Track Payroll in Accounts Payable

Most organizations use a payroll service to maintain their payroll and run checks.

• If you do not need to keep track of deductions on an employee-by-employee basis, you can enter the net amounts for each pay period directly into the General Ledger Journal.

• If you want to keep payroll data for each employee, you can use the Entries from Journal History utility. Refer to Creating Entries from Journal History in the General Ledger module for more information.

If you do plan to maintain your own payroll and print the checks from FIMS, here are some tips:

Setting up Payroll Tracking

There are several steps that are required to set up payroll tracking in FIMS.

• Create a few special Operating Fund accounts in General Ledger, including the following:

  • Payroll Expense

  • Salaries Payable (you can also use Account Payable)

  • Expense Accounts for Employer’s Contributions (for example, to Social Security, Medicare, or benefit packages)

  • Payable Accounts for Withholding Amounts (for example, Federal and State taxes and Health Insurance).

• Create a Vendor record for each employee.

• Create a Vendor record for each agent to whom you periodically send the accumulated withholding amounts.

Entering Payroll in Accounts Payable

When payroll checks are paid, the following occur in General Ledger:

• The Checking Account balance should be reduced by the net pay amount.

• The Payroll Expense Account should have a debit (increase) equal to the gross pay amount.

• Each Payable Account that is accumulating the withheld amount should have a credit (increase). The combined credits should equal the difference between gross pay and net pay.

To accomplish this in Item Entry you must be flexible in the use of Expense account field. You must also create several line items to record the payroll Voucher:

• Enter the Gross Pay on the first Line Item and enter the Payroll Expense account in the Expense field.

• Enter the Federal Taxes withholding amount on the second Line Item. Make sure you enter the amount as a negative number (place a minus sign in front of it). Enter the appropriate payable account in the Expense field.

Note: Because the withholding amount is entered as a negative amount, FIMS will make a credit entry to the payable account.

• Create additional Line Items with negative entries to record additional withholding amounts (for example, deductions for FICA, State Taxes and Health Insurance). As with the second line item, enter payable accounts in the Expense fields for each of these withholding amounts.

The net pay (after deductions) appears in the Voucher Total field.

Note: After these Vouchers are created for the first payroll payment, you can use Allow Voucher Recall to copy the Line Items for subsequent checks.

Paying Taxes and Benefit Premiums

When you use Accounts Payable to pay taxes or premiums, you must be flexible in your use of the Expense t field on the Line Items tab.

The goal is to reduce the appropriate payable account(s) by the amount of the payment. For example, if the premium is due on group Health Insurance that is paid through a combination of employee withholding and employer payment, you would create one Line Item for the employee contribution and one for the employer contribution.

• Enter the employee’s contribution on the first Line Item. Make sure to enter the amount as a positive number and enter the payable account in the Expense field.

• Enter the organization’s contribution on the second Line Item and enter the appropriate expense account in the Expense field.
  
  

Note: You do not have to create an expense entry when you pay health insurance premiums The expenses are recorded in the Payroll Expense account when you enter the individual paycheck Vouchers.

General Ledger Journal Entries from Payroll

The following chart illustrates the General Ledger Journal entries that are created when you post and pay payroll Vouchers. Remember that to create the correct debits and credits you should enter the Gross Pay Line Item as a positive amount, and each deduction as a negative amount.