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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.
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.
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.