Payroll accounting manages a company’s payroll information, including employee salaries, bonuses, and taxes. Accurate employment records are necessary to comply with legal requirements, and payroll accounting is often separate from regular bookkeeping. Accountants review entries and remit payroll taxes to the government agency.
Payroll accounting is a process that occurs in all businesses and focuses on the financial management of a company’s payroll information. Accountants will record information related to employee salaries, bonuses, and commissions; Accountants will also record and report taxes related to this information in the general ledger. Payroll employees and managers are responsible for providing this information to accounting, along with maintaining the necessary documentation to meet legal requirements to show accurate employment records. Payroll accounting is often separate from the regular bookkeeping office as the information is highly sensitive and not visible to various employees.
Businesses will often have a payroll office that keeps up with all the legal requirements for hiring employees. Information related to background checks, drug tests, employment contracts, benefit agreements, salary concessions, and other information will often be included in specific human resources laws. Failure to keep accurate employment records can result in heavy fines or other penalties for not following laws and regulations. Some companies may use accountants to audit the payroll accounting processes in the human resources office. This audit ensures that there are no violations of the current human resources law in the company.
The inputs to post payroll figures are fairly simple. In today’s technology environment, many entries occur in real time using pre-programmed policies in the company’s accounting software package. Accountants in the payroll accounting department will review the entries to ensure that no errors occurred during automatic processing. The basic entry will debit the payroll expenses for the wages and salaries of each employee and the credit payroll payable. The company may have separate accounts that define specific payroll groups. Once paid, the system will debit the payroll to be paid and the credit in cash. These entries, in terms of debits and credits, are also the same for payroll tax accounts.
Payroll accounting often requires companies to remit payroll taxes on a scheduled basis to the appropriate government agency. Accountants will need to complete the appropriate forms and cut a check to the agency for these taxes, often quarterly. Larger government agencies may have an online deposit system to transfer this money online as needed. Accountants will need to reconcile these accounts to ensure that all money posted to the account will go to the appropriate agency. Outstanding debit or credit balances indicate an internal problem with the payroll accounting system. Accountants will need to adjust withholding figures or percentages to correct this problem.
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