 QuickBooks Desktop 2023. Pay Employees Form. Let's do it! Within two weeks, QuickBooks Desktop 2023. 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. Here we are in QuickBooks Desktop Sample Rock Castle Construction Practice File provided by QuickBooks going through the setup process we do every time, maximizing the home page to the gray area. Going to the view dropdown, we've got the height icon bar checked off as well as the open windows which we can see on the left hand side. Going to the reports dropdown, company and financial P&L profit loss income statement tab 010124 to 123124 for the range change. January through December that is customizing the report up top. Going to the fonts and numbers to change the font size to 12. Okay. Yes, please. Okay. Reports drop down again company and financial this time the big balance sheet big balance sheet 123124 the date range. We're going to the customized report fonts and numbers to change to 121212. Okay. Yes. Okay. There's the setup process we do every time we're going back to the home page. Then we've been looking at the employee or payroll cycle. Now we're going to looking at each of these forms remembering that these we can think about these items as forms, the forms being used to enter actual the financial transactions, meaning we entered data into the form. The form then inserts the financial transactions, the double entry accounting system transactions, at least two accounts being affected, the debits and credits that will impact the balance sheet and the income statement as well as related reports to it. Just as we saw in the vendor cycle and the customer cycle, we're going to first start with the main form that being the pay employees. Note that you might say, well, what about what about the enter time thing up here? The enter time thing? Is it required in the payroll cycle because you might basically have someone counting their time just like in Excel or something like that and give it to you weekly if they are hourly employees or you might not have hourly employees. You might have people that are salaried employees, for example. The crucial component for the payroll kind of starts here when we process the payroll and we do that whenever we set up the payroll to be processed, which might be weekly, semi monthly, bi weekly, monthly. Those are the common payroll processes. Also just note that this just remember that this employee cycle, the employees can basically be thought of as vendors, meaning what's going to actually happen at the end of the day for the employees. Well, we're going to pay them. There's going to be money coming out of the checking account and the expense of basically payroll expense. Isn't that just like a vendor up top? Well, yeah. Well, why is it different on the payroll? Because the payroll has so many other things we have to do with regards to withholdings and human resources stuff that now because of laws and regulations, it's basically its own special field due to the complexities related to it. So when we process this form, we are in essence processing just a check like we would if I was just going to make a check to a supplier. But there's a bunch more information that needs to be processed with it. At the very least, we've got to take out the taxes, which are going to be Social Security Medicare and the federal income tax and we got our portion of those taxes as well. All right. So if I check on this form, notice in this payroll setup, it's going to take us because I have payroll turned on within QuickBooks. It takes us to the payroll tab over here in the payroll center. And they got the first tab within the payroll tab, pay employees. So I'm just going to open up one of these processing of the pay employees by double clicking here. It's going to say, hey, this is a sample in old file. I'm going to say, OK, just I just want to look at it. I just want to look at it. So now we've got the three employees. So let's just do a quick recap of this processing. Remembering that at the end of the day, what do we expect to happen? Three checks to be processed. They might be electronic transfers, you might say. Well, what about each check? What if we have direct deposit? Still, for QuickBooks, their checks because they're basically decreasing the checking account, but they will be specially named checks, checks that decrease the checking account in essence. So this whole process should be fairly easy to do if payroll has been set up properly, meaning the withholding should be set up with the W-4s already. The biweekly set up should already be set up. If all that is set up properly, then the payroll processing should be a fairly easy, fairly routine thing to do. We will talk about how to set up all that stuff and some of the complexities with it when we get into the practice problem in the second half of the course. So you've got the pay period ends. Notice when you're paying somebody, you have to think about when the pay period ends because you're going to be paying them for the prior week or the prior two weeks or the prior month, but then you're going to be paying them on whatever the current day is that you're writing the check. So this will be the end of the period, 1229. This is the check date. In this case, they're the same. They might always be the same, but they might not always be the same. You might say, well, if you pay someone weekly, then maybe you pay them every Friday or let's say the pay period ends on Friday. However, you might say, I don't want to actually process the checks on Friday because they might still have to give me their timesheet and whatnot. And I have to enter that into the system before I can process the checks. So you might give yourself some grace period between the pay period end and when you actually process the payroll so that you can collect the necessary information to process the payroll check. So these dates may not always be the same. And then it's going to come out of the checking account. Note that sometimes many people will set up their own payroll account because the payroll account sometimes will give you another internal control that you're doing things properly in payroll. One of the reasons to do that or why you might think about doing that is that payroll one is really complex. If you're going to have an issue, oftentimes be sued or something like that. It's often your employee, unfortunately, that is going to be suing you or something like that. So you want to be able to make sure that you have your information as clear as possible. And the checking account number three has a whole bunch of stuff in it already because every other cycle goes through the checking account. So you've got a whole lot of variety of forms in there. So it would be nice if you can have just a checking account that just has your payroll transactions that might make things a little bit easier. Although a little bit more complex to process the payroll because then what would happen is you would transfer money from the checking account to the payroll just to cover payroll and then process the payroll out of that payroll account so that that account only has deposits in it from money that you transferred in it and then decreases only related to payroll, which can help you to kind of double check things if there's an issue in the future just to keep that in mind. We've got the print paychecks on check store. So we can, if we're going to print the actual physical paychecks, we can do that. We've got the hand or assign paychecks. So we can assign the paychecks here or if there is no paycheck number, we can not have the paycheck number because it might be an electronic transfer or something like that. You can uncheck all of them down here, open paycheck detail. We'll see that shortly. So these are the three items we're going to check them off when they're ready to go. And then we can save it here if we want to finish later or continue to process the actual paychecks. These will process the three paychecks. Let's go into one of these individuals. If I select an individual, see if they can open that up. This gives you the data that's actually happening. Hopefully this happens automatically, meaning it populates automatically in essence for the most part, except you might have to add the hours, for example, into the system. So here we've got regular pay. This is an item that is set up similar to an inventory item to help populate an invoice. This being a payroll item, helping you just populate the payroll. You've got the rate, which of course was set up when we put in the W-4 information for this particular employee, Elizabeth. The hours, which might have been pulled in through the hours that were put into the time tracker, right? So that's how that could feed in. And then we've got, this is the worker's comp code, if necessary, depending on your area. Overtime, if there was any overtime hours, it would be applied here, which could have a different rate because there could be time and a half. That's another kind of law that you've got to take into consideration, which might be different from place to place. Sick hourly. And then we've got the vacation information. These are the items. So we only have the 80 up top, the 80 hours times the 14.75 gives us our pay. So that's how much pay they would get, but we have to take from them some stuff, right? So we had to take from them health insurance. That is a usually going to be a non-mandatory or voluntary withholding because they opted into the health insurance plan, which could be beneficial because there might be tax benefits and it might be a group plan with a cheaper rate. And then they also have the federal withholdings. That's federal income taxes. Those are not our federal income taxes. They're the federal income taxes of the employee. When I say our, I mean, I'm thinking of ourselves as the business. It's the federal taxes of the employee that were required to take from them out of the money we were going to give to them and pay to the government. That's because the government has made us into their tax collector. And then we've got the social security. This is the social security we're taking from them. Not our social security, their social security. The government doesn't trust them to get their hands on the money and pay their own social security. They're requiring us to take it from them before they get their hands on it. That's they're making us their tax collector. The same with the medical, the Medicare, same thing. So we're going to have to take that out as a tax. And let's just do some calculations on this just so you can have some understanding of the complexity of this. Note that the federal withholdings, we don't really know what that is because it'll be dependent on the W-4, whether they're married and how many exemptions and so on, what they give us on that. But the social security is usually up more of a flat tax. So 1180 times .062 would typically be social security. And then we've got the Medicare is usually a flat tax. So 1180 times .0145. There's the 1711. And then the California withholdings. This is a California company, apparently. And then they've got state taxes that would be dependent upon which state you're in. Not only that. So that means that they had 1180 minus all the stuff that we took out of their paycheck. And then they're only going to get 937.20. So in theory, they earned 1180. But then we paid on their behalf much of it being involuntary to the government and some of it voluntary to a benefit program resulting in them receiving a check or payment that's going to go into their account 937.20. We also had to pay on our side. This is our side taxes that we're paying not based on our income. We're paying these taxes based on an expense, right? Which is kind of funny from an income standpoint. It's kind of sadly gross. It's funny. Darkly funny. So now we have to pay 73.16 as the company for their social security. And we have to pay 17.11 for their Medicare that's kind of matching. They try to make it look kind of like a 401k plan would be the general idea of it even though it's different in how it works. But in any case, then you got the federal unemployment tax and the unemployment compensation. So it's sometimes it's easy to kind of write this out to really understand it. This is one of the most complex journal entries to be dealing with. So you might want to kind of map it out like in Excel possibly. So if I was trying to recap this in Excel, you'd say, OK, what's going to happen in terms of the journal entry? What's going to be the impact on the financial statements? Well, I'm going to say, OK, well, from the financial statement perspective, we've got the regular pay is 1180. So that's going to be then we're going to say, OK, that's going to be something like salary expense is going to be a debit. I'm going to use debits and credits, but you could think about it as going up and down 1180 for the salary expense. And then they had the insurance withheld of 25. So we're going to have withholdings that are going to come out. So I'm going to say, OK, withholdings are going to come out of the check. So I'm going to say health insurance payable because we're going to have to actually pay that to the health insurance. So to us, we took it from them and we got to pay it to the health insurance. So that's 25. So I'm going to say negative 25. And then we had to take from them federal withholdings. I'm just going to call that federal income tax, FIT for short sometimes. This isn't our tax. This is the employee's federal income tax. And it was at $97 negative 97. That's going to be a payable federal income tax payable on the balance sheet because we're going to have to pay it to the government later. And then we've got social security. I'll just call it so I'll call it SS tax payable. My call it FICA tax payable and include social security and Medicare payable. And that's going to be then the 7316, which I can also calculate of negative this number. It's going to be negative of this number times 0.062 because it's more of a flat tax typically. And then we've got the other one is going to be Medicare payable, which I probably spelled wrong, but that's usually going to be negative this number times the 0.0145. Okay. And then that's 1711, 1711. Then we've got the California withholdings. So California, which sometimes they call SIT state tax California payable. And we don't know what that's going to be. It's going to be dependent on the W4 1873 negative 18.73. And then we've got the SDI disability as state disability. SDI typically California, something like that, which would be the 1180 negative 1180. And that means that the check that's going to come out of the checking account cash checking account is going to be negative. Some of all this meaning negative some of what's going on with my of all this stuff. So there there is that 937 20 right 937 20. And then we've got to pay on our side our portion of Social Security Medicare. So you got California California training. So you got California training that we're going to have to pay. I'll start with the credits this time just to go because it's easier. Actually, let's put it put it down here California California training tab tab. And that's going to be 118 negative 1.18 that we're going to have to pay. And then we've got the Social Security for our portion, which is going to be the same as the Social Security up here. So we'll just say this is the same as this number. And then we've got the Medicare that we're going to have to pay. This is going to be like this number. And then we've got the federal unemployment tax, which is abbreviated FUTA, which makes some people laugh for some reason FUTA. That's what it's called. It's negative 7 negative 7.08. And then we've got the California unemployment, California unemployment payable, which we're going to say is 67.95 negative 67.95. Is that right 67 61.95 61.95 61.95. And so there we have that. And that's going to be the payroll tax negative sum of all of that. So 160. Did I get that right? And then you've got the workers comp. The workers comp I didn't add. Let's add that. This is going to be workers comp payable. And that was that was 121.18 negative 121.18. And then we'll bring this on down to there. So something like that. Hopefully I got that all in there. But then you try to get an idea of all the accounts that are being impacted by this transaction. And what you want to do is try to get a feel for what's going to happen to the financial statements. Now note that that's a lot going on. And again, I did that quite quickly. So so that's just to get an idea of the of what I would try to do when you enter the forms because remember our goal is to enter the forms and then try to think about what's going to happen to the financial statements because that gives us a much better idea and then go to the financial statements and see what actually happens. Now note that that kind of complexity happens per employee because this employee is going to have the same kind of issues right we can do the same thing for this employee. So you can kind of imagine what's going to happen to the financial statements grouping all employees together as if they were one employee with one big transaction one big journal entry. That's how you might enter the stuff into the system. If you had this done by a third party like an ADP or a paychecks and you were just entering it into the system to get the balance sheet and profit and loss recorded properly relying on ADP or paychecks to do the actual kind of work with regards to employee by employee reporting paycheck stubs and all that kind of stuff. But when you but when you actually do the payroll in the system we also have to record each transaction individually because we need the reports that are going to be used on a employee by employee basis to process the payroll forms and all that kind of stuff. So if you were to if you were to continue on this would print the paychecks let's close this back out and then let's look at the balance sheet and just give a quick recap of what's going to happen. I'm going to talk about this more in the second half of the course but we can see when we process the paycheck there's going to be a decrease to the checking account double click the checking account and I'm going to change the date from 010124. And I'm looking for a special check here which is going to be a paycheck so it's still a check right but it's a paycheck if I double click on it. It's not going to take me back to that data input form it takes me to a paycheck type form decrease in the checking account except the bottom of the paycheck has this summary data instead of like the expenses and items tab. If I go to the detail then it shows me the detail right. And if I close this back out and close this back out that looks different than a normal check which looks like this which at the bottom just has one account lot easier of a transaction which just has the expense account. That we put on it and then the other side would be going to the profit and loss. The main component being the the caught or the salary that was paid out which would be something like now it's a little bit you could like apply it to multiple expense accounts if you want to categorize your expense accounts differently but here's for example gross wages. So if I go into gross wages then we've got the amounts that are being applied for the gross wages if I double click on it you could see we're at notice the check was 1299 if I go into it they earned the amount of 1596 15. That's the amount that's going into gross wages here not the net check right because the idea is that they earned the full gross amount even though they got a check for the amount that they got paid right so they earned. If I look at this transaction they earned this even though they only got a check for that all this is the difference and all that is going to be recorded on a payable. So if I go back on over here and go to the balance sheet we've got liability accounts for all of the stuff that we took out of their check and that includes the federal withholdings that we took from them. So if I go into there and change the date 010124 we've got the federal withholdings that we took out we've got the FICA taxes that we took from them. We've got the state withholdings that we took we've got then and that's those are going to be and then we've got the health insurance that we took out right and those are the ones that we saw here and they created payable accounts. Health insurance, FIT, Social Security, Medicare, SIT, SDI and then the check and then we also had to pay more because we had to match or we had to pay our payroll taxes. Notice that this number represents and this is what oftentimes people get confused so if you understand this you really have a better understanding than most people. The payroll taxes do not include from our perspective the company perspective this stuff even these even though these are payroll taxes to some degree to from one perspective. They are not our payroll taxes as the employer in theory they're the employees payroll taxes. We are just the tax collector that were forced to take the payroll taxes out of the employees pocket before the money even reached their pocket right. So these taxes down here from our perspective our our payroll taxes as the employer because they're not part of the employee salary their taxes we have to pay over and above not based on our income but based on our expense of payroll right. So we have an increase then as well to the to the FICA to the FICA tax which is going to be Social Security and Medicare 0101 to 4. So Social Security and Medicare if I double click on this one we've got hold on a second clicking on this one we've got this amount here and then we've got this amount here we paid it twice we didn't pay it twice. We took half from them and then we had to pay our half right. So that's how that's how it happens for Social Security and Medicare and then if I close this back out we also we don't we don't have to pay federal unemployment tax because that's just there. I mean federal income tax that's just their tax we do pay federal income tax on our income depending on how we're set up if it was a sole proprietorship through our schedule C that goes to the 1040 but but this is their income tax. And that we're taking from them to pay on their behalf. We do have to pay FUTA which is the Federal Unemployment Tax Act which is an employer only tax. We do not take that out of their pay it's usually a smaller tax so it's not as big of a deal but we have to deal with it and it's confusing from a payroll perspective because it has that small cap that everybody hits and it's easy to get messed up on which is useful to use software. State withholdings this is this is dependent upon each state. So this is the money we took from the employees similar to the federal withholding for their state taxes. SUTA is another one that will be partially dependent on states but most states have it because of some kind of kind of manipulative work on the federal side of things. So in any case generally do have a SUTA that you're going to have to deal with and it will typically have an employer component to it. So if I double click on this one and go from 0101 to 4 you've got those items. If I click on this one and we look at the California the California the the unemployment company. So California training that's going to be a specific to California and the unemployment company 83 80 closing this back out closing this back out the 83 80 here closing this back out. And then the state the state disability which will be dependent on the state the workers compensation dependent on the state and so on. And the other side of all that stuff will be on the income statement and typically it notice this gross wages is just the employees portion. And remember that includes their withholding. So it's their gross pay. Then the payroll taxes only includes the stuff that we had to pay that we didn't take out of their paycheck. So then that's what the payroll expenses are here on the other side of things. So again payroll complex transaction even if you have a third party like an ADP doing the payroll just entering the payroll in terms of one journal entry for all of the employees and tracking it and still being able to do the bank reconciliation can be kind of complex from an accounting standpoint. And because of the complexity it's a useful tool to look at and kind of to get an understanding of we'll get into that in more detail when we post these transactions in the second half of the course with the practice problem. Also just realize that sometimes the default for QuickBooks will group these two things together payroll taxes and the wages and one you could also break out the gross wages into different groups like if they were salaried employees or non salaried employees or if they're by department. So you might see different areas if it's job cost system you might have some of the wages that are being recorded up here as part of the cost to get sold which can add to complexity. And if you go to the balance sheet you could kind of have more or less categories in terms of your payables. You might just use one payable would be like payroll payable you know that would group everything together or you might have more categories. You could see here they grouped Social Security and Medicare under FICA which is kind of common because they're under the same kind of code. They're both federal taxes even though they're different you could break it out to Social Security payable Medicare payable and so on that kind of breakout and how to do that stuff would be dependent upon setting up the payroll and using the items to kind of give you that kind of flexibility to go along with whatever desires you have with regards to your reporting.