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Payroll Accounting

Payroll Accounting

It's a fact of business—if a company has employees, it has to account for payroll and fringe benefits.
In this explanation of payroll accounting we'll introduce payroll, fringe benefits, and the payroll-related accounts that a typical company will report on its income statement andbalance sheet. Payroll and benefits include items such as:

  • salaries
  • wages
  • bonuses & commissions to employees
  • overtime pay
  • payroll taxes and costs
    • Social Security
    • Medicare
    • federal income tax
    • state income tax
    • state unemployment tax
    • federal unemployment tax
    • worker compensation insurance
  • employer paid benefits
    • holidays
    • vacations
    • sick days
    • insurance (health, dental, vision, life, disability)
    • retirement plans
    • profit-sharing plans

Many of these items are subject to state and federal laws; some involve labor contracts or company policies.