Amy has a master's degree in secondary education and has taught math at a public charter high school.
Entering payroll information correctly into your accounting system is extremely important so your financial records are accurate. An accurate financial record may be in less danger of being audited.
Business owners know and understand the importance of keeping accurate financial records. Come tax time, an accurate financial report makes it that much easier to put in the required numbers. Also, an accurate financial report also keeps you, as a business owner, more likely to be safe from IRS audits. And even if you do get audited, your accurate financial records are there to back up your tax filings.
Part of your accurate financial records are your payroll records. Your payroll records are your records of your employees and how much you have paid them and when. In this lesson, we'll see how you can enter your payroll records properly in your accounting system. Yes, there are different types of accounting systems, but regardless of the type of system you use, you still need to record certain pieces of information. This process is also a necessary part of making sure your employees are paid accurately and reimbursed appropriately for time worked.
The data that you need in order to complete your payroll records in accounting are the following:
Amount employee worked
Once you have all this information, you can then enter all this information into your accounting system.
Let's look at an example of how this information is entered into an accounting system.
Here is the information you have gathered for one particular employee:
Employee name: Amber Shrader
Employee address: 123 State St., Valley High, CA 00444
Pay period: May 2, 2016 - May 15, 2016
Amount employee worked: 80 hours
Pay rate: $24.12
Gross pay: $1,929.60
Tax withholding: $432.32
Health deductions: $80.00
Dental & vision deductions: $45.00
Retirement deductions: $250.00
Net pay: $1,122.28
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You calculate gross pay by multiplying the amount worked by the employee's pay rate. You calculate net pay by subtracting all the withholding and deductions from the gross pay. Now, it is your responsibility as the business owner to send all these withholding and deductions monies to the right locations. You need to send the tax withholding funds to the appropriate federal and state departments. You also need to pay for the health insurance you are providing. The same goes for the dental and vision care funded by the deductions you are taking. The retirement deductions need to go into your employee's retirement savings account. Your accounting records need to include the mailing addresses of these institutions with instructions on how to electronically send the funds if possible.
Once you have all this information, you write this information down line by line into your accounting system. You either write this information down on paper or enter this information into the appropriate locations in your electronic accounting software.
Once your information is entered, you can now issue your paychecks to your employees. If you are writing out the check by hand, you just need to write down your employee's name and the net pay amount. You can then give your employee a separate slip with the breakdown of how you calculated the net pay. If you are using an electronic accounting system, the software will print out the paycheck for you automatically, including the calculations.
Let's review. Your payroll records are your records of your employees and how much you have paid them and when. In order to enter your payroll records into your accounting system, you first need some necessary information such as your employee name, pay rate, hours worked, and necessary withholdings and deductions. Once you enter this information into your accounting system, you then make your necessary calculations to find out your employee's net pay. Then you can write the paycheck for the net pay made out to your employee.
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