Month-end payroll accounting can include accrued weekly or biweekly payroll processed throughout the month, bonus or commission payments and employer taxes due. It can also include a current payroll if employees are paid monthly. Once payroll costs are calculated and accounting is complete, monthly payroll expenses are transferred to a balance sheet and income statement.

Accrued Payroll

Month-end accrued payroll is normally recorded through adjusting journal entries. Adjusting journal entries ultimately affect both the balance sheet and income statement. In the case of payroll accrual, accrued wages and salaries affect the balance sheet and wage and salary expenses affect the income statement. Accrued payroll represents the total earnings accumulated for all employees as of the end of an accounting period and is recorded as a debit to wage and salary expense. The offset entry is a credit to accrued wages and salaries that zeros out the account.

Current Payroll

Month-end payroll accounting for employees who are paid monthly follows the same process as that for employees who are paid weekly or biweekly. Gross pay is recorded as a debit to wage and salary expense. Withholding amounts are entered as a credit to the appropriate payable account. For example, federal income tax withholding is recorded as a credit to federal taxes payable, Social Security and Medicare taxes are recorded as a credit to FICA taxes payable, and a wage garnishment is recorded as a credit to wage garnishments payable. The final entry is a credit to cash for the amount of total net pay.

Bonuses and Commissions

Bonus payments and sales commissions often accrue over a period of months and then are distributed as a lump-sum payment at the end of the accrual period. For each month an employee qualifies for a bonus or commission, the amount is recorded as a debit to a bonus or commission expense account and a credit to an accrued bonus or commission accrued liability account. Payroll accounting to record payment at the end of month in which payment is due consists of a debit for the full amount of the accrued bonus or commission liability account, a credit to the appropriate payroll taxes payable account and a credit to cash for the net amount paid.

Employer Taxes

Employer-related payroll expenses accrue over time and are paid in a lump-sum payment. Accounting to increase an employer’s tax liability for each payroll period consists of a debit to a FICA, unemployment tax, worker compensation, sick days, insurance and 401(k) expense account, and a credit to a corresponding taxes payable account. At the end of the month when taxes are paid the payable accounts are debited to zero them out and a credit to cash signifies the total amount of taxes paid.