The amounts withheld are based on an employee’s earnings and designated withholding allowances. The employee is required to complete a W‐4 form authorizing the number of withholdings before the employer can process payroll. The employer withholds income tax amounts based on the allowances designated by each employee and tax tables provided by the government. The employer pays these withheld amounts to the Internal Revenue Service . In addition to income taxes, FICA requires a deduction from employees’ pay for federal social security and Medicare benefits programs. FICA taxes are withheld by the employer and are deposited along with federal income taxes in a financial institution.

When you or your bookkeeper goes to close the books for November, $700 will need to be recorded as a credit to be paid in your accrued payroll account. When you pay the full $1,000 balance on Dec. 3, you’ll clear the balance by debiting payroll accounting the account for $700. Recording payroll on your books involves making sure that amounts are accurately posted to payroll accounts. Before you can record payroll, you will need to set up payroll accounts on your chart of accounts list.

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You can export the GL entry from your payroll processing system and import it into to CosmoLex, or manually enter it. A payroll journal is a specific type of accounting journal that includes data regarding the human resources part of the company. To further understand how payroll journal entry works, you might review the examples again. Your payroll tax expense as a debit must equal the total of your tax liabilities.

These documents detail the amount that must be withheld from each pay period. For the first kind of payroll journal entry, it is important to realize that you only do one entry for all employees. You don’t make a journal entry for each employee individually. Whether you are paying one employee or dozens of employees, you need to make a payroll journal entry. We have credited a liability account for each of the tax amounts. Sometimes you will see all the taxes lumped together into one account called Payroll Taxes Payable. We have also credited Cash for the amount of the net pay.

Post Payroll Journal Entries to the General Ledger

Debit payroll tax expense for the total of all payroll taxes that employer pays. For recording the payroll, it is recommended to make separate journal entries to record the accounting information. When the employees are paid, an entry is made to reduce the wages payable account balance and decrease cash. The total amount of company expense is $58.80 because the is the total amount of tax that the company incurred. Use the same payable accounts for Social Security and Medicare.