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Senior Explorer **

How do I post year end liabilities via a Journal Enry?

I'm trying to find out the correct way to post end of year liabilities that are paid in the first month of the following year. I've posted a sales tax liability via a J/E and the liability shows on the B/S as a liability and on the P&L as an expense. I'm assuming this is incorrect as the accountant sent me a brief note stating that sales tax is not a liability and an expense. I have posted the employee liabilities and it's fine. Where I'm having trouble is the employer FICA, FUTA and 4th quarter sales tax liability. Can someone please explain this to me and the correct way to post the aforementioned liabilities?

 

Thank you!

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Best answer 08-27-2019

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Established Community Backer ***

Re: How do I post year end liabilities via a Journal Enry?

It does not matter whether the payroll is done by intuit or an outside source or yourself manually.
The concept is the same, when you run payroll some amount is posted to each liability account, and an expense account.

I think you need more help than you can get in a forum post, I suggest you sit down with the accountant

View solution in original post

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Established Community Backer ***

Re: How do I post year end liabilities via a Journal Enry?

Could you explain why you want to do this?

 

If you are a cash based taxpayer, liabilities have no impact at all on the P&L or your income tax filing. Cash based is all about the date you received payment from a customer or when you actually paid the expense.

 

Accrual based taxpayers, the date you enter the bill/liability is the date the expense is reported on the P&L, and for income in accrual it is the date you charged the customer.

 

balance sheet account just roll forward from one year to the next.

Senior Explorer **

Re: How do I post year end liabilities via a Journal Enry?

Hi Rustler,

Thank you so much for getting back to me. The company is cash-basis and I was under the impression that all liabilities for 2018 should show on the balance sheet even though not paid until the following year. When the payment is received, I post the payment against the liablity account and the appropriate expense account. So since the employer's FICA, FUTA and the 4th qtr sales tax have not been paid yet, it does not need to be entered as a liability? So far,  could not find how to post those expenses as a liablity without posting it to the expense as the off-set account for the J/E.

Established Community Backer ***

Re: How do I post year end liabilities via a Journal Enry?

When you run payroll, those liabilities are posted to their respective accounts and the offset entry for employer portion is posted to payroll expense. So the liability is on the balance sheet at that point

But since you are a cash based tax payer, that expense from the liability entry does not show on the P&L until you pay it.

Balance sheet accounts do carry forward from one fiscal year to the next.

 

Sales tax is totally different, for sales tax all you are doing is collecting it, holding it, and paying it out - solely balance sheet activity. There is no company expense for sales tax (use tax as a part of sales tax due is another thing but the same reporting rules apply for a cash based business)

Senior Explorer **

Re: How do I post year end liabilities via a Journal Enry?

Thank you for the valuable information. I have to post the payroll manually as it is done by an outside source and not through QB payroll. Sorry, it is the use tax that I was speaking about. I'm not sure how to get the 4th quarter use tax liability or the employer FICA and FUTA to show as a liabiity on the balance sheet for 2018 since technically (for the set of books I'm handling right now) the liability has not yet been paid. The sales tax application is also not used in QB. I'm just preparing a set of books for the accountant from the records provided to me. The accountant has requested that there be a balance sheet and P&L.

Established Community Backer ***

Re: How do I post year end liabilities via a Journal Enry?

It does not matter whether the payroll is done by intuit or an outside source or yourself manually.
The concept is the same, when you run payroll some amount is posted to each liability account, and an expense account.

I think you need more help than you can get in a forum post, I suggest you sit down with the accountant

View solution in original post

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