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Tracking payroll expenses by class, department, or location

SOLVEDby QuickBooksQuickBooks Desktop Payroll16Updated August 30, 2021

Learn how to track payroll expenses  using classes in QuickBooks Desktop.

You can use QuickBooks classes to classify your income and expenses by department, business office or location, separate properties you own, or any other meaningful breakdown of the business you do.  We'll show you how to track payroll using classes.

Consider the following when setting up class tracking

  • Set up classes on the basis of the type of reporting that you want to do. And consider how you want to see your business segmented on reports.
  • Set up a class such as "other" that you can use to deliberately classify transactions that do not fit into any specific class that you have defined.
  • Do not use classes for two different purposes. E.g., do not create classes for tracking office locations in addition to tracking partners.
  • Identify both income and expenses for each class you set up.
  • Consistently enter the class information on your forms and registers to be sure that this information is valid and useful.

Set preferences for tracking payroll using classes:

Here's how to set preferences for tracking payroll using classes.
Tracking payroll classes demo

  1. From the QuickBooks Edit menu, choose Preferences.
  2. Select the Accounting icon. Then select the Company Preferences tab.
  3. Select Use class tracking. Then select OK.
  4. If prompted, select Yes to save changes.
  5. In the Preferences window, select the Payroll & Employees icon.
  6. Be sure that Full payroll is selected in the QuickBooks Payroll Features section.
  7. Select Job Costing, Class and Item tracking for paycheck expenses.
  8. If you want to assign one class to an entire pay check, select Entire paycheck.
  9. If you want to assign one class to each item on the pay check, select Earnings item.
  10. Select Ok.

If you selected the Earnings Item payroll preference (so you can assign one class for each earnings item on a paycheck), the Preview Paycheck window will include a Class column. You can now assign a different class to each earnings item. If you selected the Entire paycheck payroll preference, your payroll expenses will be prorated by class on reports.

To identify how payroll expenses are distributed to each class, use the formula:
[Rate X # of hours]/ Total wages = percentage/rate of the proration for each Class
Once you have chosen to report on payroll taxes by job and class, reports of expenses by job and class break down company-paid payroll expenses not only for salaries and hourly wages. But also for company-paid payroll taxes.

Note: Marking Track Expenses By Job will not add a class column to the payroll items listed under Other Payroll Items on a paycheck. Instead, in reports, these items are divided based on the division of the earnings items on the paycheck.

Generate a payroll summary report broken down by class

Here's how to generate a payroll summary report to show the company paid liabilities and the gross pay

  1. From the QuickBooks Reports menu, choose Employees & Payroll Reports. And then choose Payroll Summary.
  2. Select Customize Report on the report button bar.
  3. From the Column drop-down list, select Class.
  4. Make any other changes to the report. Then select OK.

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