Want the files used in this video?
Purchase the exercise files in my Knowledge Store
How to enter payroll in QuickBooks
The classic mistake that inexperienced bookkeepers make is that they book the net payroll as payroll expense and the taxes all go to the employer’s tax expense. This leaves a lot out of the picture.
- What about Payroll Liabilities?
- Where is the gross payroll amount?
There are 2 ways you can enter payroll into QuickBooks.
- Summary
- Detail
Summary
Under the summary method of entering payroll into QuickBooks you are entering lump sum totals. You still have to enter the gross payroll to the Payroll expense line, show the deductions into liabilities and then record the tax payment with the appropriate split between the employer’s share of the taxes and the remittance of the liabilities that were withheld from the employees paychecks.
Choose a method in the video to learn how to book your payroll based on the method you prefer.
Detail
In the detailed method of entering payroll into QuickBooks you are entering each individual paycheck. This presents a challenge in that the paychecks do not come out of your bank account individually. So we need a way of recording each paycheck individually while still being able to show the lump sum net payroll that actually comes out of our bank account. The answer is pretty simple once you see what it looks like in QuickBooks. You create a fictitious bank account called “Payroll Clearing” and enter each individual paycheck in there. Once you’ve entered all of the paychecks for the pay period the bank account will have a negative balance equal to the total net payroll that comes out of your actual checking account. All that is needed now is a transfer from your checking to the payroll clearing and the payroll clearing account will zero out.
Love the videos with both versions shown of summary or detail methods. I have a question as to how to properly account for treatment of other deductions. These would include medical, child support/garnishments, repay or pay advance loans, etc. Would these also be subtracted out of the first check? As you were going through the video I’m looking at my pay statements and I need to address these to get to the net payroll. Otherwise, it’s straightforward. Thanks!
The medical and child support or any “Other Deductions” are just that. They come out of the employee’s paycheck and reduce the gross pay to get to the net. Then you have to figure these payments may well be going to another authority, so there might be an additional payment that gets taken out with each payroll for these other deductions. You would record those payments as checks of course with an offset to the payroll liabilities account to zero out, or if you choose to you can put those other deductions in a separate liability account. This will keep it a bit cleaner especially when you are trying to figure why the liabilities don’t zero out if they happen not to.
Thanks for sharing the videos. So I followed your Detailed Payroll entry but one thing does not work on my Quickbooks. I cannot zero out my payroll liabilities.
So I write a check from the payroll clearing accounts $160 and split the amount ($200 to gross wages and $40 to payroll liabilities).
Then I write a check from my checking account to the payroll company $40, split the amount (10 to payroll liabilities and $30 to employer liabilities). This is where my discrepancy is. If I have $40 balance in payroll liabilities and I only put a credit of $10 toward payroll liabilities, it will not zero out.
This part really confuses me. I am using the standard quickbooks online.
Thank you!!!
When you record the check to pay the liabilities in QuickBooks the line item to zero out the payroll liabilities has to equal what was withheld so the account zero’s out. The difference goes to employer taxes. Of course you should check these #’s against the payroll reports to make sure they are accurate. So if you are doing that and it isn’t working I’d have to see it to be able to understand and help you. If you would like to do that, go ahead and sign up for a 1 hour session with me over at http://www.QuickBooksAnswers.Info