A QuickBooks Payroll Tip for creating a more functional Payroll Liabilities section on your Chart of Accounts.
QuickBooks, by default, provides a limited Payroll Chart of Accounts containing only two accounts – Payroll Liabilities and Payroll Expenses. When you run a Balance Sheet or a Profit & Loss Report (or look at your Chart of Accounts listing) you only see the totals with no details and have to run further reports to find the individual amounts that make up the totals. I find this to be problematic.
This article will show you how to add sub-accounts to the standard Payroll Liabilities account so that you can quickly and easily “see” the individual amounts for each payroll liability and how to edit your existing payroll items to accurately point to these new accounts. A little extra work up front will provide you with a very function Payroll Liabilities section on your Chart of Accounts.
Step 1 – Determine the required Payroll Liability Sub-Accounts
Open your Payroll Items List {Lists menu -> Payroll Items} and scroll to the bottom, and pay close attention to the items that are currently pointing to or assigned to Payroll Liabilities.
NOTE: You may want to customize the columns that are displayed in this list. To do so, right-click the Liability Account heading -> choose customize columns -> from the available columns list click on Expense Account -> the Add button -> Liability Account -> the Add button -> Payable To -> and the Add button. Click Ok. This will provide you a more detailed and functional Payroll Item List to work with, as shown in the screenshot above.
From this list, we will determine what we need to add to our Chart of Accounts to make it more functional. We will be adding sub-accounts for:
- Federal Unemployment {FUTA}
- Federal Withholding {FWH}
- Medicare {M-CARE}
- Social Security {FICA}
- State Withholding {STWH}
- State Disability {SDI}
- State Unemployment {SUI}
- Employee Training Tax (ESD}
Step 2 – Create Payroll Liability Sub-Accounts
Once you have the list of items that we will be adding as sub-accounts to the main Payroll Liabilities account; go to your Chart of Accounts {Lists menu -> Chart of Accounts}.
- Click the Account button {at the lower left corner of this window} -> choose New -> click the radio button next to Other Account Types and from the drop down menu choose Other Current Liability -> click the Continue button
- In the Account Name, type in Federal Unemployment -> click the box next to Subaccount of and then from the drop down menu choose Payroll Liabilities. Add other details as required or necessary.
- Click the Save & New button to create the other items from your list.
NOTE: Create a single account for Social Security and Medicare.
Step 3 – Edit existing payroll items mapping them to the new accounts
Going back to your Payroll Item List, edit each item assigning them to the newly created sub-accounts.
- Click on the Federal Unemployment payroll item -> click the Payroll Item button -> choose Edit -> click the Next button -> from the Liability Account drop down menu -> choose Federal Unemployment
- Click the Next button until you get to the last window then select Finish.
NOTE: You may receive an Update transactions with new account window, here you can choose to update all existing transactions OR update transactions starting on a specific date. My personal preference would be to update all existing transactions – you may want to consult your accountant about this.
When you have finished mapping the items to your new sub-accounts; simply opening and viewing your Chart of Accounts will provide you with a detailed account of each of your payroll liabilities, as well as the grand total.
On Wednesday, we’ll provide instructions for making the Payroll Expenses section of your Chart of Accounts provide more information on Profit & Loss Reports.
Alex, there is really no such thing as “typical” when it comes to numbering sub-accounts. I usually put payroll liabilities into the 24000 – 26999 Other Current Liabilities section. Here’s a couple of articles on numbering your Chart of Accounts – and .
So, if I were to choose 22000 as my “main” payroll liabilities account, I would number my subaccounts as 22100, 22200, etc.
Hi Nancy:
would you happen to have a list of a typical “numbering” for all payroll related sub-accounts?
As you know QB doesn’t number the accounts or sub-accounts, but in order to import data from the third party payroll company doing that job for us, instead of imputing it manually…so we were asked to assign number to all the sub-accounts.
Thank you
Alex
Hi Theresa
Yes, these instruction will work with the 2014 version of QuickBooks Pro, Premier and/or Enterprise.
Make sure that you create a backup before making any changes 🙂
Thanks for the wonderful compliment – it’s tough putting together meaningful content!
Do these instructions work for premier pro 2014? Love your website, so much more helpful than any other. Thanks!
[…] Can you tell, just from looking at your Chart of Accounts how much you owe for State Withholding? […]
Hi Pheobe
If it were me I would set up (or use) the main QuickBooks Liability account called Payroll Liabilities (by default) and then add sub-accounts for Federal Withholding, FICA (both employer & employee share), M-CARE (both employer & employee share), State Withholding, etc. If you do this – you’ll also need to edit each of the payroll tax items in your Payroll Item List and “point” them to these new Liability sub-accounts.
I am trying to get my quickbooks to correspond to my actual payroll payments (941 and state). I have made liability accounts for company share of social security and medicare. Is this correct? Or should I only have liability accounts for employee share?
Thanks for answering.
Becky, I’m so glad that you found this helpful!
Thank you so much! Your instructions and illustrations made this super easy.
Hi Carol, thanks for dropping by. Which reports are you referring to? Both the Balance Sheet and the Profit & Loss Reports can be collapsed to show only the main or master accounts – allowing the end user to view the details while allowing an accountant to see only an overview.
[…] we covered creating a more functional Payroll Liabilities section on your Chart of Accounts, so that you could quickly and easily see not only the total of your payroll liabilities; but also […]
This would be helpful if Quickbooks allowed you to collapse reports by master accounts, or main jobs, or any sort of collapsing vs expanding. One of the BIG negtives of QuickBooks.