Key Components to Setting Up Payroll: Part 4 – Payroll Journal

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This article is written to provide you with an understanding why it is important to have a Payroll Journal ready to be used and given to Accounting for each pay period.

Payroll Journals are used to record the compensation paid to employees such as direct labour expenses, salaries (including paid time off), incentive bonuses, fringe benefits, the company’s portion of payroll taxes, and/or other company paid program’s costs during a set period including retirement savings plans, and repayment of advances. These entries are then incorporated into the company’s financial statements through the general ledger.

The payroll journal is at the department summary level for each department cost centre, see screenshot below.

This example of a payroll journal shows the following information which is used to help the Finance team in entering the information for their financial statements correctly.

    • Department Identification Name
    • Department Cost Centre Number
    • Department Employee Headcount
    • General Ledger (GL) Account Numbers
    • GL Account Identification Name
    • Cost $Amount under each GL

The amounts entered will come from the payroll report that is generated once payroll has been processed. It is important that each GL listed is correct and that all $Amounts entered into the payroll journal match the payroll report exactly to ensure Finance is reporting correctly.

For more information on setting up payroll, see Part 5 for Company Payroll Policies.

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