE THE JOURNAL ENTRY TO POST ALL THE PAYROLL INFORMATION TO THE PROPER ACCOUNTS.
You access this feature from the COMPANY menu, almost all the way down. It says: “Make General Journal Entries.” You will get a screen with several columns. Put in the proper date and label the journal entry with the name of the payroll, i.e. “ PR for 10/7/08”. Tab down to the top of the left column for Account Name.

• The first entry is posted to the Exchange Account, and it is the total payroll number: all the direct deposits, all the checks and the taxes. It goes in the CREDIT column. Find the amount in the payroll service report, or add together the checks you entered to get the amount. (You can find that total if you go to the Chart of Accounts, highlight the Payroll Exchange account, and click on the button at the bottom called “Reports”, and choose “Quick Report”. You will get a list of all that is in the account and a TOTAL.

  You have now zeroed out the Exchange Account, which is what you want.

• The second entry is the GROSS amount of the payroll.

  You should first create the proper Payroll Expense Accounts: QB always creates a Payroll Expenses account, but you want to break down what goes in there. Create a new account called “Wages” or “Salaries” (which ever is appropriate to your company) and make it a subaccount of Payroll Expenses (click on the box for that feature in the Create Accounts window, and enter Payroll Expenses as the parent account). Somewhere in the PR report you should find an amount labeled “Gross Payroll”. Post the expense in the Debit Column.

• Third Entry : If you do not have an account named “FICA-employer share”, create it here. Just type in the name, QB will ask you if you want to create it, and say Yes [all these accounts are EXPENSE – type accounts, and the amounts are posted in the Debit Column.] If you want to list Social Security and Medicare employer share separately, create an account for each. Otherwise, just add them together right on the screen. Put in the SS amount, hit the PLUS sign on the number pad and you will see a little calculator tape appear, then type in the Medicare number and hit ENTER. QB will add them. [you can do this in ANY numerical field – handy to know].

• Next entries are the State and Federal Unemployment amounts that the employer pays [also in the Debit column--these are all expenses to the employer]. Create the accounts as you go if you need to (make them all sub-accounts of Payroll Expenses – the beauty of sub-accounts is that QB adds them up for you on a P&L and gives you a subtotal for that whole category.

• The final entries are anything else the Payroll company has documented: employee advances (Debit) or paybacks (Credit), deductions for child support (Credit). The latter must be posted to a Liability account; then when you pay the amount to the government entity, post it to the same liability account to zero it out [handle Garnishments the same way}. If you faithfully account for every deduction or addition to each paycheck that is in the report in addition to the fields mentioned above, you should come out with a balanced entry. QB will not let you post an unbalanced entry. If you have a problem, call me. We can work it out together.

• When you are finished, always check out the PAYROLL EXCHANGE account. It must be zeroed out.

  Go to the Chart of Accounts, highlight the Payroll Exchange account, and click on the REPORT button at the bottom of the screen. Choose “Quick Report”. Make sure the date in the upper left corner of the report is set to “ALL”. Then click on the Modify Reports button above it. On the DISPLAY Tab which you see when it opens, look for the box in the lower left call “Columns”. There in a list in that box with a scroll bar. Scroll down almost to the bottom, and click on “Balance”. Then click OK and you will see that a balance column has been added to the report. You can add or subtract columns in this manner. You want to see the balance column return to ZERO after every payroll. The only time it will not, is when some matter like a lost paycheck and its replacement is reported in the next payroll. The currant one may be out of balance, but the column should return to zero after the item is reported in the next payroll.

  If the account is not zero, you need to find out why. Double check all your entries to catch the error.