What is payroll accounting in finance and accounting?

Payroll accounting deals with calculations and distributions of employee’s compensations like salaries, bonuses, commissions, overtime pay. It also helps higher level management to make decisions about labour cost.

Type of payroll accounting includes −

• Initial recordings − Records gross wages, employment taxes which are owed to government

• Accrued wages − Records wages owned to employees which are paid later. Readjustments are made after payments.

• Manual payments − Records when company pays manually for pay adjustments or employee terminations.

Steps for payroll accounting includes −

• To hire employees.
• Prepare paperwork regarding payments of employees.
• Pay checks.
• Record payroll.

Steps to record payroll in general ledger are −

• Record payroll expenses.
• Record payroll liabilities.
• Transition accounting periods.

General example for journal entry

An example for journal entry is explained below −

Payroll accountant duties includes the following −

• Calculating gross pay.
• To calculate total deductions.
• Calculate total amount to be paid to employees.
• Authorise the amount of payments distribution of payroll.
• Issues reports to higher management regarding labour costs.