In this article you will learn how to map the chart of accounts, which is what you need to do before you can run payroll. You will also learn about various main payroll accounts, how to update payroll accounts and how QuickBooks debits and credits the accounts
Map chart of accounts
Before you can run payroll, you first have to map your chart of accounts. This is to make sure payroll expenses and liabilities are organized correctly.
- After signing up to Advanced Payroll you will see the Get ready to run payroll "initial setup wizard." You will be able to update the mapping from here.
- After you update the mapping you can specify the proper bank account and payroll liability accounts.
After setup, you can edit the account settings anytime to get more detailed reporting. Just remember to consult your accountant first.
Get to know payroll accounts
Here's a list of the main accounts QuickBooks Online uses to organize your payroll:
Payroll clearing account: After you run payroll, tax and direct deposit amounts show here until the pay run is processed.
Wages & earnings expenses: The expense for things like regular pay, overtime, and commission that you pay to employees & contractors. New income/deductions will inherit the top-level setting and can be changed at any time.
Employee benefits expenses: The expense for company contributions you pay into employee benefits like health plans or RRSP’s.
Payroll tax expenses: The expense for the portion you pay for payroll taxes like Canada Pension Plan (CPP) and Employment Insurance (EI).
Wages & earnings liabilities: The liability for things like regular pay, overtime, and commission that you pay to employees & contractors. There is no top-level account for these liabilities.
Benefits & deductions liabilities: The amounts you deduct from employees & the portion you pay for benefits like health plans & Registered Retirement Savings Plans (RRSPs).
Payroll tax liabilities: The amounts you deduct from employees & the portion you pay to Canada Revenue Agency (CRA) or Revenu Quebec for payroll taxes.
Payroll subscription fees: The taxes and fees you pay for using Advanced Payroll. There is no top-level account for the fees. Sales tax expenses is for folks with sales tax centre not on.
Update payroll accounts
Here are the steps to update payroll accounts:
- Select the Gear icon on the Toolbar, then Payroll Settings.
- From the left menu, select Chart of Accounts.
- From the Payroll bank account drop-down, choose your Bank Account. This is where we’ll show the payroll charges that come out of your bank account. You can also create a new account from this screen.
- Select the Advanced drop-down to see the pre-selected accounts.
- You can change any accounts you want.
- To be more detailed with mapping, select the drop-down list of sub-accounts of each main account:
- Select Done.
How QuickBooks debits and credits the accounts
You'll see two separate journal entries for each pay run:
Journal Entry 1
- Syncs to your QBO account on the day payroll is run
- Debits the clearing accounts and credits the bank account
Journal Entry 2
- Syncs to your QBO account on the pay date
- Credits the clearing account debits expenses and liabilities
Now you know how to map the chart of accounts, about various main payroll accounts, how to update payroll accounts, and how QuickBooks debits and credits the accounts