Common Questions and Answers for Payroll

Q.  I use the Payroll module and pay taxes on a cash basis.  What do I need to do to adjust the accrual postings for payroll taxes expensed and accrued to employer's FICA, Medicare, FUTA, SUTA and any employer contributions so I can close 2010?


A.  Follow these steps to convert year-end accrued payroll entries to a cash basis:

Year end payroll reversing journal
Reversing journal entry


  1. Run a User Defined Report for all the payroll liability accounts (Federal payroll taxes, state payroll taxes, etc.) as of the last day of your fiscal year.   The ending balances of these accounts are the values that will need to be "backed out."  Keep this report open.
  2. Record a Cash/Tax journal entry on the last day of your fiscal year.  Debit (reduce) the balance of each of the liability accounts by the amount from the report.  Offset the liability balances by crediting (reducing) the corresponding payroll expense account.
  3. Before saving this entry make sure to check the Reversing Entry* box.
  4. Refresh the User Defined Report to verify that the payroll liability balances have been zeroed out.

* A reversing entry resets the original liability and expense balances on the following day so you'll have the correct liability balances in the new year.


Note:  It would be a good idea to save this entry as a Macro so that you can perform the same entry next year.  (Just change the amounts.)