 uh let's say one uh 31 so we say okay two that what in the world that's quite long does it need to be that long ah whatever all right and so then let's make this black and white up top i'll make i'll make this whole thing black and white so i'll go black white let's center this one this one i'm going to center across these two right clicking format sales center across those two and then i'm going to format paint that and center this one across these two and then format paint that and center this one across these two all right okay and so then i'm going to say that we're going to have the journal entry for adam is going to be payroll expense the payroll expense is going to be the total that adam earned 4583 33 but i'm going to put the cash down well i'll put it up here the payroll liability meaning we didn't give him 4583 we only gave him 3572 70 because we withheld the sum of f it social security medicare and then this adjustment which is that you know the adjustment i had to put in there and then we had cash so he only got cash checking account which is this needs to be a negative i'm going to put credits as negatives if you don't know debits and credits that's okay but i like to make my credits negative because it's easier and then so the so the difference is that which is the paycheck or in other words he earned that he got paid that the difference is the withholdings that we took from him which he in theory is the one paying to the government even though we are the tax collector in essence the government's forcing us to be the tax collector taking his money to pay the government all right i can also think about that as erika so i'm going to do the same journal entry but the erika over here so i'm going to say erika had net pay of 2400 but we took from erika the negative sum of f it social security medicare because the government made us do it's not our fault erika and so the negative sum of this the plug is the 185640 so in other words she earned that she got that we took this from her we don't get to keep that we have to pay it to the government on her behalf because the government has made us their little lap dog tax collector through coercion so if we then sum up the totals here we sum up the totals and we sum this up equals the sum of these these and this we can think of this as if it's just one large one employee in other words we can think of one journal entry for every for both of them for all of our employees we can think of the payroll as one payroll transaction if we combine all the accounts together and so when we put it into our accounting system what's the impact on the accounting system well it's the total so it's so we could think okay the gross earnings are are this these two let's actually sum this up that'd be good let's insert i'm going to insert something and put the total here total equals the sum of these two and i'll just sum it across how about them apples those are some good apples all right so then we're going to say so then the total is this for both of them and then we took from both of them a total of these uh one five five four twenty three and our and and so there and so then the net check for both of them is the five four uh two nine so we could just do one journal entry now we have to be careful to do one journal entry because it's going to show up on our checking account so we want to be able to reconcile so if i just to put one journal entry in place it's going to be a little bit more difficult to reconcile but you could you know do that and it would be and that would be one way to work but there's one other thing that happens that we have to deal with on 131 23 and that's the employer taxes which we have not yet paid but we've incurred them based on the employee earnings and so that would be uh payroll taxes which are the sum of these and the and then the payroll liability actually we and we could do this like employee by employee if we wanted to which would be but we don't need to do that let's just do the total i'll put it out here at the sum of these and so there we have it so so when we so when i put this in and so there's no there's no cash involved with this transaction because we have not yet paid it we will pay it in the future so note like when i put this into my system then i could do it as a lump total of all the payroll together because i don't need all the detail but you might want to put it in check by check because it might make it easier to reconcile and then this transaction uh is doesn't have cash in affected as well so we can enter that as like a journal entry into the system now notice that if you're a bookkeeper you might try to do this on a cashed based system you might say hey look can i can i run my zero system on a cashed based system and allow the third party processor to process these paychecks and you kind of can right because if you're in the united states for example you can have the third party processor process the paychecks and then uh and then you can you can enter them or you can wait till the paychecks actually clear the bank right when they clear the bank there's going to be the net checks that come through and just record the net checks when they go through the bank which is you're going to see on our side in the bank feeds as payroll expense right if we do that we're what are we missing we're missing the breakout of the payroll liabilities the accrual components however once we pay the payroll liabilities then we'll be back it's just a timing difference we'll be back in play so so you might if you have a small business and you're trying to run the payroll just to get your taxes calculated for payroll and for your federal income taxes at the end of the year you might be able to do just a year-end adjustment you might be able to work with a third party processor have them deal with all the payroll stuff the 941s to 940s and so on you do your zero automating zero waiting till the payrolls clear the bank and just recording them on a cashed based system to payroll noting that's not perfect because you're missing the accrual components but then at the end of the year working with a tax preparer and or CPA firm that can take the payroll reports as of your end and make a year-end adjustment to properly record the payroll as of the end of the year so that you can do whatever you need to do including do your income taxes with it okay that said i'm going to enter it into our system as two checks right these are the two checks that are going to clear the system and then we'll enter a payroll liability with a journal entry to kind of mirror what we have here all right so let's go back on over and finally just make our two checks so i'm going to call it a plus button and i'm just going to say it's a money out form so spend money form and i'm going to enter it's going to go out of the checking account also note that if you're dealing with a third party processor you might set up another checking account just for payroll because sometimes it's easier to deal with payroll when when you only have one account that deals with it that means you transfer money out of the checking account into payroll just to process the payroll and that way all of your payroll transactions are in one checking account which can make it easier if there's like an issue but we're not going to do that so we're going to say this is going to be adam hamilton we're just going to set them up as a contact because we're doing the payroll uh outside imagine it's a third party payroll processor we're going to say that the date is going to be