Payroll Accounting Setting Up and Calculating Staff Payrolls

payroll accounting

Before joining the team, she was a Content Producer at Fit Small Business where she served as an editor and strategist covering small business marketing content. She is a former Google Tech Entrepreneur and she holds an MSc in International Marketing from Edinburgh Napier University. Use this Payroll Accountant job description sample to advertise your vacancies and find the best candidates. Feel free to modify responsibilities and requirements based on your needs. Errors or inconsistencies in payroll calculations occur as a result of either input mistakes or system issues.

You can see more details including journal entries at our free Explanation of Payroll Accounting. Have a paymaster issue paychecks to employees, requiring employee identification if there are a large number of employees. If manual payments have already been made to employees, such as advances, then deduct these amounts from the remaining net pay.

Segregation of Accounting Duties

Before joining Fit Small Business, Heather was the Payroll/HRS Manager for a top cloud accounting firm in the industry. Her experience has allowed her to learn first hand what the payroll needs are for small business owners. 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. However, if you use a manual accounting system, you will need to create journal entries. Use IRS tax tables to determine the amount of taxes to be withheld from employee gross pay.

What is the basic accounting of payroll?

Payroll accounting refers to the system that organizations use to keep track of employee wages, benefits, payroll taxes and types of deductions. This information is used to create financial journal entries recorded on a GL for financial reporting and business-related purposes.

An accurate financial recording is key to a streamlined payroll process. Before even paying employees and disbursing taxes, your accountant should ensure all financial transactions get recorded. Under payroll accounting services, the payroll executive makes entries under expense, liabilities, and assets. The asset and expense accounts are classified as debitsDebitsDebit represents either an increase in a company’s expenses or a decline in its revenue. The liabilities, equities, and revenue accountsRevenue AccountsRevenue accounts are those that report the business’s income and thus have credit balances. If a company’s employees are paid weekly based on hours worked, the payroll processing is likely done during the first few days following the work week.

Calculate Your Employees’ Gross Pay

You’ll also be able to capitalize on its accurate financial reporting to make sound business decisions. Often, people and even accounting professionals tend to use payroll liabilities and payroll expenses interchangeably. When recording payroll, you’ll generally debit Gross Wage Expense, credit all of the liability accounts, and credit the cash account. Gross Wages will appear on your Profit and Loss or Income Statement, and the liability and cash accounts will be included on your Balance Sheet. Deposit all withheld payroll taxes and employer-matched taxes at a bank that is authorized to handle these transactions.

Software automates and organizes many manual and error-prone activities involved in payroll accounting. This probably is the single best thing a business can do to manage payroll, because it can save time and money. Software can help you organize a payroll system according to the scale of the company’s operations and number of employees. Their company pays employees every two weeks for a total of 26 pay periods. Small business owners benefit from accounting software because it helps them track accounts receivable and accounts payable, gauge their profitability, and prepare for tax season.

Income Taxes

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Monique Danao is a journalist and freelance writer who has worked with several startups and tech companies. Her work has been published in Sitepoint, Fast Capital 360, Social Media Today, WPMayor among other publications.

What does a payroll accountant do?


Ensures accurate and timely processing of payroll updates including new hires, terminations, and changes to pay rates. Prepares and maintains accurate records and reports of payroll transactions. Ensures compliance with federal, state, and local payroll, wage, and hour laws and best practices.

You’ll have to consider your employees’ wages, payment period, fringe benefits, and tax obligations. If you have the support, it’s a good idea to designate at least one or two other employees as secondary reviewers—someone in accounting or who won’t present a conflict of interest. This will ensure your journal entries have additional eyes on them before they post; it can also be helpful if you’re out on a day that payroll journal entries need to be posted. Summarize the wage and deduction information for each employee in a payroll register, which you can then summarize to also create a journal entry to record the payroll.

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