Process Payroll Expense and Tax Accrual

Use the following procedure to process expense and tax accrual.

Warning The use of Payroll Expense and Tax Accrual for a quarterly or annual pay cycle is not recommended. Payroll Expense and Tax Accrual is designed to post accruals when a pay cycle overlaps two general ledger periods. Because quarterly and annual pay cycles normally overlap more than two general ledger periods, the resulting accrual posting is limited to the current period and previous period on a percentage basis.

The pay period ending date will match the period-ending date from the Pay Cycle window in Payroll Data Entry. The pay period starting date will equal the number of days in the pay cycle subtracted from the pay period ending date. For example, a weekly pay cycle will have a pay period starting date that is 7 days prior to the pay period ending date. These dates cannot be changed.

The accrual date will be the same as the period-ending date of the period prior to the current period. This date can be changed to any date within an open general ledger. The percentage to accrue will be the same as the sum of the number of days from the pay period starting date to the accrual date divided by the number of days in the pay cycle.

Note If the current pay period does not overlap two general ledger periods, the accrual date will be the same as the payroll accounting date, and the percentage to accrue will equal 100.

To process payroll expense and tax accrual

Select Payroll Setup menu > Payroll Options.
On the Main tab, select the Allow G/L Accrual Postings check box. For more information, see Payroll Options - Fields.
Click Accept and exit Payroll Options.
Select Payroll Setup menu > Department Maintenance.
In the Department Number field, enter the department. For more information, see Department Maintenance - Fields.
On the Main tab, select the applicable expense accrual allocation check boxes. The determination of which payroll postings to accrue should be made prior to processing your first payroll.
In the Payroll Accrual Account field, enter the general ledger account to which to post the accrual. This account is generally a short-term liability account.
Click Accept.
After processing the next payroll cycle, but before printing and updating the Check Register, the Payroll Expense and Tax Accrual window appears. This window displays the general ledger period-ending date, payroll accounting date, pay period starting and ending dates, accrual date, and the percentage to be accrued. For more information, see Payroll Expense and Tax Accrual - Fields.
Print, verify, and update the Check Register. The Daily Transaction Register lists the Payroll Expense and Tax Accrual postings.

The Payroll Cash account and Deduction accounts are not affected by the Payroll Expense and Tax Accrual postings and are updated to the general ledger with the payroll accounting date.

Examples - Expense and Tax Accrual

The following examples illustrate the Daily Transaction Register General Ledger postings that result from no accrual, a 50 percent accrual, and a 100 percent accrual.

Example - No Accrual

POSTINGS FOR:02/02/03
SOURCE JOURNAL	G/L Account	DEBIT	CREDIT
PR-0001	Payroll Cash Account		790.00
	Employee FICA Payable		50.00
	Accrued Employer FICA		50.00
	Employee Medicare Payable		20.00
	Accrued Employer Medicare		20.00
	Federal Withholding		100.00
	Federal Unemployment		10.00
	State Withholding		20.00
	State Unemployment		10.00
	State Disability Insurance		10.00
	Workers' Compensation		10.00
	Employee Deduction		10.00
	Standard Payroll Expense	1,000.00
	Employer FICA Expense	50.00
	Employer Medicare Expense	20.00
	Federal Unemployment Expense	10.00
	State Unemployment Expense	10.00
	Workers' Compensation Expense	10.00
		------------	------------
	JOURNAL 0001 TOTALS:	1,100.00 =======	1,100.00 =======

Example - 50 Percent Accrual

POSTINGS FOR:01/31/03

SOURCE JOURNAL	G/L Account	DEBIT	CREDIT
PR-0002	Payroll Accrual Account		400.00
	Employee FICA Payable		25.00
	Accrued Employer FICA		25.00
	Employee Medicare Payable		10.00
	Accrued Employer Medicare		10.00
	Federal Withholding		50.00
	Federal Unemployment		5.00
	State Withholding		10.00
	State Unemployment		5.00
	State Disability Insurance		5.00
	Workers' Compensation		5.00
	Standard Payroll Expense	500.00
	Employer FICA Expense	25.00
	Employer Medicare Expense	10.00
	Federal Unemployment Expense	5.00
	State Unemployment Expense	5.00
	Workers' Compensation Expense	5.00
		---------	---------
	JOURNAL 0002 TOTALS:	550.00 ======	550.00 ======

POSTINGS FOR:02/09/03
SOURCE JOURNAL	G/L Account	DEBIT	CREDIT
PR-0002	Payroll Cash Account		790.00
	Payroll Accrual Account	400.00
	Employee FICA Payable		25.00
	Accrued Employer FICA		25.00
	Employee Medicare Payable		10.00
	Accrued Employer Medicare		10.00
	Federal Withholding		50.00
	Federal Unemployment		5.00
	State Withholding		10.00
	State Unemployment		5.00
	State Disability Insurance		5.00
	Workers' Compensation		5.00
	Employee Deduction		10.00
	Standard Payroll Expense	500.00
	Employer FICA Expense	25.00
	Employer Medicare Expense	10.00
	Federal Unemployment Expense	5.00
	State Unemployment Expense	5.00
	Workers' Compensation Expense	5.00
		---------	---------
	JOURNAL 0002 TOTALS:	950.00 =====	950.00 =====

Example - 100 Percent Accrual

POSTINGS FOR:01/31/03

SOURCE JOURNAL	G/L Account	DEBIT	CREDIT
PR-0003	Payroll Accrual Account		800.00
	Employee FICA Payable		50.00
	Accrued Employer FICA		50.00
	Employee Medicare Payable		20.00
	Accrued Employer Medicare		20.00
	Federal Withholding		100.00
	Federal Unemployment		10.00
	State Withholding		20.00
	State Unemployment		10.00
	State Disability Insurance		10.00
	Workers' Compensation		10.00
	Standard Payroll Expense	1,000.00
	Employer FICA Expense	50.00
	Employer Medicare Expense	20.00
	Federal Unemployment Expense	10.00
	State Unemployment Expense	10.00
	Workers' Compensation Expense	10.00
		----------	----------
	JOURNAL 0003 TOTALS:	1,100.00 ======	1,100.00 ======

POSTINGS FOR:02/02/03
SOURCE JOURNAL	G/L Account	DEBIT	CREDIT
PR-0003	Payroll Cash Account		790.00
	Payroll Accrual Account	800.00
	Employee Deduction		10.00
		---------	---------
	JOURNAL 0003 TOTALS:	800.00 =====	800.00 =====

Example - Adjusting Accruals

Because accruals are performed on a percentage basis, they may not reflect the exact amounts for the specific days for which the accrual is intended. You may need to adjust the "percentage to be accrued" amount for a greater level of accuracy.

In this example, you have a weekly Payroll and print checks every Friday. For the 7-day week, ending February 4, you print checks on February 3 (Friday). The pay period is calculated as 01/28/03 through 02/03/03. The week is calculated as Saturday to Friday because January 28th is 7 days prior to February 3rd.

	Sat	Sun.	Mon.	Tues.	Wed.	Thurs.	Fri.
	01/28	01/29	01/30	01/31	02/01	02/02	02/03

Empl1	100.00	100.00	100.00	100.00	100.00
Empl2	100.00		100.00	100.00	100.00
Empl3	100.00	100.00	150.00		150.00

Total/ Day	300.00	200.00	350.00	200.00	350.00

Total/ Period		500.00			900.00
Grand Total					1400.00

Because this is a weekly pay cycle, the number of days in the pay period is 7. The number of days up to and including January 31 is 4. The percentage to be accrued equals 4 divided by 7, or 57.14 percent. This portion of the accrual goes into January, while the remaining 42.86 percent goes into February.

Because work was done during 5 days in the week and only 2 of those days are in January, a more accurate accrual occurs if the percentage to be accrued is changed to 2 divided by 5, or 40.00 percent.

If you have daily Payroll information available, a more accurate percentage can be calculated by finding the total wage amount for the days in January and dividing that amount by the total wage amount for the week. In this case, 5 divided by 14 (or 500/1400) gives a percentage of 35.71.

For more information, see Payroll FAQs.