 QuickBooks Online 2023. Pay employees, 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. We also have open the free QuickBooks 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. It's online sample company. If you want these two open at the same time, we suggest using the incognito window or another browser. You can open the incognito window if using Google Chrome by selecting the three dots in the browser and incognito window and then type into the search engine, QuickBooks Online Test Drive. We're gonna be using the sample company to compare and contrast the accounting view, the view get great guitars company file is in, and the business view, the view that the sample company is in. If you'd like to switch back and forth between the two views, you can do so by selecting the cog up top and switch the view down below. Opening up a couple of tabs to put reports in, we're gonna duplicate the tab up top by right clicking on it and duplicate. Right click on the duplicated tab again to duplicate, and then we're gonna go back to the tab to the middle and select the reports on the left-hand side. Opening up one of the faves, that being the balance sheet report, and then we're going to, let's take a look at that on the business view, by the way. If I go to the business view, the reports are located in the business overview, and then we have the reports on the left-hand side. That's where they're located here. Back to get great guitars, let's tab to the right, and then open the reports on the left-hand side. This time, the P&L profit loss, the income statement, in other words, closing the hand boogie, scrolling up to change that range from 010123 tab, 123123 tab, run it for refreshing it, and then tab it to the middle, close the boogie, scroll up, range change again, 010123 tab, 123123 tab, and run it to refresh it. That's the setup process we do every time. Now we're going to be processing the payroll. So I'm going to go to the first tab over here. Remember that payroll is something that you have the option as to whether you want to pay more to process the payroll within QuickBooks or process payroll with a third-party provider. There's pros and cons in both of those formats of the payroll. We were able to turn on the payroll for the free, as part of the free 30-day trial. So we're going to be testing out the payroll within the system. So if I go into the payroll, we're now in the payroll center. And if we're in the other view, by the way, the payroll is down here as well. We have a similar tab in the business view. Now, if I take a quick look at our flowchart here, just to think about the process of payroll, what we did is we set up the payroll, and that's the first thing we got to get going because the payroll taxes could differ based on the location and we have to pay more to get the payroll set up within the QuickBooks online software. Then if we're tracking time within the system, we can enter the time into the system, although that's not a requirement for all payroll because you might be tracking the time outside of the system in another program or an Excel spreadsheet or you might just be paying salary. And then we're going to be paying the employees, which is what we're going to do now, which you can basically think of as like a check type of form because at the end of the day, it's going to be a form decreasing the checking account. However, they're going to be multiple check forms depending on how many people were paying and they're going to be some of the most complex checks in terms of journal entries because we're going to have to calculate the gross pay, the withholdings, which we're going to focus on just the mandatory federal tax withholdings, social security, Medicare and federal income tax, although you could also have the benefits to be withheld such as a 401k plan, health insurance, and you could also have state obligations as well, both required, you know, required obligations for state taxes. The processing of the payroll as we saw when we set up could be on a weekly basis, bi-weekly, semi-monthly or monthly basis. And then of course, those withholdings that we took from the employees and the employer taxes would have to be paid. And that would be the next step on the payroll liabilities. And then we have to file information reporting forms, which would be the 941s on a quarterly basis, 940s at the end of the years, W2 at the end of the year, and W3 at the end of the year. So now we're in this step, processing the payroll. Now note that if you were doing this through a third party provider, then they would be processing the payroll and handling the HR typically, meaning they're going to track all the taxes, not only on a aggregate basis, but on a year-to-date basis, a per employee basis and a year-to-date versus a current paycheck basis. That's a lot of data to kind of process. And so that's why it could be beneficial to either do it within QuickBooks where you're gonna have all that information or by a third party provider, in which case you could just pull in the summary data into the system to get your financial statements correct and use the third party provider to have all the detailed information. Okay, back to QuickBooks. Let's go into the, well, let's go to the overview here. We've got the overview, we set this up in a prior presentation and now we're just gonna go into pay my team. Now, processing the payroll can be a little bit complicated in a practice problem depending on what the date you're working in is because it's kind of hard to work in the past and in the future with the payroll because typically payroll is set up to be working in real time in the current time. So if you're working in this problem far into the future or something like that and you wanna test out the payroll, you might have to be somewhere in the range of when you're working the problem in order to be able to practice with the payroll. That said, we're pretty close here, so we should be okay. So we've got the balance that's gonna be coming out of the checking account. Here's the balance, we've got the pay period and we're talking one one to one 31 because we're talking a full month. We're saying that we're paying people monthly. The pay date happens to be the same day as the end of the pay period. That's not always the case. It might be for some people that oftentimes and actually actually that you might have the pay period end on the 31st and you might then have a couple of days before you actually process the checks to make sure that you can get everything processed. But we have it on the same day for our practice problem here. And then down below, the people were paying. We had Adam that we set up as a salaried employee and Erica Smith. So salaried employee, I think we said like 55,000 a year which comes out to 4,583. Let's just double check that. If I pull up the trustee calculator. Calculator, where are you? It doesn't, here it is. Okay, we can say I paid 55,000 divided by 12. There's where that number comes from. And then Erica, we need to put in the hours in order to process the check here which we could do in this outer field. But I'm gonna go into the check because I'm gonna make some changes to line it up to kind of our generic practice problem. So if I wanna see the detail, I'm gonna go into the pencil here. So we'll go into the pencil. Here's the information. So Adam, here's the location, the address, the pay period and the pay date and so on. So we have the pay at the 458333 and then the employee taxes. So these are the withholdings from the pay for the employee taxes. Now I'm gonna change some of these here. This is being generated directly from what we put in that we would have gotten from the W-4 but I'm gonna put my own information in here to kind of match the practice problem that we put together and match our bank reconciliations. So I'll give just a quick recap on how this would work. The federal income tax is not our federal income tax as the business. We pay taxes too as the business owner but this is the employee's federal income tax that they would pay that's gonna be reflected on their form 1040 that we are withholding from them. The federal income tax is quite complex due to the progressive tax systems and all the different deductions and whatnot. That's one of the primary reasons you pay for payroll because you have to get the information from the W-4 and then go through this complex calculation to get the federal income tax which is useful to have a computer to do oftentimes although you could look it up on a table. So but I'm gonna just tight so I'm just gonna make up the number here at 720 to match the practice problem. Now these other two down below are automatically calculated and they are usually more of a flat tax so they're gonna be a lot easier to calculate and notice they're kind of hard coded in here. They won't even let me change it because if I take the 4583.33 the gross times the 0.062 I believe it is and that's where we get the 284.17 that's the employee portion of Social Security that they're paying into and then if I take the 4583.33 times 0.0145 that's where you get the 6648, the Medicare and then the California tax I'm gonna try to say that I don't want the California tax because I'm making it a generic problem. So now we have then the 720 plus the 284.17 plus the 66.45 that's the total of 1070.63 minus the total check which is the 4583.33 minus the gross pay. So 4583.33 minus the 1070.63 would mean the net check at this point of 3512.70 and then we've got the employer taxes these are the taxes that we're going to match on our side and that's gonna be the Social Security so we're paying over and above we're basically paying taxes not on our income but on an expense the amount that we're paying the employees of that 284.17 the 66.46 it's designed or it was designed to look kind of like our retirement kind of set up, right? They put money in and we kind of like match it down below. Now normally you would have another one that we turned off which was the FUTA Federal Unemployment Tax Act and but it's usually fairly small and it has a fairly low cap. So we took that out and that would be the federal taxes and that one is only on the employer side not something that's being taken out of the employee wages. And then again, if you had any state taxes you could see the California income tax here if that was applicable but we're gonna make it generic and then if you had any non-required withholdings the voluntary withholdings they like benefits they would be up in here as well. So that's gonna be the general idea what's this gonna do when we actually record it? It's gonna record a paycheck. The paycheck is going to decrease cash by what we calculated here the 3,512.70 and then it's gonna increase an expense of the 4,583.33 because this is what they actually earned even though they're only gonna get the check for that 3,512. And then the difference is gonna have to go to a payable. So we're gonna have a payable for everything that was withheld this 1,073 that we're gonna have to pay to the government because that's why we took it from the employees or never gave it to them even though in theory they earned it. And then we've got the social security which is also gonna increase another expense account which might be payroll tax expense or combined into the same payroll expense and the other side of that is also gonna go to a liability so that we have to pay our portion of taxes on the employee wages. This is the transaction that would happen on an employee by employee basis and we can think about the same transaction happening in aggregate as if all employees were like one employee filing or processing payroll for one timeframe. So let's save this one. I think this one looks good. I'm gonna say, okay, let's save that. Now I'm gonna change Erica's rate here so you might have 16 on it. I think I changed it so I'm gonna close it to show you how to do that. I'm gonna go to the employees on the left hand side. We're gonna choose Erica. Let's close up the hand buggy and I'm looking for the rate. So if I scroll down, we're looking, there it is, you might have 16 there. If you're following along, I'm gonna edit it and I'm gonna change it to, I think we had 15 for the practice problem. So let's change it to 15. I lowered it, she's gonna be pissed. I'm sorry, that's what my data that's what my practice problem says. My supervisor made me lower it. Anyways, we're gonna go back in to the payroll then, back to the overview and let's close it up and go back to the pay of the team. Good. And then we're gonna put the pencil for Erica. So Erica, I'm gonna say that she worked for the month, 160 hours. And notice I'm just imagining we got that from some other location like an Excel worksheet or something like that, or another program that we're tracking time in. And then in the federal income tax, I'm gonna put, I'm gonna change the federal tax to 360, which is quite high, but that's what I have on the practice problem. We can see that the other rates here are more of a flat tax. So we can take the 2400 times .062, that's where they're getting 14880. And if we take the 2400 times .0145, that's where they're getting the 3480. Those are more of a flat tax system, although there are caps on it and some tricky stuff, which makes it useful to have the software to help us. That comes out to 582. So I think that looks good. So if I was to add this up, we've got 360 plus 148.8 plus 34.8. That's what we're gonna withhold minus the 2400, or 2400 minus this, means that she would get a net check of that. So what would the journal entry be for this employee so far? It would be, the expense would be recorded after 2400. The other side would be the net check, decrease in the check in account for the 543.60, and then some kind of liability here for what we basically took from the employee or never gave them in the first place, but which they earned in theory. And then we have our employer taxes, which are gonna be matching, in essence, the Social Security and Medicare, and we didn't add the FUTA taxes. So this would be another journal entry, where you could think of it as another journal entry, which would be increase in the payroll liabilities, the other side going to payroll taxes expense. Notice that this is the only part that really should be in a payroll tax expense category, even though you might think of these as payroll taxes, and we typically do as an employee, but these are the employee's payroll taxes, and they earned 2400, and then in theory, they paid their own payroll taxes, even though we, the employer, are the ones forced to withhold it from them and pay it on their behalf. Whereas these payroll taxes are payroll taxes that we are paying over and above the employee's wages. So it's a little bit tricky to understand that, but once you get that, it makes sense, I hope. And so there's gonna be that. And now, so I'm gonna say, okay, let's save this one. I'm gonna say, okay, and that's what we have. Here's our summary. I think we need to adjust Adams again. I think they didn't, I'm gonna go back into Adam, and it was employees. We had, this should be at the 720 now, because I readjusted it again, and this should be zero. So there it is. So now we're back to where it should be. This side looks good. Okay, I'm gonna say, okay. So we got our preview down below, and then we've got save for later. So let's go to the preview button. That gives us another summary. So we've got view and submit. We've got the total payroll. Here's the net pay, the employee and employer for a summary up top. And then we've got the employee by employee breakdown, which is nice here because they actually give you the total pay and the employee taxes and the net pay. So this is the total pay minus what was taken out for the employee taxes and then the net pay. So they give you the summary here. I kind of feel like they should give us this summary on the prior screen. But anyways, you can go back here. We can go to the preview payroll details. Let's go ahead and do that. So it gives us another little kind of report format. So you've got the pay, you've got the deductions. You've got the employee pay taxes and the employer pay taxes on an employee by employee basis and then the total. So remember when we talked about the journal entries, the accounts that were impacted, you can think of it on an employee by employee basis, but you can also think about it in terms of what's the total impact on the financial statements as if all your employees were basically like one employee. If you were working with a third party provider, then you might have them process the payroll, break their information out on an employee by employee basis, have them give the employees the stuff that's necessary by check basis, as well as a year to date basis. And you're entering, you're mainly concerned in that case with making your financial statements correct and being able to enter the data in such a way that you can do the bank reconciliations. But it would just be some, you can kind of summarize it in that case, which takes far less data than to break out all the data necessary for an employee by employee basis by just thinking of them kind of as if they were one employee and what's the impact on the financials. All right, so then we've got the submit or save for later. I'm gonna go ahead and submit the payroll. By the way, when I made the change before, I should have saved it for later. And then I wouldn't have had to go back in and change Adam's information here. So let's go ahead and submit the payroll. And so now we've got this item, we got a survey. I'm not gonna do the survey. No survey right now and not using direct deposit. So if you have direct deposit, then you can set up the direct deposit. Otherwise we're gonna be entering the check numbers into the system. I'm gonna let it auto fill the check numbers. So auto fill the check numbers, enter a start check number greater than zero. I'll leave that be for now. Let's take a look at the paystubs. Now, remember from an HR perspective, we generally have to give the employees a pay stub in some way, shape or form because we have to tell them not only that they got a net check, but what we took out of their check. So this is, if you have an electronic transfer, you'd still need to give them this information. And notice what we have here. We've got the current and the year to date. So this is the salary current in year to date. They're the same right now. Obviously they would be different if it wasn't the first pay period. Social security, federal income tax, Medicare taken out. They've got the summary current year to date on the right. And we have that for both of our employees. So that looks good. I'm gonna close that back up and let's go ahead and finish this out. So I'll say finished payroll and then let's make sure taxes got paid on time. Most small businesses pay taxes every month. So set up taxes now and I'm gonna say that we'll do it later. I'll do it later for the practice problem purposes. Obviously that when you're gonna have to pay the taxes will be partially independent on the company themselves. And you might have different requirements for when or how often or how far after the payroll you have to actually be paying the taxes. So let's take a look at that now as we see the impacts. A lot of the times the first thing I like to look at is the actual check register. So we can find that in the accounting and then the chart of accounts. And if you're in the business view, by the way it would be the chart of accounts is in the bookkeeping and then the chart of accounts under the manage. And then in the chart of accounts I'm gonna select the check register to see where those checks that were created. Here are the two paychecks that were created. Now it didn't apply the check number for whatever reason. I tried to auto fill the check number in there. So I'm gonna go in and add the check number if I can. Let's try to edit, let's try to edit Adam's first. I'm gonna go into Adam and then let's edit and I'm gonna try to give Adam a check number here and I'm gonna call it 1012. Because when I do the bank reconciliations I'm gonna have a check number on it. And so I'd like to tie that out. It's not a big deal but I'd like to do that if I could. So I'm gonna save that and then I'm gonna go back into the hamburger up top and we're gonna go back into the accounting on the left hand side, the chart of accounts. Again, I'm gonna go into the register and just try to add the other check number to Erica. Erica, edit that one. And this is gonna be, I'm gonna say 1013. All right, so not a big deal if you don't have that but it'll make it a little bit easier to tie out on the bank reconciliation. So if I go back down into the accounting and we go into the chart of accounts and open up the cash, there they are. Okay, then let's take a look at the impact on the financial statements. If I go to the balance sheet, we're gonna say what's gonna happen from this. Well, obviously the checking account went down so cash is gonna go down. We generated however many checks we have employees and we processed them. There's our two checks. Obviously these amounts are the net check. They're not the full payroll that was received in terms of gross pay. On the income statement, if I go to the income statement and refresh it, run it to refresh it, then we have down here the wages. And if you don't like wages, you could change the name of the account possibly to like payroll or whatever you wanna call it. But we've got the 698333. Those are the gross wages that were earned before we took out the taxes from them, the withholdings. And so there is that. And then we also had our taxes as the employer that we had to pay over and above the payroll taxes. This is our kind of matching portion for the way the payroll taxes are set up. Social Security and Medicare. And we're gonna have a liability back to the balance sheet. We have a liability down here for those taxes. So we got them down here. Now they grouped them in these two categories here. And you could kind of go in and try to adjust the categories if you wanna group your categories differently. But let's first go into here. Federal taxes that were withheld. This is what we withheld. And the portion that we owe for the employer taxes that we have to then pay at some future point after the payroll is processed to the government. So that's the general idea with the payroll. Now remember, if you had a third party payroll provider doing the taxes, and then you would want to enter the information into the system just possibly like one lump sum here given their payroll reports. So your financial statements are correct. You can even try to stay in a cash-based system and try to wait till everything clears the bank, be on a cash-based system and record the payroll taxes and liabilities as expenses when you actually pay them and then make a period end adjustment for financial reporting at the end of the month or the end of the year possibly with the help of the CPA firm and your payroll provider periodically. If you wanted to be a bookkeeper trying to automate everything on a cash-based system possibly with the bank feeds as much as possible and then making a periodic adjustment. You don't have that option if you're processing payroll within QuickBooks because you need all this added data. All this information is necessary in order to generate the information that's needed from an HR perspective as well as processing the checks as well as creating the financial statements at the end of the quarter and the year. Let's go to the tab to the right, right-click and duplicate that tab. And then just note that we also have other payroll reports that are gonna be generated now that we have payroll turned on that's under the reports on the left-hand side and we can scroll down to the payroll reports. Pay roll, scroll down. So here's our employee reports and then we have all these payroll reports down below. So it's a plethora of payroll reports. Let's look at the payroll detail report. So opening up the payroll detail, I've closed up the hamburgers. We've got the date range for, I just put the whole year January through December, 2023. Obviously we only have one payroll period for the first month of operations. We've got our two employees. Notice that we can see this in terms of an employee by employee breakout and we can also see it in terms of the gross amount. So this is similar to a report that you might get from like a third-party payroll provider if you had this done by a third-party provider that you can then use again to give your summary information for the financial reporting on either a paycheck by paycheck basis or a month-end, quarter-end or a year-end basis as you need as you need to be putting that into the system for whatever your needs may be. Now, obviously when you're processing payroll within the QuickBooks system, you can see all the added data that's gonna accumulate up as we're tracking the information necessary for the processing of payroll, for issuing the stubs, for filling out the reports. And at the end of the year, you wanna get everything entered as best you can for the payroll and try to not have a system where you have errors when you're doing the data input. You'd rather not tinker around with something until you get it right with payroll, but rather get it right the first time because oftentimes if something's not set upright, it's gonna come to light like at the end of the year when you're really busy doing everything else and that's kind of an issue with payroll sometimes. So at the end of the year, of course you're gonna have to process all of the last 941, the 940, the W-2s and the W-3. And this information will be necessary or this is the type of information used by QuickBooks to help to populate those forms. And if you were in an audit or something like that, you would expect the payroll forms here to tie out to what's reflected on the financial statements to be able to tie out to what's reflected on the reporting forms, the 941s, the 940s and the W-2 forms. So that's the general idea. Let's go back and just check out our trial balance now. I'm gonna open up and then go back to our reports and then let's just type in our trial balance and check our numbers, trial balance. And then we'll run that from 010123 to have 123123 and run it. And now we've got the balance sheet on top of the income statement. If your numbers tie out to what we have, that's great. If not, try expanding the range and see if it's a date issue and then you can go in and change the date. Note that if you need to change a payroll check, then usually you have to actually delete the payroll and then process again to make it record properly. You can't just adjust like a payroll check typically except the check number that we did. But normally if you have to change the numbers on the check, then you typically have to delete it and process it again. So beware once again, payroll, one of those things you don't wanna tinker with to get it right. You wanna get it right the first time, make sure twice cut once. That's the adage you'd like to be going with.