 In this presentation, we will take a look at the Payroll Expense Journal Entry. When looking at the Payroll Expense Journal Entry, we're going to pull this information from the Payroll Register. And the Payroll Register will show the regular pay for our employees. We have four employees, these representing the data for the four employees, totaling up to the total here for each of these columns, including the regular pay. The OASTI or Social Security, the HI or Medicare, the FIT or Federal Income Tax, the Group Insurance, the Union dues, the 401K or Retirement Plan, and finally the Net Pay. So in essence, what we have here is what the earnings were. We're going to be considering this in total. So we're going to make this Journal Entry not per employee, but per total here. And we'll have the total earnings, less all the stuff that was taken out before we paid our employees, less the Social Security, less the Medicare, less the FIT, less the Group Insurance, less the Union dues, less the 401K plan, giving us Net Pay here, 2826611. We're going to use this information in order to create our Journal Entry. And to do that, if you think about the Journal Entry just in terms of the most basic type Journal Entry for payroll, if we only were paying, say, this check amount and didn't have all these deductions or paying, let's say, this check amount, and we didn't have to deal with all these withholdings, it would be just like paying any other expense. It would be very simple. So you probably want to start, we would start there and think from there, meaning is cash affected? Yeah, cash is going down or paying cash. Cash is a debit balance. We're going to make it go down by doing the opposite thing, which is a credit. And then the other side would typically be wages expense. So that would be our normal Journal Entry if we didn't have to deal with all the other payroll stuff we got to deal with. And then we have all this other payroll stuff we got to deal with, which means we got to take out all this information from the paycheck, and then they're only going to get this Net Pay. So to do that, what we're going to do is create these liability accounts because we don't get to keep this money, even though we're only paying them 28266, they've earned 48719, and whatever we don't pay them is a liability to us in something we will then have to pay someone, typically the government. So we're going to put these liabilities account then one for OASDI, which is Social Security, one for HI, which is Medicare. These two are employer portions. That's why we don't see these here. So they're not going to be on our register, and they're not going to be coming out of the paycheck. They're not going to be in the payroll entry for employer taxes, but we do have FIT, federal income tax, the group insurance, the union dues, and the retirement. So that's what we'll pull out, and those are the accounts we will use. Very useful when doing a payroll journal entry, just like any journal entry, but especially for payroll, to see the chart of accounts, and then we can see what accounts we're going to be using in order to record these liabilities. For example, the account might just have payroll taxes payable and group all these together, or it might break them out in this way. It's nice to break them out because then we can see exactly what the liabilities are for, and then make sure that we're paying the right people. So that's what we're going to have here. We're going to build this journal entry then, and we'll start off with our, we got a payroll register. We said that the beginning number is going to be that 48, 896, and that's going to be the salaries and wages, and that's coming from here. Then we're going to put all these, we're just basically lining these right up from our register to our journal entry, starting with the OASDI, or FICA, OASDI. That'll be a liability, liabilities that have credit balances. We're going to make it go up by doing the same thing to it, another credit. So that's that 3,031, 3,031. Then the HI, here, 708, liability. So that's a FICA tax, HI. We're increasing the liability with a credit. Then we got the FIT that we're going to have to pay, 8,599,13. It's going to be a credit to FIT, 8,599,13. Then we're going to have the group insurance, 5,500, that we will be removing collectively for the four employees. Then we've got the union dues, we're going to take those out too. So we're going to take out the union dues. We're going to have to pay those to the union. So that's going to be a credit until we do so to the liability, increase in the liability. Then we've got the 401K or retirement plan. We're going to be increasing the 401K retirement plan, that being in some way owed back to the employers or to fund the retirement plan. And then finally, we're going to have the net pay, which will be the 28,266,11. And that will be taken from the net pay here, and you can also think of it as kind of like the plug formula that you need to make this work, meaning the debits minus the credits if we add up the credits up until here, the calculator went away, up until there and then subtract it out. We're going to say the credits before that are 3031.55 plus 708.99 plus 8599.13 plus 5500.1 plus 16 plus 2774.2 gives us the 20,000 before this 28 of the credits. And then the debits are only 48,896. So if we subtract that out, then minus the 48,896, we have the difference of 28,266,12. It's a rounding difference. So because this came from Excel, so it's off by penny, but that's okay. We're going to be okay with that. So that's going to be our journal entry. And this will be the check that is actually paid. Of course, it is consisting of four checks being paid. We took the total here to enter this data into our register or into our general journal. Now let's post this to a worksheet and see what it would look like. Here's our trial balance. It's in balance. We can tell because the debits equal the credits or the positive numbers minus the negative numbers equals zero. We currently have net income of 500,000, which is this income, no expenses. So we're just going to post this out then. Here's the salaries and wages expense. Here's the salaries and wages expense. Going from zero up by 48,896 to 48,896. Here's the FICA for OASDI. Here's the OASDI. Going from zero up by 3,031.55 to 3,031.55. Then we've got the 220 for the HI. Here's the HI going up by 708.99 to 708.99. Then we've got the FIT. It's a liability. So here's the liability for FIT here, it's at zero. It's going up by 8,599.13 to 8,599.13. Then we've got the 245, the union dues payable. It's going up from zero up by, or actually the group insurance, sorry, group insurance, going up from zero up by 5,501 penny to 5,500 and a penny. Then we've got the union dues. It's going to go from zero up by 16 to 16. Finally the retirement plan going from zero up by 2,074.22, 2,774.20. And if we see all this, and then the cash of course up top is going from 600,000 down by the 28,266, the check, the net check, 2,571.733.89. Now if we see all this together, this is going to be the difference that we made. Note here that these of course are all the liabilities that we are later going to have to pay. So we only took this much out of the checking account. We had an expense of this amount. And the difference then is all these liabilities that we will then have to pay at some point in the future. Note how this journal entry mirrors the register, mirrors the calculation, mirrors what you probably see on your pay stub in terms of your salaries minus, which is the debit minus all the credits that we're taking out of the paycheck. Also note that the effect on net income is only the 48,896 and not including all these liability accounts down here. These are liability accounts. This is the only expense account and note that we're changing net income not by the net check, not by the cash, but by what was earned. So we changed it by what was earned, 48,896 was earned, even though 28,266 was all that is paid at this point on an accrual basis, then we recognized what was earned, 48. So net income went down by the 48,899,500,000 before, 451,104 now, 500,000 minus the 48,896. Another confusing point that we want to make sure we understand here is that this typically the salaries and wages here will include all the salaries and wages that were earned. And we will have a payroll tax expense as well, but it's not going to include all these payroll taxes that we're currently going to pay, which is confusing their liability accounts that we're going to pay, but we're not recording a payroll tax expense related to them. Why? Because these aren't our payroll taxes as the company. They're not our stuff that we're paying from our checking account. In theory, they are coming out of the employee's check. These are employee's check. So the real expense is the employee's earnings. This is the employee's earnings. It just so happens that we're paying some of those employees earnings, not to the employee, but on behalf of the employee to the government. But then there is going to be a payroll tax expense, but that's what we'll do in a separate presentation and we'll look at the journal entry for our taxes, which will include our portion and our portion. I'm thinking of us as the employer, our portion of the OASDI and the Medicare and then the FUTA tax, which are going to be employer taxes. End simulation. End the simulation.