The QuickBooks Chart of Accounts is nothing but a list of certain accounts that helps in classifying assets, liabilities, owner’s equity amount, along with income. In other words, It is actually a list of accounts and balances of the company.
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It usually assists in comprehending the bank balance of the company, how much it owes to the creditors, and how much it owns, by offering a complete financial report. The organized chart of accounts provides a deep insight into the actual performance of the organization. In simple words, it is termed a very important factor of the accounting system. Hence, it is crucial to comprehend the right procedure to set up the chart of accounts for Payroll in QuickBooks Payroll.
Let’s learn in detail about the Set up and Configure Payroll Chart of Accounts in QuickBooks Payroll.
What is Payroll Chart of Accounts in QuickBooks?
The Payroll Chart of Accounts is a list of names and account numbers which are connected with the company. Generally, the chart of accounts has four different categories that are as follows:
- Liability Accounts
- Assets Accounts
- Expense Accounts
- Income Accounts
Here are the four basic categories. In each of such categories, the line items will separate the specific accounts. Every line item displays an account in every category. Some of the charts of accounts may also show the equity account and that is a direct representation of all the things that stay post-accounting for revenue and operating expenses accounts.
What are the Different Kinds of Payroll Chart of Accounts?
The four kinds of Charts of Accounts are as follows:
Asset accounts usually have everything that is of any value like vehicles, valuables, buildings, land, etc. Hence, such type of Chart of Accounts assists in monitoring the amount paid by users for any particular property along with other factors like depreciation. Some items which are in liquid forms like other bank accounts, cheques, etc., are also added to the Chart of Accounts.
Not to mention, the asset accounts also comprise certain things like reviewing accounts and other bank accounts. Notes receivable and accounts receivable can be the other asset accounts. The Chart of Accounts simplifies different asset accounts by arranging them into line items to enable them to monitor different components seamlessly.
Liability Accounts comprise factors like payroll taxes, mortgages, credit card balances, promissory notes, bank loans, income tax payables, personal loans, etc. When a loan account is added to this account by users, it is important to make sure that users have also included the loan sum.
Users will be required to log only the principal amount and waive the owed interest. When you reach every monthly payment and add the payment in the particular account system, users will divide the payment into a certain number deducted from the owed amount and a certain amount of the interest paid will be sent to the expense account.
Income Accounts are usually inclusive of revenues, expenses, extra incomes, cost of sales, or expenses. A few of the accounts are the same for all kinds of businesses, however, some accounts are fixed for a certain kind of business type. Some of the income types are economical and simple to issue, while some others need expenses, time, and effort.
Preparing separate line items in the particular chart of accounts is suggested for various types of income. Users are suggested to think about what can be the different profitable activities, and then classify them based on income type rather than shuffling all the income into one specific account.
Such an account alerts the users about the money that they have used or spent on something. Not to mention, it enables them to monitor the cash which is not with them. It is always recommended to split the expenses into different accounts and users get the chance to prepare sub-categories for their expenditure.
How to Configure Payroll Chart of Accounts in QuickBooks Payroll
Here are the steps to configure the Configure Payroll Chart of Accounts in QuickBooks Payroll.
Total time: 10 minutes
Step 1: Navigate to the Chart of Accounts
First, Navigate to the Chart of Accounts page. It is important to note that for QuickBooks Online, the Chart of Accounts is in a different location.
Step 2: Choose Employees
Choose Employees available on the left side of the menu.
Step 3: Select Payroll Settings
Choose the Payroll Settings tab.
Step 4: Select Chart of Accounts
Choose the Chart of Accounts that is present under Business Settings.
What are the Primary Accounts in the Payroll Chart of Accounts in QuickBooks Payroll?
Here is the list of the Primary accounts in the Chart of Accounts:
- Wages Expense Account: This account is utilized to register the gross wages expense for the particular pay run.
- Superannuation Expense Account: This particular account is utilized to monitor your SGC super expense transactions.
- Employer Liability Expense Account: This particular account is utilized to register any employee liabilities that are registered against any employee inside the pay run.
- Payment Account: Such an account is mostly called the payroll clearing account. This account is used to settle the net payment amount of the particular payroll to your bank account transaction.
- Default Payroll Liability Account: All the deductions get journaled in such accounts, in case there is no particular setup for a liability account.
- PAYG Liability Account: Often named as the PAYG clearing account, such an account will monitor your particular PAYG liability transactions.
- Employee Expenses Account: Such an account is utilized to register any employee expenditures administered in the pay run. Expenses are considered to be a segment of employee wages.
- Employer Liability Account: Such an account will monitor your general employer liability transactions.
Note: It is not possible to map transactions to bank accounts directly. Hence, the suggested route is to use a clearing account and then merge the bank transactions with the clearing transactions present in the journals.
Pay Category Accounts
Such category transaction accounts are utilized to prescribe a specific wage expense to various accounts.
In case you do not mention any particular pay category transaction account, the default Wages Expense Account will be utilized.
Deduction Category Accounts
Such category transaction accounts are used to assign specific deductions to various accounts. In case you do not mention a particular deduction amount, the Payroll Liability Account will be utilized by default.
Expense Category Accounts
Such category transaction accounts are utilized to assign particular expenses to various accounts. In case you do not mention any expense account, by default the transactions will be shifted to Employee Expense Account.
Employer Liability Category Accounts
Such liability category transaction accounts are utilized to assign particular employer liabilities to various accounts. In case you do not mention a liability account, by default, the transactions will be shifted to Employer Liability Account. Not to mention, if you forget to mention an expense account, by default the transactions will be shifted to the Employer Liability Expense Account.
Split by Location
During the mapping of your default accounts, you will see there is an option that says, Split by Location. It enables you to write a transaction line as per the location of the journal for the same account. It usually helps if you access class tracking or locations in QuickBooks Online.
What are the Location Specific Accounts in the Payroll Chart of Accounts in QuickBooks Payroll?
If you wish to split your particular GL by location and assign the transactions to other accounts, you can state location-specific accounts. Such accounts will function just like the primary accounts, but they will be applicable to the location they are mentioned for.
How to Map Accounts in Your Payroll Chart of Accounts in QuickBooks Payroll?
Journal entries are created depending on the account which is mapped to a particular transaction type. Such transactions are prepared depending on a transaction hierarchy, which is stated below:
- Top Level: Default Account Mappings
- Second Level: Deduction Category Mappings, Expense Pay Category Mappings, Category Mappings
- Third Level: Location-specific default account mappings
- Fourth Level: Deduction Category Mappings, Location-specific Pay Category Mappings, Expense Category Mappings
Note: With the account, transactions are matched right from the lowest to the highest level.
How to Export the Chart of Accounts in Payroll Chart of Accounts in QuickBooks Payroll?
For users who have several sets of location-specific accounts, if they require to alter a specific account, it can be complicated to locate all the places where an account is utilized.
The Export Configuration factor includes an Excel spreadsheet export to enable the user to check out which account has been accessed across the total Chart of Accounts.
Furthermore, It is also possible to export the configuration of your Chart of Accounts through Data Extracts in the Payroll Settings.
All the steps mentioned above will enable users to monitor their business activities on a regular basis. Users will now be able to configure the Payroll Chart of Accounts in QuickBooks Payroll.
However, It is quite likely that you may get stuck somewhere while implementing the steps. In such a scenario, call our dedicated Dancing Numbers team.
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