What Are the Payroll Debit Entries in the General Ledger?
Your general ledger holds your company’s financial transactions. The ledger’s chart of accounts includes various control accounts under which you post the respective transactions. This includes payroll journal entries, which show wages paid and payroll liabilities for the recording time frame. You record the entries as debits and offset them as credits.
If wages earned will be paid at a later date, you record the payroll transactions as accruals. For example, the Oct. 31 payday reflects payment for Oct. 21 to Oct. 27. Your journal entry date would be Oct. 27. Make a note that payment is for the respective pay period and indicate the actual payday that payment will be made. If the pay period ends on payday, you do not need to accrue. Simply record the entries under the actual payday.
At the end of each payroll period, make debit entries under the salary expense account for all gross wages and salaries paid to your employees. You may lump all payments together as one debit entry or you may separate the different types of payment. Compensation includes salaries; regular wages; overtime; bonus; severance; back pay; retroactive pay; vacation, sick, personal, holiday and bereavement pay; and commissions.
Include the deductions you made from your employees’ paychecks in the salary expense gross amount. Deductions include federal income tax, Social Security tax, Medicare tax, and, if applicable, state and local income taxes. Additional withholding may include state disability insurance, state unemployment tax, wage garnishment, health insurance and retirement contributions, union dues and charitable contributions. List the withholding amounts as credits. The total credit for all withholding should equal the total debit for salary expense. The sum of all your credits that are payable is your net payroll. Salary expense and employee withholding are done as one payroll entry.
Make a separate debit entry, under your employer payroll tax account, to record your own payroll tax liabilities. You are required to pay Social Security tax, Medicare tax, and federal and state unemployment tax. Depending on where your business is located, you may be required to pay employment training tax and local payroll tax. Record all of your payroll tax expenses for the pay period as one debit. Then, list the individual amounts as credits. The total credits should match the sum of your debit. Make a note that taxes will be submitted to the respective agencies at a later time.
If you accrue salaries and wages, when you actually pay your employees, you make another journal entry under the actual payday. Record your net payroll payable as a debit and offset it as a credit to your cash account. When you pay your tax liabilities, record all individual tax amounts as debits to reduce your cash account.