 So now we're going to go into the pay liabilities. Now if you have the payroll set up within the accounting system, remember you have two options. You could do it within QuickBooks, Payroll, or you can do it with a third-party provider. Either way, you typically have to pay more. If you do the payroll within QuickBooks, we want to make sure to use the widget to process the payroll. If you do payroll with a third-party provider, it's possible that you can actually kind of set your whole thing up still on a cash-based system and wait till everything in essence clears the bank and then just record everything as like a payroll liability and then adjust your payroll accounts on your financial statements to be correct periodically, possibly just at the end of the year so that you can make your financial statements and do your taxes as of that point in time based on the payroll reports provided from the payroll provider, like an ADP or a Paychex. If you're trying to automate your whole system, separate the bookkeeping from any kind of accrual stuff, that's a method that you could use, but you need to have a network with a payroll provider, you doing a bookkeeper that automates the bookkeeping and a CPA firm or tax preparer, all of which have the knowledge to do their part in the process. If you're doing payroll within the system, then of course we need to track payroll as we go because the system's going to have to generate all these other reports to properly report the payroll. So as of now that when we enter the payroll, we know what's going to happen is cash is going to go down so whenever we enter the payroll for the first month and the second month, we saw the checking account has payroll checks that are impacted. Here that's for the net check and then the expense is on the income statement under payroll expense, that's for the full amount earned. So the difference between the two is the payroll liability, what we kept from the employee because we were forced to and that we're going to pay to the government on their behalf in theory, even though they're kind of forced to do it. It's not really a voluntary thing, that's involuntary taxes. So here it is on the liabilities, they increase. Now the liabilities also increased by our portion, the employer portion of payroll taxes that being social security, Medicare and if we had it turned on federal unemployment tax are the main ones and over here we've got the taxes on this side. Now this is going to be reflected, you'll recall if I right click on the tab, duplicate it in the sub ledger reports which we will have if we're doing payroll internally which we're doing here because it was part of our free 30-day trial thing. So we'll test in it out playing with payroll which is always good times, good times, payroll play. So we're going to go down here and say I'm going to go to the payroll summary by employee and change the range from 010128 to 020128. What? What? 2-3. Okay so there we go, so there's the payroll for the two periods. Now we saw that this doesn't exactly match what we had in our system because we made some adjustments to our system general ledger accounts outside of processing the payroll. Now just to point out that that's still going to be an issue it's the same thing you have a similar issue when you're paying the payroll. So now I'm going to pay off for example the liability accounts. So if I go into the payroll liability account I'm going to be paying off part of this payroll liability account but I'm imagining that we process the January payroll that we now have to be paying off in February. So the end January payroll we've got a liability of 2028-46 and then the February payroll we're going to actually pay it to the government in March. Now obviously your payroll when you have to pay the payroll and setting up how soon after processing the payroll you need to pay it is something that you're going to have to make sure that you set up properly according to where you are and your requirements and your location when you do the setup and it'll depend on how often you pay do you pay people weekly semi-weekly and so on and how much payroll do you have in terms of how how soon after processing you got to pay the payroll liability but that's what we're going to do in our practice problem. So going back now normally to do that obviously all we would have to do is write a check right it's going to be like a check form or an expense type of form decreasing the checking account the other side decreasing the liability account here but normally we would want to do that with the payroll widget going to the tab to the left and going down to the payroll on the left hand side we processed the payroll in here using the run payroll item but remember some of our limitations in trying to do a practice problem with payroll inside of an accounting software is that payroll is generally designed to run real time so QuickBooks is trying to kind of automate everything and so it's hard to kind of work in the future or in the past like you need to do in a practice problem so we can't we don't so we don't have any like payroll check that is due as of this point in time when I process the check if you work this payroll problem in the future then you might have it due because you'll be in the future and you might you might have to be able to process the payroll also note that of course it's possible for you to kind of more automate the payroll process once it's going to be set up so that hopefully the the pain of the payroll will happen you know when it's required to happen soon after you process the payroll so you can kind of automate the system