Overview
Payroll journal entry is a record of how much you pay your employees and the overall expenses towards your employees. These entries are then incorporated into expense, liabilities, and asset accounts. Below are some of the key types of payroll journal entries in BQE CORE.
Manual Payments Entry
In this entry, all employer-side withholdings are accounted in relevant liability accounts. This entry increases the withholding expense account and withholding liability account. This means it increases the company’s expense as well as a liability on account of employer-side voluntary withholding. Let us look at the entries below.
Entry No. 1
Debit: Payroll expense account is debited by net pay
Credit: Bank account is credited by net pay
Note: In this entry, the paycheck amount (Net Pay) is paid to the employee. It decreases the bank account and increases the relevant payroll expense account.
Entry No. 2
Debit: Tax expense account is debited by employee tax
Credit: Relevant tax liability accounts are credited by employee tax
Note: In this entry, all employee taxes are accounted in relevant liability accounts. This entry increases the payroll tax expense account and tax liability account. This means it increases the company’s expenses as well as a liability on account of employee tax.
Entry No. 3
Debit: Tax expense account is debited by employer tax
Credit: Relevant tax liability accounts are credited by employer tax
Note: In this entry, all employer-side taxes are accounted in relevant liability accounts. This entry increases the payroll tax expense account and tax liability account. This means it increases the company’s expense as well as a liability on account of employer tax.
Entry No. 4
Debit: Expense account is debited by employee withholding amount
Credit: Relevant liability accounts are credited by employee withholding amount
Note: In this entry, all employee-side withholdings are accounted in relevant liability accounts. This entry increases the withholding expense account and withholding liability account. This means it increases the company’s expense as well as a liability on account of employee voluntary withholding.
Entry No. 5
Debit: Expense account is debited by employer withholding amount
Credit: Relevant liability accounts are credited by employer withholding amount
Agency Payments
In this entry, payment is made to an agency which is responsible for managing 401K retirement plan. The payment is also made to the state and federal tax agencies.
Entry No. 1
Debit: Relevant withholding liability accounts are debited by employer and employee withholding amount
Credit: Bank account gets credited by the employer and the employee withholding amount
Note: This entry decreases the bank account and withholding liability account. This means it decreases the company’s bank account and decreases liability on account of employee and employer withholding.
Entry No. 2
Debit: Tax liability account is debited by the employee tax amount
Credit: Bank account is credited by employee tax amount
Note: In this entry, payment is made to the State Tax agency. This entry decreases bank account and state tax liability.
Entry No. 3
Debit: Tax liability account gets debited by employee and employer tax amount
Credit: Bank account gets credited by the employee and employer tax amount
Note: In this entry, payment is made to the Federal Tax agency. This entry decreases bank account and federal tax liability.