 In this presentation, we're going to continue on with the payment of employees within our accounting system. We're going to be doing this by imagining that we have a third party that's going to be processing the payroll for us, such as an ADP or a paychecks, we're going to take that information from them and enter that then into our accounting system. Time to push forward with Sage 50, cloud accounting. Here we are in our Get Great Guitars file. We're currently in the customer and sales section. We're going to be looking at the payroll employee and payroll section quickly. Note that in the past, we talked about setting up the payroll within Sage. You can do so. It's typically going to be an added feature and you'd want to talk to your representative as well as your accounting professionals to get advice on the payroll. Within our practice problem, because we don't want to be adding anything to the practice problem, we may look at payroll in a separate kind of course in and of itself for payroll. We are going to be imagining payroll is being done by a third party such as an ADP or a paychecks. We're taking that information. We're going to be entering it into our system. Last time we thought about the kind of reporting that could happen and be provided to us and the kind of thinking about what is going to be done in our system and what might be done by a third party and how would we deviate the tasks and what would be needed to be done between the two. If we had someone else that was doing an ADP or a paychecks, then what we need from them typically, one of the things we're going to need is going to have the detailed information. We would like them to be able to provide to the employee what the employee needs on a paycheck by paycheck basis, which is going to be the earnings that they earn for that paid period minus all the withholdings and the net pay reported by both paycheck and reported by the year to date total for each employee. We got to track all that kind of information and allow that detailed information to be provided as needed. Then in our system, however, we really want to just make the financial statements right. In our system, we need to make the financial statements right. Really, what we want is kind of like the journal entry. We can think of the journal entry then in our system is basically the overall journal entry. Basically, you could think of it as if all the employees were one employee and we could total up the entire thing and then just enter this into our system so the financial statements are right for the financial reporting. If someone then came to us and we introduced the totals, we would say, yes, look, everything is right for the financial statement, but if the employee came in and said, I need information about my specific circumstance, we're going to say, go to ADP or paychecks or we're going to go to ADP or paychecks to get that detailed information. In our financial statements, we have the general overall information. As we enter this into our system with that method, we want to think about, do we want the cash to tie out on a check-by-check basis because these checks are going to be coming out of our checking account. Do we need the cash to tie out so that we can more easily reconcile, in which case we might want to break out the transactions on a journal entry by journal entry basis, employee by employee, or do we just want to enter one transaction and just be able to reconcile and make sure that everything ties out to the lump sum that's going to be coming out of our payroll account. We're going to, in this system, I'm going to put in two transactions by employee so we get to the net checks that will come out so we can then look at the bank reconciliation more easily, and then we'll enter the second one with a journal entry down below. So that's what we're going to do now. We're going to enter this into the system. Let's go back over to the sage then, and I'm going to go to do this into the vendor section. I'm just going to make a check. So we're in the vendor section. The first two I'm going to make a check because the checking account is going down, therefore the money out form is probably the easiest form to use. So I'm just going to make a check for it, and we're going to say that these are going to be our two employees. Now I'm going to set them up in essence as a vendor rather than basically an employee. I'd like to track the information, but I'm not running the payroll through sage, so therefore I'm going to put them in basically as a vendor here. So I'm going to add another vendor. I'm going to say new, and we'll add the vendor. And so I'm just going to put, this is going to be Adam, and there's the name there. We probably would want all their contact information, but I'm going to put the minimum information now. Now the vendor type, you might want to add like an employee or something like that in a type 1099, no, we're not going to 1099 them. That's going to be something that hopefully ADP will help us with a W24. And then this is going to be going to the wages expense. What we want. So I'll keep that as wages expense as the default, although we'll probably have to have a split account when we record it. So that would be the default account whenever going to this particular vendor, which is basically an employee. So I'm going to then say save, let's save that up top. And then let's close this up top. And then let's choose that new employee, which was, I forgot his name. I forgot our employee's name, Adam, that's Adam. How could you forget Adam? Such a good guy. So we're going to be going through here and saying that now we might want to put like it's an electronic transfer, because again, we can use an electronic transfer even though we're using the money out form, right? And then I'm going to say that the date is going to be 013020. And the amount that's going to be coming out of the paycheck is going to be the net check. So that's going to be the 353933353933. So it's going to be 3539.33. And then we can't just be put in the other side to wages, however, because part of it, we need to have two accounts that are going to be affected here. So if I go back on over, we know that this amount came out of the checking account, but the payroll expenses for the gross pay. So I need to record wages expense. I'll report the gross pay, which is the 4583333. So I'm going to say, all right, this needs to be the gross pay 4583333. And then the other one's going to go to a liability account, some kind of payroll liability account. So let's see what they have here for us. I'm looking for current liabilities. Now they broke it out into federal payroll tax payable, then FUTA, state, SUTA, these are all payroll tax liability accounts. All we basically are looking at are the federal payroll tax liabilities, which includes Social Security, Medicare, and FIT, federal income tax. So we'll include that one. And it's going to be in there. Notice it gives it to us now at a negative 104.4. That's what it should be, because that's what we need in order to be in balance. So that's going to be this amount here, 104.4. Or you can think of it as the sum of these three amounts which add up to 104.4 as well. So there is that. So we're going to say that looks good. So let's say, okay, and our split is there. Let me just open it back up and make sure it's still there, it's still there. That's good. So then we're going to say save, let's save that, and we're going to say yes. I'm a little hesitant, but I think everything's working well. I don't know why. Everything's looking perfect, but I was a little hesitant. So the other one's going to be Erika. So let's say Erika and do the same thing with Erika here. So I'm going to say Erika will set up Erika and will pay her as well. She's already been paid. They've been paid already, but now we're just putting it into the accounting system. So it's going to be Erika, I'm going to say Smith. And we don't have Erika set up again. Let's set her up as a new vendor and we'll go through the same process with her. And we're going to say that this is going to be Erika Smith. And I'm going to copy that, put that in the name down below as well. And the type, she's going to be an employee. And I'm going to say wages over here. We're going to say this is going to wages. Now remember, we're setting these up as a vendor, even though they're employees because we're taking this information from the third party ADP and a paycheck. We're not running the payroll through the Sage 50. So I'm going to say, okay, and let's close this back out. So now we should be able to pick Erika. Make sure I'm picking her from the list. All right. So there we have that. And then I'm going to say this is an electronic for 11. That looks good. Cash. Good. Then the amount that's coming out of the checking account is going to be for the amount of the net check. That's how much is she's actually getting, even though she earned 800 because the Fed took 170 from her. But we had to be the people that took it, even though it's really, we don't get to keep it because the Fed took it from her really, but they made us take it. So in any case, then if we do the split up top, we're going to say wages, and that's got to be the 800, what she actually earned, the $800. So we'll go back over here and say this should be 800. And then the other side is going to be going to that liability account. So we're looking for that liability. And we're picking up the federal payroll tax payable. The federal payroll tax is payable. That's the one. That's the 170. They're giving it to us because that's, that's what needs to be done to be in balance, right? So that's what needs to be done. That's going to be these three items, which add up to the 170 or we can see it in journal entry formats down here. All right. So then let's close that back out and let's say, okay, so that it saves. Let's check it one more time. I like to check it one more time just to make sure it didn't disappear. So there it is. Looks good. Let's record that and take a look at the financials thus far. So we're going to say, record that please. And then close this. And then we're going to go to our reports dropdown. Let's take, let's go to the financial statements. We'll open up the balance sheet first. Balance sheet bringing the period or the range for January. So we'll take a look at it for January. Make this large. And then I'm going to see what came out of the checking account. What's going to come out of our checking. Now also note that a lot of times you might see companies will often set up another payroll account that will be a checking account just for the payroll. And that'll make it easy for everything in there will be payroll related. So that makes it a little bit easier to see the payroll items. It's a good practice to do. We're not doing it here. So it's in our checking account. All right. So we're going to go then and say that we paid the 3630 and the 3539. So there they are. There's Adam and Erica are two employees. They're excellent workers. We did well hiring them. And then the other side is going to be going to the income statement. So let's go on over to our income statement. I'm going to open up an income statement. So we'll open that up and then we're going to change dates back on to the January. I don't need the zero amount. So I'm going to remove the zeros because I don't need to see those. And there we have it. Wages down below double click it on the wages now. There's our wages. There's our two amounts of the wages. Those are the gross pay, not the net pay, the expenses, the gross pay. The difference between the gross pay and the net pay what we saw in the cash and what we now see in the expense accounts is what we took from them. But we had to. It's not our fault. Like we took it because the Fed wants it and they made us take it. So it's a liability. So we owe it. So if we go then down to the liabilities, then it's going to be the federal payroll tax payable double clicking on the federal payroll tax payable and there's the credits, the two amounts that were taken out of the paychecks that we now need to pay for the Fed. Now is that it? No, no, that's not it because we then have to pay the employer portion of payroll taxes, which is going to be the social security and Medicare. So we're paying this over and above what has been actually earned by the employees. It's not coming out of their check. We have to pay it for having employees because we have employees. We have to pay. So there's going to be the 307 and the 77. So we're going to add those up now. We're not actually paying it yet, but we need to process it as we process the payroll because we incur it for some reason when we pay employees. So that means that we're going to record the payroll tax expense and the payroll liability. We're going to do it as a journal entry and a lump sum because I don't have to deal with that kind of tying it out to the bank reconciliation as we do this process. So let's go back on over. We're going to say that we'll go back on over here and let's do this one with a journal entry. So I will typically go to the tasks up top because this isn't a normal transaction. There's no cash involved and there's no other stated form for it. So that means we default to the journal entry or where we go. We fall back to the last resort, which is basically the journal entry in 013020. And we're going to say the general ledger account. Let's see if they have a payroll tax. Now sometimes some accounting systems don't break out the difference between payroll taxes expense and the payroll expense, but I think it's a good practice to do usually. So let's see what they have here. They got wages expense and they did break out payroll tax expense. So payroll tax expense then should only include the employer portion of the payroll tax. So then I'm going to say then that this is going to be for the 384, which is going to be the sum of these two amounts. So that's what we owe for both Adam and Erica for payroll taxes for them both. So that's going to be the 384. And then the other side is going to be going to the liability, which we've already seen the liability account for the payroll liabilities, because we owe it just like we do for the amount we took from the employees. It's all going to the same people, the same people are taking it from us as they did from the employees. So it's going to the Fed. So we're looking for the payroll tax for the Fed. So the federal payroll taxes, that's the one. And so there we have it, and that's going to be a credit of the 384. There we have it. So that looks good. Let's go ahead and record this. So we're going to say save. And then yes. And then we'll close this one back out. And then let's take a look at what we have so far, or we're pretty much done. We'll look at it now. This is what we're, this is the completed project pretty much. We'll not talk for this component of this part of it. So then we're going to say then that the payroll liability, if I go down to the payroll liability, we have the federal taxes, it should be going up in the credit direction for the amount now our employer portion. So we have the amount that was taken from Adam for payroll taxes, the amount taken from Erica for payroll taxes, the amount taken from the company for payroll taxes all go into, of course, the same place the federal government that tries to split it up as if they're different things, you know, they are kind of different programs, you know, for the Social Security Medicare and the federal income tax. All right. So then we're going to close this back out. And then we're going to go to the other side on the income statement. And now we've got, if it didn't show up refresh the report up top, then we have the wages as well as the payroll taxes. So here's the payroll taxes double clicking that, then you have our payroll taxes. Remember, the payroll taxes should only be recording the employer portion. Again, that's something that most people don't fully understand too well. So that's going to be it for now. Let's get out of here.