Calculation spreadsheetĪs we said, GnuCash doesn’t have an integrated payroll module. So, these amounts must be accumulated in respective liability accounts so that the correct amounts can be paid, when they become due. However, these payments are not made at the same time as the payroll. These are also employee-related expenses to the business. In addition, the bookkeeping system must keep track of company contribution to social security tax, Medicare tax, health insurance, 401(k), and so on. The business owes these deducted amounts to the respective tax authorities.

The net pay thus calculated becomes payable to the employee and it becomes an expense to the business. There will be other deductions such as county or local taxes, separate deductions for health, dental, and vision insurance, 401(k) or other retirement plan contributions and so on. Net payįor example, most employees in the US will typically have the following deductions: If you want to look up any of the payroll details for a particular employee, at any time, you can simply open and view the split transaction. This split transaction will populate the appropriate expense and liability accounts. When you record payroll in GnuCash, it is done with a single split transaction. However, when it comes to making payment, there will be several deductions. Monthly salaried employees are typically hired with a gross pay. Go ahead and create three accounts, Federal Income Tax, VA Income Tax, and FICA Tax of Account Type Liability with Liabilities as the Parent Account as shown in the following screenshot:

We need to create liability accounts to hold these amounts until they are due.

Create the liability accounts: The tax amounts deducted from the employee’s gross pay are owed to the appropriate government agencies.

Create the expense accounts: You need two expense accounts – one Payroll Expenses for gross pay and another Employer FICA Tax for the company contribution to FICA tax.

Take a moment to study the following screenshot:

We have created a spreadsheet of the calculations that we are going to use in making the payroll entries.

We are going to enter the payroll accounting entries for one employee with appropriate deductions for federal and state income tax and FICA tax: Time for action – making payroll entries in GnuCash

This is useful for things such as taxes, which may be paid to the government at a different time from paying employee salaries. Deductions may have to be stored in a short term liability account. This is one of the more complex transactions in terms of accounting, simply because there are many different deductions and matching payments to be made to various tax authorities and health insurance and other vendors. Payroll is a financial record of salary and benefits provided to an employee. Gnucash 2.4 Small Business Accounting: Beginner’s Guide Employees and payroll

Gnucash split transaction tutorial