payroll part 2

[sallyf]

The non-accountant is back again.....
When I am setting up the pay item descriptions, I'm having a hard time understanding which debit and credit accounts to use for withholding amounts (federal and state withholding and FICA). right now I have the credit account as 01-5131-000 Federal withholding and the debit account as 01-2210-000 Federal withholding payable. I know this is incorrect but what would be the right way???
I know this is really basic....and I ought to understand this, but I seem to have a mental block.

sally

[sallyf]

Should taxes withheld be an employer liability item instead of a deduction?

Educate me!!!!!!!!!!!!!!!!!

Thanks
Sally

[Zeb]

Matcing items where the employee has a deduction, but the employer also pays the government the same amount, will be the employer liability items. The employee will still have a deduction but there will also be a matching item that the employer pays. I believe FICA is an examples.

For what debits and credits to use, you should notice on the maintain item descriptions screen, what ever type of item you have selected (deduction, income, employer liabilty) it gives a hint as to what the debit and credit should be. Here is also an article giving some detail for the item types.

If you have an accountant or CPA that you work with they should be able to easily tell you exactly what accounts to use.

Hope it helps.

[sallyf]

So why do we debit a bank account when it hasn't actually been paid yet? or does that happen when it is paid?

[Zeb]

The gross salary CREDITS the bank and takes all the money out, so you have to take the deductions from the gross and put it back in the bank.

[sallyf]

<----------- the light bulb just went on.

THANKS!

Sally