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Old 01-02-2012, 02:35 PM
Hjourzt Hjourzt is offline
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Join Date: Jan 2012
Location: San Francisco, CA
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Making Historical Payroll Entries Work Properly

Hello:

I am having a problem with entering historical payroll information into my QB records and making the information show up in the bottom line. I feel I am this close to a solution, but feel a mile away from understanding. Any help would be appreciated.

Here's the full background of how I got to where I am now. All of these steps came from QB Help.

I have been using a version of QB for the life of my business. But because I got a part-time employee this year, and because QB's payroll services are the most expensive, I purchased another software, Medlin, to do my payroll. It has worked out fine. I have paid the employee, the Feds and the State what I owe them.

Because I want QB to be the sole source of info for my business when I do taxes (with Turbotax), I took the information from my Medlin records and manually entered it into Quickbooks Pro 2011. I did this in the Payroll Setup process. It involved creating an employee. There was a point where I entered every payroll check for every month, including check number, gross pay, deductions, etc. So far so good, I thought.

But, although this info now shows up in the Employee Center, I see no mention of it in my tax report for this year, nor in my checking or cash-on-hand accounts. In other words: it seems as if QB has a list of the amounts I paid to my one, part-time employee, as well as a record of how much I owe the governments for this payroll, but these amounts are not affecting what QB says I have earned (income minus expenses) for this year. It is as if those amounts don't count.

When I click on the Employee Center tab, I see the employee and the checks I've written as "YTD Adjustments." I click on one and it opens up as an "Historical Paychecks". All the info is right there, gross pay, deductions, date, check number, etc. But there’s no account associated with the amount.

There is a button labeled, "Accounts affected," which I click on. A box opens up offering me three choices. The first is already selected: "Do not affect accounts." My steel trap mind grasps that this might be the problem! But there are two alternatives: "Affect liability and expense accounts but NOT the bank account", and, "Affect liability, expense AND bank accounts."

The big question: Which of these two options should I choose?

To be honest: I don't understand why I am being asked this in the first place. It seems to me that the government and common sense dictates that when you pay an employee there is only one proper way to record that transaction such that one has proper records for tax time and everything else. Why wouldn't I want to have this "Affect" my accounts?

Obviously, the key is in the words, "Liability," "Expense," and "Bank Accounts." I know what these words mean in the abstract, but I clearly don't understand what's going on in this part of payroll accounting. Its not at all like paying a sub-contractor.

So, can someone explain what this means, and how each of these choices will affect my tax records, and which I should choose?

Any help will be very much appreciated.
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