Skip to main content
H
hello-woottonhal
March 9, 2023
Question

How do I categorise employee wages in QBO? I'm new but it seems like under transactions it sees it as an expense?

  • March 9, 2023
  • 2 replies
  • 0 views
Original commenter did not share additional details

2 replies

M
MadelynC
March 10, 2023

Yes, that’s right, @hello-woottonhal. I'm glad to share some information about payroll accounting in QuickBooks.


QuickBooks Online Payroll automatically creates default accounts where your payroll liabilities and expenses are recorded. For employees’ wages, the program uses an expense account to track payroll transactions accurately.


If you prefer to record it in a different register or account, you can add a new one to your Chart of Accounts. Here's how:

 

  1. Go to Payroll.
  2. Click Payroll settings.
  3. Under Business settings, go to Chart of accounts.
  4. Select Default Accounts.
  5. Select the settings you'd like to change.


Please note that for payroll expenses and liabilities, QuickBooks won't allow you to use a different account type, such as the Cost of goods sold.


Here are some resources you read to learn more about payroll setup and how to stay organized and compliant with all the relevant regulations:

 


You can add comments anytime if you’re interested to learn more about managing your employees and payroll. I’ll be here ready to help you out. Have a good one!

paul72
paul72
March 10, 2023

Hi @hello-woottonhal 

 

Yes - Wages would be an expense.

 

If you're using QBO Payroll, everything should be categorised automatically.

 

If you're using outside payroll & entering as cheques/journals you should enter the Wages in Expense Accounts (with Taxes Owing going to Liability Accounts depending on how much detail you want/need to capture).

 

Hope this helps.

H
hello-woottonhalAuthor
March 10, 2023

Thanks Paul, appreciate your reply and help. Yes we run payroll outside of QBO which our accountant takes care of. 

I’m just categorising the expense through the bank transactions. So would the category be wage liabilities with no vat. 

thanks

paul72
paul72
March 10, 2023

Definitely NoVAT @hello-woottonhal but - & I hate saying 'it depends' - the category/account depends on how you or your accountant enter the Payroll into QBO.

 

It is possible to simply enter the bank transactions as Wage Expenses.  Then all the other related Expenses (PAYE/NIC/Pension) can also be entered as Wage Expenses.  In this set-up the Wage Expenses increase week-on-week (or month-on-month) & you don't keep a running tally of PAYE/NIC/Pension liabilities - you're simply paying as Expenses each month.

 

However, the usual way of doing it is to enter each payroll run as a Journal in QBO.

This simply adds an intermediate step - moving money to Wage Expenses from Wage Liabilities (& other Liabilities) which you later cover from the Bank Account.  In this set-up, your Wage Liabilities should balance to £zero after each bank transaction has been entered & you keep a running tally of PAYE/NIC/Pension liabilities.

Terms & ConditionsAccessibility statement