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Payroll Reconciliation and Sustaining Correct Accounting Books


As a small enterprise proprietor, payroll is one among your greatest bills. You could ensure you run payroll and report it in your books accurately each time. Examine your normal ledger entries with payroll reconciliation for correct accounting and payroll data.

Payroll entries within the normal ledger

Payroll transactions contain totally different accounts in your books, together with expense and legal responsibility accounts. Each time you run payroll, you have to report it within the normal ledger.

Normally, you report the next sorts of payroll transactions within the ledger:

  • Wage and wage bills
  • Employer liabilities
  • Worker liabilities (withholdings and deductions)

The entries in your ledger ought to match the data on the payroll register. If you do payroll reconciliation, you confirm that each data are an identical.

What’s payroll reconciliation?

Every pay interval, your payroll should steadiness along with your ledger’s payroll expense account. The payroll reconciliation course of helps you retain correct accounting data, that are crucial for tax submitting and measuring monetary well being. You test that the transactions in your books equal the payroll register.

If you reconcile payroll, make sure you report the correct quantity for every worker. And, look to see if every transaction was recorded within the right ledger account.

Examine that every one the accounts affected by a paycheck agree with the gross earnings. This contains payroll bills in addition to withholdings and employer liabilities.

Let’s say an worker earns $2,000 throughout a payroll interval. The worker doesn’t obtain all the quantity they earn. A number of the cash goes in direction of taxes and different withholdings.
This worker receives $1,600 after withholdings. The remaining cash goes in direction of Social Safety, Medicare, earnings taxes, and insurance coverage deductions.

You could make sure you recorded all payroll accounting transactions precisely in your books. Bills and liabilities have to be debited and credited accurately. And, you’ll want to make certain that the calculations are proper.

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The right way to do payroll reconciliation

There are a number of issues to recollect when reconciling payroll to normal ledger entries. You must reconcile payroll earlier than submitting payroll and giving workers their checks. It’s a lot tougher to repair errors after you pay workers. Reconcile payroll a minimum of two days earlier than payday.

If you reconcile payroll, test that these particulars are right:

  • Withholdings and deductions
  • Employer taxes
  • Hours labored, together with additional time, trip time, sick days, and so forth.
  • Wages and salaries

Make certain the numbers you recorded are affordable. Have a look at previous payrolls to see if the present pay interval is comparable. If there’s a massive distinction, be taught the trigger. Then, be certain that every transaction you entered is right.

The right way to reconcile payroll

The reconciliation of payroll doesn’t need to be troublesome for small enterprise homeowners. Use the next steps to reconcile payroll.

1. Print out your payroll register

The payroll register summarizes every worker’s wages and deductions for the pay interval.

2. Match every hourly worker’s time card to the pay register

Verify that you simply entered the hours for every worker accurately. The hours entered ought to match the worker’s time card. Don’t overlook to distinguish common and additional time hours, in addition to trip and sick time.

3. Make certain the pay charges and salaries for every worker are right

Account for additional time pay, double time, and unpaid time that might usually be paid. Additionally, be certain that all pay charges are present, akin to in case you gave an worker a increase final pay interval.

4. Examine that you simply took all deductions out of worker paychecks

Make certain any new deductions have been taken out, like in case you get a wage garnishment for an worker. Additionally, test in case you have been supposed to alter or cease deducting any quantities.

5. Make entries within the normal ledger in keeping with your payroll register

You may make one payroll entry exhibiting the payroll sum for the interval. Right here is how you’ll report debits and credit within the normal ledger:

  • File wage and wage prices as a payroll expense with a debit.
  • Record the whole for every kind of wage deduction with a credit score.
  • Add an entry for employer liabilities with a debit.
  • Embrace an entry for worker liabilities with a credit score.

Make certain the payroll bills match entries you made in your books and checks you issued. If the data matches, there aren’t any errors along with your payroll. After you reconcile payroll, submit payroll and pay your workers.

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This text has been up to date from its authentic publication date of September 8, 2017.

This isn’t meant as authorized recommendation; for extra data, please click on right here.



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