 QuickBooks Online 2023 Payroll Adjustment Get ready to start moving on up with QuickBooks Online 2023 Here we are in our Get Great Guitars practice file. We started up in a prior presentation using the 30-day free trial. Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again click the link below for a free month membership to our website and all the content on it. We also have open the free QuickBooks Online sample company. If you want these to open at the same time we suggest using the incognito window or another browser. You can open incognito window if using Google Chrome by selecting the three dots in the browser, incognito window, then search in your search engine for QuickBooks Online Test Drive. We're going to be using the sample company to compare and contrast the accounting view, the view that the Get Great Guitars file is in and the business view, the view the sample company is in. If you want to toggle back and forth between the two views you can do so by selecting the cog up top, the changing of the views down below. Opening up reports to put tabs to put reports in that is right clicking on the tab up top like we do every time to duplicate it, right clicking on that duplicated tab to duplicate it again, going to the tab in the middle so we can go to the reports at the bottom left and then open up one of our faves, the balance sheet, one of our favorite reports. And then note that if you're in the business view by the way the reports are located in the business overview section and then in the reports. So then I'm going to go to the tab to the left or the right that's on the right side and then go to the reports again on the left and then open up the profit and loss like we do every time, close up the hand boogie, scroll up, change the range from 010123 tab, 123123 tab, run it to refresh it, tab to the middle like we do every time, close the boogie and then change the range from 010123 tab, 123123 tab, run it to refresh it. That's the setup process that we do every time. Now last time we ran payroll and we're going to make a slight change to the payroll because we want to match our practice problem and match what's on our bank reconciliations and just to point out also the process that you might have to go through if changing payroll. So if I go to the first tab here and I hold control down and I go down to the payroll, we went to last time, we went to the overview and then we ran payroll which is in the run payroll on the right hand side. Now this processed in essence the payroll checks and the withholdings and the impacts on the financial statements from the transactions. Now we just want to point out that with payroll it can be a little bit more complex to make adjustments to payroll. We can't just go in and adjust the paychecks as easily because we have to be careful about all the withholdings and calculations related to the payroll taxes. Also, when trying to practice and learn payroll it can be difficult with a practice problem because the payroll works best when it's running real time. In other words, if you're working this practice problem at some point into the future, if it's too far into the future then you might have difficulty running the payroll because it works best in real time. The other issue with that, we do have payroll courses to kind of dive into this in more detail but the other problem with payroll is that payroll looks quite different from the first quarter to the fourth quarter because there's going to be caps that could be hit and those are most clear when you see the FUTA tax Federal Unemployment Tax Act which has a fairly low tax so the taxes with relation to that particular payroll tax will be a lot different from quarter one to quarter two to quarter three to quarter four in which case quarter four unless you have new employees you're not going to see much of that tax and the Social Security has a cap as well although it's a lot higher of a cap so if anybody's going to hit it they wouldn't hit it until quarter three or quarter four or something like that but you don't get to see those changes if you only process one quarter in other words, if you're trying to process or see what's going on with your 941s when you process them on a quarterly basis the typical thing is to say, okay well it's quarter two I'm going to compare what happened to quarter one to quarter two but things can be a little bit different because of these caps that people can hit on it and so that's something that we got to you know you got to just kind of be aware of and it's a difficulty to run the payroll problems now also what was impacted on the financial statements are multiple accounts here so we've got of course the liabilities that were impacted you'll recall for the withholdings for our withholdings and the employee withholdings we've got then on the income statement we've got the wages and the tax accounts that were impacted and we have a whole bunch of other payroll reports those are going to help us to report the payroll tax stubs to the employees on a year to date basis as well as a paycheck by paycheck basis and do the 941s to 940s to W2s to W3s therefore it's not as easy for us to just make a change in other words if I'm saying there's a check that is incorrect normally I can go okay there's a balance sheet here and I'm going to go into the cash and I can say okay this check maybe it's wrong for whatever reason it doesn't match what actually was deposited into the bank account or something like that when we do the bank reconciliation well I can't just go in here and change the amount of the check clearly it's going to cause an issue and even with the dates we want to kind of be careful with that because if I the reporting if I don't do the payroll within the QuickBooks system then the reports will not match and your W2s won't match and your calculations for the payroll taxes and all that kind of stuff will get all messed up so that's why the adage for payroll is typically do it first the first time and measure twice cut once as opposed to tinkering until you get it right some things are great for tinkering until you get it right some things are better off to get it right the first time measure twice cut once payroll better off to get it the first time if you do make an error then typically you need to void the check as opposed to deleting it because usually in practice we want to make sure that we have a paper trail of the data because employees are the most likely person to sue us unfortunately as well and it's most likely we're going to run into problems that we want to see a paper trail with so I want to be as transparent as possible with everything that we're putting into the system now in our practice problem so you usually have to void it and then you'd have to process the payroll again so that the system can process the payroll check properly and do all the reporting properly but in our practice problem we made an error in the recording of one of the taxes so we're going to get out to our practice problem over here to this paycheck that's going to be on our bank reconciliation so we're going to do something that I don't recommend doing in practice but we're going to do in the practice problem to make the bank reconciliation correct and the error was in the calculation of Social Security and Medicare so just to note the issues so you can see how these kind of problems happen with payroll taxes and how they can get kind of complex all of a sudden we had an error in the calculation of I think the Social Security tax so if you got an error in the Social Security tax calculation what is that going to impact well if I go to the balance sheet the balance sheet got deleted here I'm going to go from 010123 to 123123 and run it then we're going to have we're going to have this liability that's going to be impacted here for the taxes but it's not only just going to be the employee portion but also the employer portion because there's a matching thing so if I got it wrong on the employee side it's likely that we got it wrong on both sides and then on the income statement there's going to be an impact on both the wages because the wages include the employee portion of the tax and on the taxes here which are payroll taxes because those are the taxes that we pay over and above so you can see just this little kind of miscalculation can get quite complex in the number of things that are going to be impacted also the other reports are going to be impacted the W-2 stub or the paycheck stubs are impacted and so on so to do that to just make our bank reconciliation correct and tie out to our practice problem numbers I'm going to make another transaction just directly into the check register which you wouldn't do in practice but we will do in the practice problem so we're going to go down to the accounting on the left hand side and then I'm going to go into the chart of accounts and if you're in the other view by the way that would be under the bookkeeping and then the chart of accounts so that's where it is under the business view if you're looking at the business view I'm going to close up the handbook we're going to go into the bank account I'm going to use the register to enter this so we'll register and I'm going to hit the drop down and what I'm going to do is I'm trying to adjust this check right here but I don't want to actually physically adjust the check I'm just going to add another one with the same check number so when I do the bank reconciliation and that part of the practice problem we can see what is going on again you wouldn't do this in practice to a payroll account because what will happen as you'll see is the payroll reports will no longer tie out to payroll if and we'll point that out I'll show you exactly why that's an issue here because our payroll accounts won't tie out to the reports and at the end of the at the end of the year you would like to have of course your reports that you're going to make your 940 once your 940 is your W2's your W3's your financial statements the amounts reported on the for expenses and any liabilities to tie out to tie out right and if they don't you would think there's an issue so in any case I'm going to hit another check just to show you that and we're going to say this is going to happen on 013122 I'm going to make the same check number as as 102 the pay is going to be Adam Hamilton who is an employee and then this is going to be to adjust payroll and this is going to be a payment of we're going to say $60 to make the adjustment and this is going to go into payroll liabilities payroll liabilities and that form so that's going to adjust it so we get back to where we need to be again you wouldn't do this in practice we're just doing it for the practice problem it will throw off our payroll reports which is an issue in practice it would be an issue so I'm going to say okay it has the same check number I'm going to say okay I'm just doing that so when I when I reconcile we can I can show you what's happening with the bank rec now the other issue was with a was with the payroll liabilities on the employer side which didn't have any impact on the checking account because we didn't write a check for our portion our portion of the liabilities so it's just basically a journal entry so for the other side I'm going to go back to the register and I'm going to I'm going to choose the register to pick a journal entry from and that's going to be the payroll liability account so I'm going to scroll down to the payroll liability here it is I'm going to go into that register and I'm going to increase it again but this time with just a journal entry because all we have is a journal entry here because it's not the checking account I'm going to go oh one three one two two I'll call it journal entry that's fine journal entry two and we're going to say the payee I won't put anything I'll say payroll payroll adjustment and this is going to be a decrease of sixty that's to match it and the other side is going to go to the payroll expense expense account or tax the taxes payroll tax there it is payroll expenses there it is the taxes alright there's the other side so that means that the liability account got hit by both the employee and employer portion this part is going to the expense account expense account side because cash hasn't been affected we haven't paid it yet alright let's save it close it and show you what's going on here I'm going to go back to the balance sheet and let's go back here to our balance sheet and let's run it and so now with the checking account if I go into the checking account I'm going to have this adjustment that we put in a check for 1012 no I put it in there as of 2022 sorry about that I got the wrong year now so I'm going to change the date up top to 2022 run it and then I'm going to change it from 22 to 23 so there it is I'm going to go back into it again see if I can get this can you get it right for crying out loud how many we're going to make this up to 23 we're going to make it to 23 save and close it again and so there it is so now we've got this adjustment down here with the two that we're going to say are basically one check that'll help us to do the bank reconciliation when we get to that part of the practice problem or course alright going back and then we also had an impact on the this one that should have two $60 amounts one being a journal entry and I think I did the same thing with the dates did I not let's take it back to 2022 I'm working in the past so yeah I got a date issue I'm going to change the date to 2023 where is your head wake up get get some coffee or something wasting my time you're wasting my time I'm sorry here we go there's the adjustment and then here's the adjustment for that one so that looks good and then go back and then tab to the right and I'm going to run this one we made an adjustment to the the taxes tab so the taxes tab so there we have it now even if you figure that that was correct in practice we wouldn't do that in practice typically because even if you felt like that was the right thing to do there was an error and you made a journal entry to fix it for that particular pay period it's going to cause all kind of problems if you actually make a journal entry to any of these accounts wages, taxes and the payroll liability accounts because then these accounts will no longer tie out to the payroll reports and the payroll reports are what are being used to create the 941s the 940 the W2s and the W3s so at the end of the year or at the end of the quarter when you try to tie out your forms to what's on the financial statement you'll have this difference and then you're going to have then you should figure it out right then you're going to be like okay there's an issue something is wrong you know what are we going to do with that issue so in other words if I was going to go to this tab duplicate it and then I go to my reports down below my reports are going to be down here and I go to my payroll reports closing up the boogie scrolling down to the payroll reports and what was the one we looked at the payroll detail report I think so let's look at the payroll detail report then now we've got this information and if I look at it at the total this is the total that we have thus far the gross pay you would think would be matching out to basically the income statement on the gross pay the amount that we paid we changed by that $60 $534.23 minus if I go back on over here to just look let's go to the income statement and look at the taxes now we've got that difference minus the $474.23 there's that $60 difference that's an issue even if I thought it was right here but because I posted something a journal entry not through the payroll it's not going to be reflected in the payroll reports and the payroll reports are the things that are going to be used to be creating the W2s the 941s to 940 and so on also the liability we would expect for payroll liability to be at this 7517.56 because we haven't yet paid the payroll liability so if I go back to the balance sheet and we look at the payroll liability actually that's not right that's the total payroll cost I'm looking for just the taxes the withholdings that we've made that we haven't yet so that would be 1614.23 that we withheld from the employees and then our taxes come out to the 534.23 so that means we should have a liability that we owe to the government at this point in time here that doesn't quite match minus this 2028.46 so we have a difference of 60 and 60 that 120 so again we made this adjustment for our practice problem so that we can do the bank reconciliation so that we can tie out to our bank wreck here and also I think it's a good just example of what not to do in practice why you would want to make a change by voiding the way to do it even if you think you're right you shouldn't be posting anything directly to these accounts because if you do then the payroll system isn't going to match your reports aren't going to match and then that's going to have an issue if you got an audit like that your payroll reports don't match at the end of the year you should be tying out your payroll reports your W-2s your 941s and everything to what's actually being reported from the financial statements hopefully they should tie out if you used QuickBooks correctly and everything was run through the QuickBooks system if you post things directly to a particular account then things won't tie out and you're exposing yourself to problems if there was an audit or something like that or to make changes at the end of the year which is the worst time to be making changes you'd like to do that as you go major twice cut once let's go into the reports you don't have to belabor the point you're the one that made the error you're talking like I made the error trial balance let's go into the trial balance and check our numbers this is where we stand at this point in time if your numbers match out that's great if not try to expand the date range let's change the date range from 010123 to 123123 okay now if your numbers match then great if not try to expand the date range and then drill down on any missing or differences and see if you can change them if they're not payroll items they're payroll items you might not have to avoid them and then enter it again or do our adjustment that we just did which you can change the date if that one is different and we'll do a transaction detail report at the end of entering the first month of data which helps us drill down on any differences