What Is Payroll Accounting? The Ultimate Guide

Payroll accounting refers to the system that organizations use to keep track of employee wages, benefits, payroll taxes and types of deductions. This information is used to create financial journal entries recorded on a GL for financial reporting and business-related purposes. Some payroll providers offer supplemental services that go hand-in-hand with paying employees. QuickBooks, for instance, offers HR services, workers’ compensation insurance, and more by connecting business owners to partners. If you work in a non-monopolistic state, you likely have access to pay-as-you-go workers’ compensation insurance plans.

If you’re looking to convert from manual bookkeeping to digital, consider a staggered approach. Overhauling all at once can be overwhelming and discouraging, so it’s best to take it slow and make meaningful and intentional shifts. As of 2021, approximately 1.7 million people worked as bookkeeping, accounting, or auditing clerks. The BLS expects the field to have a 5 percent decline in growth from 2021 to 2031.

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Any company that must highlight cash flow retained earnings, or any other changes in a position financially must use a double-entry accounting system. As a responsible small business owner or bookkeeper, you should be aware of your company’s revenue streams. With accurate bookkeeping, you can tell how much your business is making in terms of income and track your spending to ensure that you have https://www.bookstime.com/ enough cash on hand to cover your business expenses. Proper financial records make it easier for you to analyze the financial state of your firm and determine areas that need improvement. Bookkeeping is the process of tracking and recording a business’s financial transactions. These business activities are recorded based on the company’s accounting principles and supporting documentation.

Some accounting software comes with invoicing features, like automated payment reminders, or you may opt for separate invoicing software. Payroll processing is the method you follow to pay employees at the end of a pay period. It’s a process that calculates bookkeeping and payroll services total pay, determines how much is deducted and issues payments to employees, tax offices and benefits providers. Companies not using a payroll provider may have a dedicated payroll professional or human resources (HR) expert processing payroll.

Payroll taxes

You may have employees who earn overtime at a rate of time-and-a-half or even double time. You may need a payroll service or payroll software—and likely even a time tracking software—to manage that. Payroll liabilities, or payables , are amounts you currently owe, pertaining to your business’s payroll. If you’re using a payroll journal, you enter payables as credits because you are increasing the amount you owe.