Course Outline
Join PRO

What is payroll accounting?

Author:
Harold Averkamp, CPA, MBA

Definition of Payroll Accounting

Payroll accounting involves a company’s recording of its employees’ compensation including:

  • gross wages, salaries, bonuses, commissions, and so on that have been earned by its employees
  • withholding of payroll taxes such as federal income taxes, Social Security taxes, Medicare taxes, state income taxes (if applicable)
  • withholding for the employees’ portion of health insurance premiums, employees’ contributions to savings plans, garnishments of salaries and wages, employees’ contributions to United Way, etc.
  • employer’s portion/expense for Social Security taxes, Medicare taxes, state and federal unemployment taxes
  • employer’s portion/expense of fringe benefits such as health and dental insurance, paid holidays, vacations and sick days, pension and savings plan contributions, worker compensation insurance, etc.

Example of Payroll Accounting

If a company’s employees are paid weekly based on hours worked, the payroll processing is likely done during the first few days following the work week. If the company’s accounting periods are calendar months (and the calendar year), the company will have to accrue for the wages and benefits earned by the hourly paid employees (which are not yet paid or recorded in the general ledger accounts) as of the last day of each month.

You can see more details including journal entries at our free Explanation of Payroll Accounting.

Join PRO to Track Progress
Must-Watch Video

Advance Your Accounting and Bookkeeping Career

  • Perform better at your job
  • Get hired for a new position
  • Understand your small business
  • Pass your accounting class
Watch the Video

Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials

Read all 2,645 reviews

Features

PRO

PRO Plus

Features
Lifetime Access (One-Time Fee)
Explanations
Quizzes
Q&A
Word Scrambles
Crosswords
Bookkeeping Video Training
Financial Statements Video Training
Flashcards
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Business Forms
All PDF Files
Progress Tracking
Earn Badges and Points
Certificate - Debits and Credits
Certificate - Adjusting Entries
Certificate - Financial Statements
Certificate - Balance Sheet
Certificate - Income Statement
Certificate - Cash Flow Statement
Certificate - Working Capital
Certificate - Financial Ratios
Certificate - Bank Reconciliation
Certificate - Payroll Accounting

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

Certificates of
Achievement

Certificates of Achievement

We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping:

  • Debits and Credits
  • Adjusting Entries
  • Financial Statements
  • Balance Sheet
  • Income Statement
  • Cash Flow Statement
  • Working Capital and Liquidity
  • Financial Ratios
  • Bank Reconciliation
  • Payroll Accounting
Badges and Points
  • Work towards and earn 30 badges
  • Earn points as you work towards completing our course
View PRO Plus Features
Course Outline
Take the Tour Join Pro Upgrade to Pro Plus