Payroll Liabilities
Definition: Withholdings and employer taxes
Scope:ModerateDifficulty:Easy
Withholdings and employer taxes
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Record payroll | ||
| Gross pay $10,000; withholdings: FIT $1,500, FICA $765, state $400. | ||
| Salaries ExpenseExpense+ | $10,000 | |
| Federal Income Tax PayableLiability+ | $1,500 | |
| FICA Tax PayableLiability+ | $765 | |
| State Income Tax PayableLiability+ | $400 | |
| Cash (net pay) | $7,335 | |
| Withholdings create liabilities payable to government. | ||
| 2. Record employer payroll taxes | ||
| Employer FICA $765, FUTA $60, SUTA $340. | ||
| Payroll Tax ExpenseExpense+ | $1,165 | |
| FICA Tax PayableLiability+ | $765 | |
| FUTA PayableLiability+ | $60 | |
| SUTA PayableLiability+ | $340 | |
| Employer’s matching portion is an additional expense. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
Salaries ExpenseSalaries ExpenseExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$10,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$10,000.00
Federal Income Tax PayableFederal Income Tax PayableLiabilityAn obligation the business owes to others. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$1,500.00
Normal bal. ▶
$1,500.00
FICA Tax PayableFICA Tax PayableLiabilityAn obligation the business owes to others. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$765.00
$765.00
Normal bal. ▶
$1,530.00
State Income Tax PayableState Income Tax PayableLiabilityAn obligation the business owes to others. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$400.00
Normal bal. ▶
$400.00
Cash (net pay)Cash (net pay)AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$7,335.00
$7,335.00
Payroll Tax ExpensePayroll Tax ExpenseExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$1,165.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$1,165.00
FUTA PayableFUTA PayableLiabilityAn obligation the business owes to others. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$60.00
Normal bal. ▶
$60.00
SUTA PayableSUTA PayableLiabilityAn obligation the business owes to others. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$340.00
Normal bal. ▶
$340.00
DurationShort-Term
Related Reports
- Form 941 Employer Quarterly Payroll Tax(Primary — Quarterly filing)
External Links
- Payroll tax — Wikipedia