How to Post a 401(k) Journal Expense Entry
A 401k is a retirement plan in which an employee contributes a portion of her wages. A company often contributes its own money toward an employee’s 401k plan to add to the employee’s contribution as a benefit to the employee. While the employee’s contribution is part of the company’s wages expense, the additional amount the company contributes is a 401k expense for the company. As the employer, you can record a journal entry for 401k expense to reflect the amount your company will contribute for a payroll period.
Determine the last date of your payroll period, which is the date on which you record a 401k expense journal entry. For example, record the entry on January 31.
Determine the amount of money you will contribute to your employees’ 401k plans. For example, assume you will contribute $500.
Write the date on which you are recording the journal entry in the date column of your accounting journal to designate a new journal entry. For example, write “01-31” in the date column.
Write “401k Expense” in the accounts column of the journal entry and the amount you will contribute toward your employees’ 401k plans in the debit column on the first line of the entry. Debit means an increase for expense accounts. For example, write “401k Expense” in the accounts column and “$500” in the debit column.
Write “401k Payable” in the accounts column and the amount of your 401k contribution in the credit column on the second line of the entry. Credit means an increase for the 401k payable account, which is a liability, or an amount you owe. For example, write “401k Payable” in the accounts column and “$500” in the credit column.
Tip
You can combine your 401k expense in a journal entry with other payroll expense items, such as worker's compensation expense.