Accounting and Bookkeeping
Processing payroll is time consuming and tricky given the various state tax laws. It is recommended that you outsource your payroll processing to a payroll-processing firm. They are better able to keep up with income tax law changes and are better equipped to file the proper forms on time. When you set up processing, make sure the processor files both state and federal tax forms for you.
Recording payroll is not just showing the amount deducted from the bank account, but all the parts making up that amount. Payroll includes:
- gross salary
- both federal and state payroll taxes
- deductions for benefits
- final amount withdrawn from your organization's bank account
If an organization decides to offer direct deposit for its employees, the payroll-processing firm will pull both the net salary and payroll taxes (both employer and employee)from the bank account of the organization. If an employee is paid using a check, the payroll-processing firm will provide a printed payroll check for the net amount and only pull payroll taxes from the organization's bank account.
If you outsource your payroll, you will receive reports from the payroll service for each pay period. These reports typically contain a payroll register for the current payroll period and a cumulative report that, if set up properly, will show you quarter and year-to-date information. To enter your journal entries for each pay period you will work primarily from the payroll register.
Sample Journal Entries