Liabilities Problem

Sheilah · Post by **Sheilah** » Tue Jul 13, 2004 10:31 am

The only Liability Account that I use is for Payroll. I have followed the instructions for setting payroll up and believed that I had done it correctly. However, my Taxes Payable never reduce, therefore, my general fund balance is way off. What am I doing wrong? All help appreciated.

Sheilah

Randy B · Post by **Randy B** » Tue Jul 13, 2004 11:16 am

If you followed the instructions as you say then you are crediting or increasing your payroll liabilities with each payroll you produce. You would debit or reduce those liabilities when you remit the funds to the government which you probably do with an accounts payable check. The credit to that check is obviously to cash. It sounds from what you have described you need to check to what account you debit when you remit the taxes.

Sheilah · Post by **Sheilah** » Tue Jul 13, 2004 12:47 pm

When I pay the taxes, I have been debiting an expense account and crediting the asset account (checking account). Do I need to be debiting the liability account?

Sheilah

Randy B · Post by **Randy B** » Tue Jul 13, 2004 2:42 pm

You stated you followed the PowerChurch instructions so probably what you are doing is debiting an expense account for the employer (church's portion of FICA and Medicare) and then crediting a liability account when you do payroll. For income taxes and the employee's share of FICA and Medicare you are probably debiting a payroll expense and crediting the liability accounts.

If you are set up like that, then all you need to do when you actually remit or pay the taxes is debit the liabiity accounts because you have already recognized the expenses at the time of payroll and then credit the cash account. When this process is complete, the liability account is zeroed out.

So the final answer to your question is you do not need to debit the expense accounts if you already debited them in the payroll procedure process.

Zada · Post by **Zada** » Tue Jul 13, 2004 3:15 pm

He's right Sheilah. If you've got payroll setup correctly when you actually cut the check to the IRS you would credit the bank and debit the liability. See the document for Typical Payroll Setup on the website to make sure you're payroll is setup correctly.

Zada