Many of the QuickBooks users who are using the accounting version likes to record the payroll but do not know how to go about it.
Payroll feature is not included in the QuickBooks Accounting version. So to do it, user can consider passing a General Journal into QuickBooks.
Why General Journal?
I saw some user used a Write Cheque method for salary expense and minus off the contribution such as CPF employee, CPF employer, SDF, CDAC and etc. Personally, I don't like this method as this method uses a negative value in a Write Cheque form and it may cause problem to the database (I seen an earlier version having errors in negative value). Besides, it may sometime cause confusion to the management and auditors.
A better method is to use a General Journal to record your payroll as an accrual and follow by Write Cheques to the employee and CPF board.
Below is an example to illustrate how to use General Journal for payroll recording.
Employee name: ehlim
Monthly basic salary: $1000.00
CPF employee deduction: 20% of the basic salary
CPF employer contribution: 14.5% of the basic salary
Create General Journal
In the General Journal form:
Debit: Salary expense: $1000.00
Debit: CPF Employer expense: $145.00
Credit: Salary Payable (other current liability a/c): $800.00
Credit: CPF Payable (other current liability a/c): $345.00
- Under the name column of the General Journal form, select the employee's name. This will enable you to print a transaction report of this employee at the later stage.
- Optionally, you may consider entering short information regarding this salary journal in the memo field. The memo can be such as "Salary for the month of Jul 20009".
This is to accrue monthly salary and CPF expenses. You will able to see this information (the General Journal that you have just created) in Profit & Loss report and Balance Sheet report.
Write Cheque to the employee
Next you have to prepare a pay cheque for your employee. In the Write Cheque form:
Pay to the order of: select your employee's name
Account column: select Salary Payable account.
Double entry for this Write Cheque transaction is debiting Salary Payable account and crediting Bank account.
Go back to your Balance Sheet report, you will find that your Salary Payable account will be reduced. This entry will not have any effects to the Profit & Loss report as there isn't any entry to the income or expenses account.
Write Cheque to the CPF board
Use the Write Cheque method to pay for the liability due to the CPF board for the CPF accrual amount.
In the Write Cheque form:
Pay to the order of: select CPF Board
Amount: enter $345.00
Account column: select CPF payable account
Double entry for this Write Cheque transaction is debiting CPF Payable account and crediting Bank account.
The CPF Payable account of the Balance Sheet report is being net off with the Write Cheque transaction that you have just created.
The above three transactions illustrated a basic way of creating a payroll transaction for your business. If you feel that creating a General Journal is too difficult to understand or you preferred a more systematic way of recording payroll transaction, you may consider upgrading your QuickBooks Accounting software to QuickBooks Plus or higher version. For QuickBooks Plus or high version does come with a Payroll feature for you to manage your monthly Payroll.
Stay with my blog, I will introduce the QuickBooks Payroll feature in my coming blogs.