Pairing a recorded expense with a liability account

fpayer · ‎May 15, 2022

I'm currently using Gusto as a payroll provider and Gusto makes journal entries in Quickbooks when I run payroll. It's been recording salaries and payroll taxes into expense accounts, but recording benefits into "Payroll Liabilities" which is a current liabilities account.

When I sync my bank account with Quickbooks, I am able to match the transactions associated with the salaries and payroll taxes to the entries that Gusto made into the corresponding expense accounts. However, I am not able to match the transactions associated with the benefits with the current liabilities account.

For the past several months, I have been categorizing the benefits transactions from the banking tab as expenses without deducting the amount from the liabilities account. Now I have a growing liabilities account which does not reflect the paid expenses.

What is the best way for me to correct this mismatch between the liabilities and the expenses?

I had considered deleting the benefit liabilities from the journal entries that were being made by Gusto so that no liabilities would be recorded. However, Gusto creates large journal entries each payroll and attempting to remove the liabilities from the journal entry would also require recalculating each entry to ensure that the debits and credits still match up.

Also, is there a way to match a bank transaction to a liability account?

JenoP · ‎May 15, 2022

I'd like to join you here and offer help to balance the liabilities and expense amounts, fpayer.

The Online Banking section is designed to let you match or add actual customer payments, deposits, bill payments, and other types of expenses to your bank register. This is the reason why you can't select a liability account when trying to match the benefits.

As a workaround, you'll want to exclude the downloaded transactions for the benefits. This way, the amount of liabilities will no longer add up every time new transactions are downloaded. Here's how:

Go to the Transactions menu, then select Banking.
Proceed to the For Review tab.
Check all the boxes for the benefit transactions.
Select Exclude.

Although, you can still continue marking the downloaded benefits as expenses. You just need to create a journal entry indicating that the liabilities are already paid and zero it out.

I would also recommend reaching out to your accountant for additional advice on this matter. This is also to make sure that you're using the correct offsetting account when making the journal entry.

Adding these banking-related articles as well should you need more guidance when working in QBO:

Please reply below if you have follow-up questions with the options I've shared with you. You can also create new threads if you have other questions about QuickBooks.

fpayer · ‎May 16, 2022

How would I create a journal entry to zero out the liability? If I debit the amount from the liability account, I need to credit the expense account so that the credits and debits equal out. However, this makes the expense account go negative, not positive.

Candice C · ‎May 16, 2022

Hey there again, @fpayer.

I appreciate you asking some additional questions so you can get this figured out.

Based on the question you're asking, I suggest consulting with your accountant to see what you'll need to credit and debit on the Journal Entry. They'll be able to give you the best accounting advice for your business.

Keep us updated about what your accountant advises you to do from here. I hope you have a great day and week ahead!

mblaroche · ‎July 19, 2023

Did you ever get a satisfactory answer for this question? I have the same issue and concern.

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Pairing a recorded expense with a liability account