Payroll Liabilities and Tax Records, Page 8

Journalizing Payroll Liabilities - Example

Follow the steps below to journalize payroll entries.

The payroll register of John Roadways is the source document for the payroll journal entry. 

1. Identify: The following accounts are affected: 

• Salaries Expense
• Employees’ Federal Income Tax Payable 
• Employees’ State Income Tax Payable 
• Social Security Tax Payable 
• Medicare Tax Payable 
• Hospital Insurance Payable 
• U.S. Savings Bonds Payable 
• Cash in Bank

1. Classify: The accounts are classified as:  
    
   • Salaries Expense - Expense Account 
   • Employees’ Federal Income Tax Payable - Liability 
   • Employees’ State Income Tax Payable - Liability 
   • Social Security Tax Payable - Liability 
   • Medicare Tax Payable - Liability 
   • Hospital Insurance Payable - Liability 
   • U.S. Savings Bonds Payable - Liability 
   • Cash in Bank – Asset Account 
2. Effect: The effect on the accounts is:
    
   • Salaries Expense account increased by $2,181.00 
   • Employees’ Federal Income Tax Payable increased by $112.00 
   • Employees State Income Tax Payable increased by $83.71 
   • Social Security Tax Payable increased by $135.22 
   • Medicare Tax Payable increased by $63.25 
   • Hospital Insurance Payable increased by $23.65 
   • U.S. Savings Bonds Payable increased by $25.00 
   • Cash in Bank decreased by $1,738.94 
3. Debit rule: Debit Salaries Expense account 
4. Credit rule:  
   
   
   • Credit all liability accounts (Federal Income Tax Payable, Employees’ State Income Tax Payable, Social Security Tax Payable, Medicare Tax Payable, Hospital Insurance Payable, U.S. Savings Bonds Payable) 
   • Credit Cash in Bank (asset account decreases) 
5. Prepare T Accounts 
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
6. Post the payroll entry:

The following table shows the general journal entry and the individual ledger accounts after posting:

Journal entry:

Ledger Accounts:

Salaries Expenses:

Federal Income Tax Payable:

State Income Tax Payable:

Social Security Tax Payable:

Medicare Tax Payable:

Hospital Insurance Payable:

U.S. Savings Bonds Payable:

Cash in Bank: