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Allocation of Payroll Expenses to Job costing in QuickBooks

The costs incurred by your company when hiring independent contractors and employees are known as payroll expenses. Start with the gross pay for the employee, then subtract any withholdings to arrive at the net pay. You must gather and manage data in order to process payroll, and your payroll costs may change frequently.

The cost of paying employees’ salaries and wages in return for the services they provide to a company is known as payroll expense. The phrase might also be taken to refer to all associated payroll taxes, such as the employer’s supplemental contributions to Medicare and Social Security. Employers must pay payroll expenses to hire employees. Employees’ pay deductions that you submit to a third party are not considered business expenses. Review each payroll component and decide if it is a business expense to comprehend these differences.

Every company should use the accrual method of accounting, which aligns revenue with expenses. Regardless of when you make the payment, the accrual method records payroll expenses in the month you incur them. The matching concept paints a more accurate picture of business profit. This accounting technique does not record expenses based on cash outflows.

A company must perform several steps in order to process payroll, including figuring employee withholdings. The accrual method posts payroll expenses and liabilities in the same period, allowing you to match payroll expenses with revenue. To process payroll and stay away from manual calculations, use a payroll solution. Documenting your payroll process will save you time because payroll changes frequently.

How do I record Payroll expenses in QuickBooks?

Request pay stubs for your employees’ payroll or a payroll report from your payroll service.

  • Select + New.
  • Select Journal Entry.
  • Enter the pay date after the journal date.
  • Put the paycheck number in the Journal no. field if you want to track it.

How do I keep track of payroll expenses? 

Remember, debits cause expenses to rise. Subtract the wages, salaries, and payroll taxes you contributed to the business. Your periodical costs will go up as a result. Typically, when you record payroll, you credit all the liability accounts while debiting Gross Wage Expense. 

Making journal entries for payroll tax:

Three typical payroll journal entries are required for businesses to post. Payroll processing can be done correctly and more quickly if you use a payroll service.

  • Payroll accrual: If you are accruing your payroll, you should debit accrued wages (also known as wages expense) and credit wages payable to record your payroll in the correct period.
  • Paid from the bank after accruing payroll: If you had accrued payroll first and then paid the employees, you would debit the wages payable and credit the bank account.
  • Taxes withheld from earnings: When a business withholds taxes, it records a liability for the amount withheld. The tax liability account is debited when the company pays the withheld taxes, and the cash account is credited when it does so. 

How to calculate payroll costs: 

In order to complete the payroll process, you must gather data, make calculations, pay employees, and deliver withheld funds to third parties. 

  • Collect data for Form W-4
    Form W-4 must be filled out by new employees. The form specifies how much tax withholding should be made by employers from employee Paycheks. The number of W-4 allowances and the gross pay determine the amount of tax withheld.

    The W-4 also offers guidance to workers with multiple jobs or spouses who are employed. In these circumstances, there are additional schedules to determine withholdings.
  • Determine gross pay by utilizing the payroll cycle
    Payroll’s starting point is gross wages. How much of a worker’s salary you pay on each payroll date depends on the number of pay periods you have each year. The pay period designates the beginning and ending dates for payroll if an employee is paid hourly.
  • To determine net pay, use gross pay and other information
    The amount a worker receives after all withholdings and deductions is referred to as net pay. Utilize the data you have gathered to determine net pay.
  • Submit payroll tax deposits.
    Business owners are required to submit deposits for tax withholdings. The frequency of deposits varies according to the dollar amount. Deposit payroll taxes for federal, state, and FICA and FUTA taxes. Tax deposits can be paid online, making it simpler for you to submit them on time.
  • Complete payroll tax forms
    Because payroll tax returns are intricate, the data you provide must be precise. To avoid late fees, be sure to turn in the forms by the deadline. There are four typical payroll tax forms. These reports can be produced automatically by payroll software.
  • Inform employees of pay amounts
    Independent contractors receive Form 1099-NEC from business owners. Each contractor who earns $600 or more from your company each year is required to receive a 1099. The contractor must report the earnings on their tax return even if they are less than $600 because they are still taxable income. A W-2 is given to employees, which details gross pay and all annual tax withholdings.
  • Maintain records on hand
    Businesses are required to keep employee time and pay records for at least two years under the Fair Labour Standards Act (FLSA). Your payroll calculations may change from one pay period to the next due to modifications to tax laws, employee additions or deletions, and adjustments to tax withholdings.

Updating existing Payroll Items List in QuickBooks

An incorrect payroll item setup could result in the incorrect amount of taxes being withheld from one or more paychecks.

Furthermore, year-end tax forms like the W-2, 941, and state forms may be inaccurate and require correction.

We’ll demonstrate how to fix it for you:

  • Edit a payroll item edit.
    • Select Lists from the menu at the top. Next, choose Payroll Item List.
    • Edit can be chosen by right-clicking the item.
    • Choosing Next twice. Type in the appropriate tax tracking category. Next, choose Next.
    • Pick the appropriate taxes. Next, choose Next.
    • Go to Calculate and choose Quantity. Next, choose Next.
    • If all the employees have the same rate and limit, enter the limit type.
    • Enter the amounts if the employees have the same rates and limits but no default rates or limits.
    • Choose Finish. 
  • Enter the rates on the employee records if the rates are different for each employee.
    • Then click Employee Centre from the Employees menu.
    • Click the employee’s name twice.
    • Choosing the Payroll Info tab.
    • Enter the proper rate and limit in the Addition, Deduction, and other Company Contributions section.
    • When finished, click OK to close the window. 
  • Verify the Wage Base:
    • Select Reports from the top menu bar. Select Payroll and Employees next.
    • Select the Payroll Summary Report.
    • Set the date to the current year of the calendar.
    • Zoom in on the payroll item for each employee. And make sure the sum and wage base are accurate. 
  • Make a payroll liability adjustment if the sum and/or wage base are incorrect:
    • Choose Payroll Taxes and Liabilities from the Employee menu.
    • Select Adjust Payroll Liabilities.
    • Date and effective dates should be entered.
    • Select the Employee and then the employee’s name in the Adjustment is for area.
    • Select each of the payroll items under Taxes and Liabilities. Additionally, you can enter a negative number to lower the amount and/or Wage Base.

Activating Job Cost Tracking in Payroll Items List in QuickBooks

You can track your payroll costs by a job with QuickBooks Desktop Payroll. You can also monitor hourly labor costs and project profitability in QuickBooks Online Payroll. 

Step 1: Configure your QuickBooks preferences

  • configure your QuickBooks job costing preferences
  • Select Edit, then Preferences.
  • Choose Accounting, then Company Preferences.
  • Make certain that the option to use class tracking for transactions is chosen.
  • Choose Payroll & Employees, then Company Preferences.
  • For payroll costs, choose Job Costing, Class, and Item tracking.
  • Choose whether to track it by the entire paycheck or a specific item of earnings.
  • Select OK.

Step 2: Configure payroll items to monitor costs by job

To keep track of expenses by job, you can create a new payroll item or edit an existing addition, deduction, or company contribution item.

If a new payroll item needs to be created:

  • Payroll Item List can be found under Lists.
  • Choose New from the Payroll Item dropdown menu.
  • Next, choose Custom Setup.
  • Then click Next after selecting Deduction, Addition, or Company Contribution.
  • After entering the item’s name, choose Track Expenses by Job.
  • Finish by selecting the information as needed on each window.

If the payroll item needs to be modified or edited:

  • Payroll Item List can be found under Lists.
  • Select Edit Payroll Item by performing a right-click on the payroll item.
  • the option Track Expenses by Job.
  • Click Lists, then select Payroll Item List.
  • You can edit a payroll item by selecting it with the right mouse click.
  • Decide on Track Expenses by Job.
  • Before you can choose Finish, select Next.
  • Repeat for every payroll item you want to keep track of.

Step 3: Construct and process payroll

You must access the paycheck details for your employees as you create and process payroll. Add the hours or pay by choosing the job title from the Customer: job column in the Earnings item section. Apply this principle to each job the employee held. Amounts are divided in reports according to the division of jobs on paychecks.

Note: Enabling Track Expenses by Job will only have an impact on future transactions.

Create job costing reports: 

If you want to see the payroll wages, taxes, deductions, and contributions broken down by job, run job reports. The same report can be used to determine which jobs are profitable and which are not.

  • Go to Jobs, Time & Mileage, then Reports.
  • Job Profitability Summary should be chosen.
  • To view the wages, taxes, deductions, and contributions for each job, double-click the job amount.

Recording Payroll Expenses by Payroll Module in QuickBooks

You may deduct a portion of a worker’s pay if your business provides benefits, if applicable. You could deduct money to cover the employee’s share of insurance premiums, for instance. Payroll expenses apply to your portion of the costs, but not to the employee’s contribution.

When using a software program to manage payrolls, you must ensure that the program is current with all the records. This not only keeps things organized but also puts you at ease and ensures that the data is quickly retrieved whenever you need it.

What is the purpose of recording payroll in QuickBooks?

You might have an excel sheet with all the payroll information for each employee. To ensure that payroll management is well-organized, effective, and accurate when you switch to QuickBooks, payroll fields must be added in the appropriate places. It is advised to create separate journal entries to record the accounting information when recording payroll.

How to Record Payroll in QuickBooks:

The following section discusses how to record the same information for payroll in QuickBooks.

Step 1: Create the Manual Tracking Accounts

  • Create payroll expenses by selecting the expense account type:
  • Taxes 

Create payroll liabilities by selecting the Liabilities account type:

  • Federal Taxes (941/944)
  • Federal Unemployment (940)
  • [State] SUI/ETT
  • [State] PIT/SDI

Step 2: Create Journal Entries

  • Click the plus sign
  • Select Journal Entry
  • Under the Date option, choose the pay date.
  • Type an optional Entry # for your journal entry. 5. Control credit and debit accounts
  • Handle debit and credit accounts: Use a debit expense account to track gross pay and corporate contributions.
    • Payroll is credited to a bank account.
  • You can follow the steps listed below to ensure that the entries you make the next time go smoothly and take less time:
    • Payroll is credited to a bank account.
    • Set the Template Type to Unscheduled and enter the Template Name
    • select “Save Template”
  • Click “Save”
  • To get to the template:
    • Go to the gear icon
    • Select Recurring Transactions
    • You can adjust the amounts as needed

Although the steps are quite simple to follow, first-time QuickBooks users might not feel confident enough to complete the setup process.

Allocating Attendance days to Jobs in Payroll Module in QuickBooks

Every company needs to keep track of employee attendance or hours. Businesses can better understand how much time and money are invested in each department thanks to this crucial data. This attendance information for tasks and billable hours ensures prompt payroll processing so you can calculate employee paychecks with accuracy. You can enforce a necessary employee attendance and time-off policy by tracking employee attendance.

Companies, especially those looking to expand, must keep track of employee attendance. You won’t be able to track employee attendance as efficiently as you would with a small team as you get busier and larger.

Less employees will attempt to abuse their working hours when you have a mandatory attendance policy. By monitoring attendance, you can determine who consistently arrives at work on time and who needs to have a timely arrival conversation. To ensure that nobody is abusing the goodwill of your company, even salaried employees should have their attendance monitored.

Using Excel or Google Sheets, manually track your employees:

You can see when your employees enter and exit the office by manually tracking their time with Excel or Google Sheets. Small businesses that don’t require a more comprehensive solution typically find that this method of tracking attendance is the most effective. The only information an employee would need to enter is the time they arrive and depart each day. Normally, overtime must be approved. Depending on how often they get paid, they would then enter a biweekly, weekly, or monthly total.

Accessing Payroll Reports in QuickBooks

There isn’t currently a payroll report that can be customized to include both the company’s financials and the tax year. You can combine and customize the two reports in Excel while you wait by exporting them there.

Follow these steps to export your reports to Excel:

  • Click Reports in the left menu.
  • Put the report’s name in here (P11 or Gross to net).
  • Set the required filters.
  • Select the Export button located at the report’s top.
  • Decide on Export to Excel.
  • A convenient location to store the file is on your desktop or in your Downloads folder.

General FAQs

1. In QuickBooks, where do I enter the Paycheck number?

Make a journal entry after paying your employees outside of QuickBooks. Obtain payroll reports or pay stubs for your employees from your payroll service. Choose + New. Choosing Journal Entry Put the date of your paycheck under the Journal date. Enter the paycheck number in the Journal no. field if you want to track it.

2. How should wages be entered as a payroll expense?

Payroll expenses for wages should be recorded, and you should detail them in accordance with your chart of accounts (example: management wages, office wages etc). Wages should be entered in the check details as a positive number.

3. What differs a bill from an expense in QuickBooks?

At the time of making a purchase for goods or services that have already been paid for, you should enter an expense transaction in QuickBooks. However, if you make a purchase and plan to pay for it later, you should enter the transaction as a bill.

4. How does QuickBooks Online record payroll?

However, you can manually record payroll transactions by using the journal entry feature. Here are the steps in detail: In the top-left corner, select + New. Choosing Journal Entry Choose the date of the paycheque(s) under Date. (Optional) Enter the journal entry number here.

How can I make sure my job costs are correct?

Make sure you have an accurate record of your job costs by following the procedures listed below. Make sure enough information is provided for each item when setting them up. Your item list’s level of detail will dictate how accurate your job cost reports are. Learn how to add, edit, and delete items in QuickBooks Desktop.

6. How to use QuickBooks to run quarterly payroll reports?

Using your QuickBooks accounting program, follow these steps to run quarterly payroll reports: Step 1: Click the Reports tab located on the left side of the main menu bar in your QuickBooks account. Step 2: Click on the “All Reports” tab. Step 3: From the list of report options, select the payroll category.

7. In QuickBooks, how do I run a report?

Go to Reports under Employee in the Payroll Centre to run a report. Following that, choose “Report Centre” from the drop-down menu. Following that, you’ll be taken to a page resembling the one below where you can view every report that QuickBooks offers. Search for the desired report under the “Employees & Payroll” tab.

8. How should I go about manually recording payroll transactions?

Payroll transactions, however, can be manually entered using the journal entry feature. This is how, with specific instructions: In the top-left corner, click the + New button. Decide on Journal Entry. Choose the paycheque (s) date from the list under Date. (Optional) Record the entry number in the journal. both debit and credit accounts. Recurring is preferred.

9. What are the job costing tools in QuickBooks Desktop for?

You can view your earnings and expenses for each job using the job costing features of QuickBooks Desktop. To ensure that your record of your job costs is accurate, follow the instructions below. Create each item with sufficient information. Your job cost reports will be as accurate as the level of detail in your item list.

10. How can I keep track of job costs?

Access the Account Management Page. Tracking job costs entails contrasting them with your revenue. This is known as job costing. You can see how much money you spend and make for each job using the job costing tools in QuickBooks Desktop. To ensure that you have a precise record of your job costs, follow the instructions below.

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