QuickBooks Pro Plus desktop 2022 Enter payroll for the second month, get ready because we bookkeeping proves our moving up the hill top with QuickBooks Pro Plus desktop 2022. Here we are in our geek Ray guitars practice file going through the setup process with the view drop down the open windows list on the left hand side company dropped down home page in the middle maximizing it to the gray area. Go into the reports drop down company and financial taking a look at the balance sheet standard. customizing it up top with a range change from a 101 to two to 1231 to two fonts and numbers change in the font size on up to 14.
Okay, yes, please. And okay. Reports drop down company and financial profit and loss range change from Oh 101 to two to 1230 122 Customizing that report fonts and numbers change in that font size on up to 14. Okay, yes, please. And okay. Reports dropped out one more time to the accounting and taxes with the trial balance and a range change from Oh, 10122 to 1231 to two customizing that report without fonts and numbers changing that font on up to 14. Okay, yes, please.
And, okay, we’re going to be entering the payroll now for the second month of operations. So we’ll enter the payroll transaction, if we go to the home page, then we’re looking at this item, pay the employees remembering that payroll is going to be an add on feature. Typically, we’re using the manual payroll here, which is a great tool for practice because it allows you to basically calculate and think about what the calculations are for the withholdings,
but it’s not something you would typically want to use in practice, given the fact that although each of the withholdings are not too difficult to calculate in and of themselves, when you put all the withholdings together, and you got to calculate them per employee, then calculate the aggregate as well, you got to calculate it on a check by check basis, as well as an aggregate basis on a year to date basis, there’s a lot of room for errors and having the double check of the software is nice.
So there’s different ways you can turn it on, or different levels of payroll that you can pay for within QuickBooks. Or you might choose to get payroll from someone else, if you’re paying the added payroll of payroll provider, for example, like an ADP or paychecks, in which case they would be doing the payroll there, it still need to be entering the information into your system. Therefore, no matter what you do, you’re going to be stuck with payroll in some way, shape or form.
When you’re looking at the bookkeeping, if there’s payroll within the company, often an area people don’t understand. So if you understand the accounting behind it, it can be a useful skill. So we turned on the payroll by going to the Edit, drop down down to the preferences. And then we turned on the payroll on the left hand side company preferences turned on the payroll, we got the manual payroll on here, so that should be free for the practice problem purposes. Closing then this back out.
As we enter the payroll, we would expect noting that the next thing we did when we set up the payroll by the way was going to list strapped down, and we set up the payroll item lists, possibly not exactly this way. But you can see that these are the gonna be the payroll items that are going to help us to to calculate the payroll, we also need to determine how often we’re going to be paying people what’s gonna be our payroll cycle, is it going to be monthly, weekly, bi weekly, semi monthly, and so forth. Once that is set up, then entering the payroll can be fairly straightforward with just basically entering this transaction.
When we do that, we’re imagining actually the generation of in essence, the checks or entering the decrease to the checking account at this point in time, and it becomes a complex transaction, because you also will have to be then dealing with the employee withholdings as well as the employee or payroll taxes that will be in place and any benefits that will be taken into consideration. So let’s check it out. We’re going to say pay the employee he is going into that item.
And so this is going to let’s close the thing on the left hand side, that carrot that thing, that thing over there. Let’s close that thing out. And then we’re going to pay period. So we’re going to say the period ends at the 228. Because we’re assuming that we’re paying here on a monthly basis, the check date, I’m also going to say as on 228 to two, you might not have these two things on the same day, you might say process the payroll at the end of one day, and then issue the check some couple days after or something like that, or whatever your system might be, then we’re going to be saying it’s coming out of the standard checking accounts.
Also note that it’s kind of common that you have another payroll account where you might be putting money into directly the payroll accounts just to cover the payroll and then paying the paychecks with it. Why would you do that you might ask? Because payroll can be complex payrolls most likely a very likely area that you that if you have problems that you want to know exactly what you’re dealing with.
And it’s nice to have those checks right in one account. So it might be worth doing or thinking through doing that, then we’re going to not be printing the checks, but we’re going to handwrite the checks here. If you were to print the checks, you check off this item, put the actual checks into the printer and print out those checks. We’re just going to do the handwriting for their practice problems. We got our two individuals down below. Because we don’t have the paid payroll, we’re going to have to do some adjustments to them. So I’m going to check them both off. I’m going to go into the Adam Hamilton which we set up as a salaried employee.
So we got the salaried employee he calculating up top but the withholdings down here or not withholding. So let’s calculate that I’m just going to estimate the withholdings for the purposes of a practice problem, I’m not going to get into the added tax here for Medicare, I’m just going to calculate the Medicare down below. So I’ve got the federal the federal withholdings, these are going to be dependent on this is, by the way, not our taxes for the company. This is the employee taxes, the things that we’re going to report on their W two. And if we typically get it right, then we’re going to get the information from the W four with a marital status and whatnot, what their withholdings are.
And then we have to look at the tables. This is where it’s good to use software software’s helpful to calculate this. And then hopefully, the the when they file the 1040, at the end of the year, they’ll get a refund, if because we try to shoot to overpay typically is how the whole system is in essence set up to be. So I’m just going to put an item here, which I’m going to say is 720. So I’m going to say 720. For that one, Social Security, it’s more of a flat tax. So this is one that will change with time.
So 458 3.33. In other words, I should say this is one that is going to be tied out with a flat rate, typically to the salary, although it does get more complex than that, because there is a cap on it as well. So I’m going to multiply times point oh six, two, and that’s going to give us our 248 17. So I’m going to say two, four 8.17. On that one, notice the year to date numbers are populating on the right hand side, that’s necessary for multiple reasons.
One, I got to report it for Human Resources purposes, to the employee on a paycheck stub or in some electronic way, if you’re given some type of electronic transfer and these caps, then I need to see what the aggregate is to hit the cap. So if they hit this the cap for like the year to date, Social Security, then that’s going to have an impact on the Social Security calculation for this particular paycheck as well. So then the Medicare, I’m going to take the 458 3.33 times point oh, one 4.14 Or five. And that’s going to be about 6666 45. So or 6646, let’s say. And so there we have it.
So the full amount they earn 4005 83 Minus the withholdings gives us the net Check that they’re going to get. And then we have our payroll taxes, which we’re going to match down here, which is going to be the 240 8.17. Medicare is about that 66.46, I’m not going to populate the federal unemployment taxes for the purposes of our practice problems. What will this do when we populate this or record this, it’s going to then record the expense of the 4005 8333, even though they’re not going to get that amount the other side, then what they’re going to get decrease in the checking account by the 3005 4870.
And then the liability is going to be going up by these amounts, which I think we just put into one liability account, you could break them out to three liability accounts or two liability accounts for payroll tax liability for these amounts that we’re gonna have to pay in the future to the government. Note that in practice, you might have state taxes as well will be dependent on the state that you’re going to be in local taxes, possibly and benefits, which would act in a similar way, the benefits of course, being voluntary, whereas these are involuntary type of actions.
And then we have our taxes on this side, which are going to be going we set them going to the payroll tax expense, these being payroll taxes, not part of the wages over here, whereas these been taxes, but not our taxes. They are the employees taxes, therefore we record them as payroll expenses. These are our taxes, that we for some reason are forced to pay on the wages, not our wages, but the wages that we paid to the employee that we had to pay in taxes on the wages that we paid to the employee. So we’re going to increase the payroll taxes for them, other side going to the liability.
Let’s do the next one. Save and Next so the next employees and now you got the two different employees. Remember, you can think of this transaction in total as if kind of they were one employee with regards to a journal entry, which is how you might enter it into the system if it was to be done by outside company like an ADP or paychecks, and then we can think of them as a paycheck by paycheck, having a similar transaction for each one, which is how it’s going to be showing up when we run the payroll through QuickBooks, which can be quite overwhelming, because it becomes a lot of data very quickly. So we’re gonna keep it up to 15.
So 160, so we got the 2400. So let’s, let’s keep it at there. Let’s keep it at that. And then we’re going to say that the hourly, the federal taxes, the federal taxes, I’m going to say, are 360, those are the ones we’d get from a table, those are the complex ones. And then I’m going to say that we have a 240 times the point oh, six, two, we’re going to say that the Social Security is 140 8.8. And we’ll hold on a second 114 8.80. And then the Medicare, I’m going to say the 240 times point, oh 145, which is going to be the 3480.
So this is going to be three 4.80. So that means that they’re going to get 2400. That’s how much they earned. That’s not what they’re going to get, then we’re going to take from them to 360 to 148 80, and the 3480, because we’re required to buy the government, and they’re going to get the 1008 5640, then we’re going to have to pay in the future in matching for the Social Security at 140 8.8 and the Medicare at the 34.8. And then I’m not going to get into the unemployment at this point.
So for this employee, we’re gonna have a similar transaction with different numbers on a cheque by cheque basis, what’s this going to be doing, it’s going to be decreasing the checking account by the 1008 5640. But it’s going to record the expense for the Payroll Expense of 2400. The difference going to the liability, those being their payroll taxes, not our taxes, even though we’re the people that the government is being is forcing to be their tax collector, we’re the tax collector, I didn’t apply for this job. But they that’s what they have to do it if I want to run my business.
And then down on this side, we have our taxes that we’re going to be paying over and above on the payroll taxes, which is going to increase the payroll tax liability, and the payroll tax expense. So save it and close it. So now you got those two items that should should you could think about the full journal entry in aggregate between those two employees. Let’s continue. Everything looks good. does everything look good people let me know if you see anything wrong, is anything wrong? Okay, I’m going forward. If anything gets messed up, it’s your fault.
So because we’re going to say create the paycheck, let’s do it. So now we have created the paychecks, I’m going to close this back out, well, we could look at the paycheck stubs. If we look at the stubs now. And say we want to we want to preview it. Where’s the preview, preview. And there we have it. So now notice, we got the current information, information you’ve probably seen similar to this. And then we have the year to date information.
Again, remember that it gets quite complex when you’re talking about multiple employees, multiple different current, and then year to date transactions for each employee. And then you’ve got the caps that are going to be involved. And if you get into different types of benefits and whatnot, it gets quite complex fairly quickly. So let’s close this back out. Let’s close this back out. Let’s close this back out, let’s open the caret on the left hand side. And I usually like to see it on the actual registers. Sometimes I’ll go to lists drop down to do that.
The chart of accounts, if we take a look at the checking up top and double click on that going into the register, there’s our two paychecks indicated with a little paycheck thing. And if you’d click on little paycheck thing, then it takes you to the paycheck detail. And if I click the paycheck detail, we get to the detail of the paycheck. Now note, you don’t usually want to be adjusting paychecks. So you can’t like change them, you have to avoid them normally, if you want to make a change, and process the payroll again.
And then we can go to the trial balance and see what happened here what happened. The we’ve got the checking account went down double click and the checking account, it went down by the net amount of the paycheck for Adam and Erica. So that’s the net amount. And then if I close that out the other side went to the liability for payroll expenses, double click in the payroll expenses.
And we’ve got the paycheck down here for Erica and Adam. Let’s take a look at Eric as this time. And if I check that one off, that’s for the total earnings, you can see not the net Check the difference between those two, closing this out and that out went up top to the balance sheet or balance sheet accounts. I could scroll up because I’m in the trustee TB trial balance.
And we see that we got the liabilities for the payroll were the payroll There they are right there. They’re right there right in front of your face. You can’t see them. So there we have them. So now we’ve got the payroll liabilities. Now on the payroll liabilities, we have both the The federal income tax withheld. And notice we got the double up on the Social Security and Medicare. So here’s and they recorded it for each employee. So you got the federal and the Social Security and Medicare doubled up. That’s because it’s got the employee portion and the employee or portion that are accumulating upward. On this side, the other side’s recorded in the expense for payroll tax expenses.
Remember that this payroll tax expense doesn’t include the withholdings for payroll taxes that we took from the employees, because that’s included in the expenses for payroll, because those are the employees taxes, even though we are the ones that are required to withhold from them. That’s often confusing to many people, if you can understand that you might be that’s valuable, oftentimes in many accounting settings. So if you go into here, you’re going to get the payroll, the payroll information, which are the actual taxes that we had to pay,
which in this case, on the federal side would be the Social Security and Medicare that we matched, and the Federal Unemployment Tax if we had to do that, but we didn’t record any in our practice problem. So there we have those items, if you were to look at it on the balance sheet, and the income statement, here would be the balance sheet, the checking account was affected, we had in the liability side of things, the payroll liabilities were impacted, as well.
And on the income statement side of things, the good ol P and L profit and loss, we broke out the payroll between the payroll taxes and the payroll expenses, which is quite common, that’s useful to do, because at the end of the quarter, and at the end of the year, you might want to then tie out your 940 ones, your quarterly 940 ones that you got to file and your 940 at the end of the year for federal unemployment and UW T’s and your W threes. And it’s useful to be able to do that if you break out the earnings versus our taxes. So you can kind of kind of tie those things out and double check that everything is going the way everything should be going.
So then you can of course also take a look at this with regards to the payroll reports, reports drop down. If you take a look at the employee payroll activity, payroll summary, the most common report change and the dates from up top from Oh 101 to two to 1231 to two. Now we’ve got our two employees. Now remember, you can look at this report, as if like paycheck by paycheck, or you can kind of look at it as a total this is a report that would be similar to a report that you might get if you had a third party like an ADP or paychecks, giving you the information where you might look at the total and enter the total into your system with like one transaction, one journal entry or something like that.
So in other words, I can I can see this as an aggregate as the as the adjusted gross pay total, the 13 966 the withholdings down here, and then the net pay that’s the net that got that impacted the paycheck for the two employees for the full paper the two months, and then we’ve got the the employer taxes and contributions. So if I was to look at the gross pay the 13 966 66 that shutout the profit and loss for the two, two periods, the 13 966 66 for the two to earnings, have two payrolls that have happened thus far for the two months.
And then if I go back to the payroll summary, that should also by the way, most likely be what you would find on the WTO or the W three form and then on the W two thus far, if it was just for this two months, you would think that these two amounts would be on the wages, the total wages in general, you know, unless there’s going to be items like a 401k plan or you know that can that can complicate the weight the different wage brackets, but in general and then down here, we’ve got the withholdings, which include the federal withholdings, which of course would be the amount that would be the withholdings for federal income taxes, and then the Medicare and the Social Security.
So that’s going to give us the amount of the withholdings, the 3001 3246 and that should be what we have thus far because we haven’t paid off even month ones withholding so 31326 46 on the balance sheet. So if I go to the balance sheet and I take a look at the withholdings, we’re talking payroll liabilities are at the 4104 92 because it’s also going to be including the employer side of the withholdings, which is the nine 972
So in other words, if I took this, this 313 2.46 plus the nine seven 2.46, which we haven’t yet paid either one of them, we get to then that 410-492-4104 92 there and then the payroll taxes on our side. These are this also should tie out basically to the expense for the payroll taxes on ours. payroll taxes. If I go back to the profit and loss, we’ve got the payroll taxes, the 972 46. So you can see how that that would basically tie out, when you create your 940s, and your 940, ones quarterly and your 940, you might be drawing primarily from this kind of information.
Obviously, QuickBooks, if you pay for it, QuickBooks might help you to populate those quarterly forms in the yearly form. But generally, you could see it kind of how it would draw from basically this information, recalculating the federal taxes on a quarterly basis, which would be the federal income tax, not ours. But the employees that we withheld. The Social Security and Medicare, both the employee and employer, calculate those items. That year in 940 calculation of the federal unemployment tax, which would be down here, we didn’t record it.
But it would be this item, it’s usually a smaller kind of tax item. And it has a small cap. So we don’t want to get into it right now. But you could see how that would basically be recorded there. And then when you think about your wages for those calculations, you got your wages here. And then of course, the year in forms, and the W two and the W three, you could see populating from something like this, which should also tie out, you’d like to be able to match that to your Profit Loss your balance sheet on a quarterly and yearly basis, at least, so that she can make sure that you’re reporting to the government with regards to your payroll taxes,
matches, you’re reporting to the government with regards to your financial statements, which you’re probably going to be reporting to them in the form of a tax return. So here’s where we stand at this point in time. If I take a look at the trial balance, you can check out your numbers here, see if you’re lining up to the same kind of stuff. If so, that’s great. If not, then try changing the date range, it’s often a date issue. We’ll be doing the transaction detail report at the end, which is a great help check your numbers. And we’ll also be making backup files so hopefully you can rework some of the practice problems if you so choose with them.