Payroll expense is the sum you pay to employees for their labor, as well as associated expenses such as employee benefits and state and federal payroll taxes. In many industries, payroll expense is the biggest expense category, so it is critical for businesses to manage payroll expenditures shrewdly.
Salaries payable is a liability account that contains the amounts of any salaries owed to employees, which have not yet been paid to them. This account is classified as a current liability, since such payments are typically payable in less than one year.
What Is a Wage Expense. Wage expense is the cost incurred by companies to pay hourly employees. This line item may also include payroll taxes and benefits paid to employees. Wage expense may be recorded as a line item in the expense portion of the income statement.
The primary difference between wages expense and wages payable lies in the type of accounts that they are. Wages expense is an expense account, whereas wages payable is a current liability account. The company presents its expense accounts on the income statement and its liability accounts on the balance sheet.
Use the following steps to reconcile payroll.
- Print out your payroll register.
- Match each hourly employee's time card to the pay register.
- Make sure the pay rates and salaries for each employee are correct.
- Check that you took all deductions out of employee paychecks.
DThe total debits in the trial balance ($500) equal the total credits ($500), as they should. The accounts carrying a debit balance are: Bank Account, Bank Loan, Interest Expense, and Office Supplies Expense. The Owner Equity account is the only account carrying a credit balance.
Salaries do not appear directly on a balance sheet, because the balance sheet only covers the current assets, liabilities and owners equity of the company. Any salaries owed by not yet paid would appear as a current liability, but any future or projected salaries would not show up at all.
In accounting, the controlling account (also known as an adjustment or control account) is an account in the general ledger for which a corresponding subsidiary ledger has been created. For example, "accounts receivable" is the controlling account for the accounts receivable subsidiary ledger.
The purpose of the control account is to keep the general ledger nice and clean without any details, yet contain the correct balances to be used in the financial statements. Many of the accounts seen in the financial statements, take cash for instance, is shown as the control account in the balance sheet.
Common types include the debtors' and creditors' control accounts, which summarize outstanding credit owed and payments due from debtors. You can also use a stock control account to summarize transactions related to inventory and stock. You still need to capture the details; these are part of a subsidiary ledger.
Advantages of Control Accounts
A different person can maintain the control account as a check against fraud. Control accounts speed up the process of producing management accounts information as the control account balance can be used without waiting for the individual balances to be reconciled and extracted.A control account is a summary-level account in the general ledger. This account contains aggregated totals for transactions that are individually stored in subsidiary-level ledger accounts. The ending balance in a control account should match the ending total for the related subsidiary ledger.
For example, "accounts receivable" is the controlling account for the accounts receivable subsidiary ledger. Other examples of controlling accounts and their subsidiary ledgers include "accounts payable" (accounts payable subsidiary ledger) and "equipment" (equipment subsidiary ledger).
Sometimes, the same person may be a debtor as well as a creditor for the business. At the end of the month, the smaller amount in his account from one ledger is transferred to his account in the ledger with large amount. The entry passed for recording this transfer is known as set off or contra entry.
Types of Internal Controls in Accounting
There are three main types of internal controls: detective, preventative and corrective.Limitations of Control Accounts:
- These accounts can not detect all types of errors.
- These accounts can not guarantee the arithmetical accuracy of the ledger.
- These accounts cannot act as a deterrent against fraud unless internal checks can be carried out.
