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Level 1

Making some Payroll items a Cost of Good Sold



I use QB Enterprise Desktop. 


I'm am planning to grow my business by adding "departments".  New departments are essentially an additional line of business service.  From a book keeping perspective I need to have profitability tracked by each department.  However, there are also general expenses (i.e. Rent, Insurance, Supplies, etc) ,or what I am calling "Corporate Expenses",  that are not going to be posted to the departmental business unit P&Ls.  So the profit and loss for the department will be Department_Revenue-Departmental_COGS.


The challenge is that each department has payroll(labor) expenses directly associated with doing their work.  Then there are also Payroll(labor) expenses that sit above the departments and are Corporate Expenses (i.e. CEO, VP Finance, Etc). 


I believe the best way to do this is make payroll expenses a COGS for departmental labor and leave higher level labor (Corporate) in the expense toward to bottom of my P&L.  I know the Payroll items can be placed in classes when doing payroll (we use Intuit Payroll) which is great however I'm concerned about Payroll items like Tax Items, Pension Expenses, etc. 


Does anyone have a practice for solving for this.  I've got to believe this is a common setup.  Any help would be much appreciated. 


Thanks in advance. 

2 Comments 2
QuickBooks Team

Making some Payroll items a Cost of Good Sold

Thank you for sharing how you want to make payroll items a Cost of Good Sold, Diesel14.


QuickBooks calculates COGS through inventory type item. Therefore, payroll items can't be added as COGS.


Payroll expenses will only fall to your payroll accounts. You can record the employee wages as an expense by allocating the job name when creating a paycheck.


You may want to check out this page: Tracking job costs in QuickBooks Desktop to learn more about recording expenses for a job.


I've also added the Set up job costing and item tracking to help track your payroll expenses by job.


Stay in touch if you need additional information, and I'm always right here to help.

Level 1

Making some Payroll items a Cost of Good Sold

We have to move those payroll cost to COGS by journal entry every week which is a pain and time consuming to do. There should be an easier way to allocate those cost.

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