What Is Payroll Accounting?


Payroll is a process that includes the recording of a company’s employee compensation. For every employee, contractor or freelance worker that is on the books of an organisation, there has to be record of how much they are to be compensated for working a particular period of time.  

Payroll processing is usually completed by a payroll officer, while payroll accounting is generally a process that is continuous. 

It involves keeping track of accrual of wages and benefits earned but not yet paid. This means keeping track of money withheld from paycheques. The system exists to ensure that payroll processing is accurate and timeous. It also ensures that employee records are up to date and consistently maintained with each change. 

It’s essentially the managing, recording and analysis of employees’ compensation. The manner in which this data is recorded has to be simple, clear and concise. 

The process uses different documents such as time sheets, paycheques and a payroll ledger. It’s for this reason that payroll has to be budgeted for. Payroll expenses must also be recorded and each entry is handled differently. This ensures that there are precise records regarding expenses associated with compensation. 

Using payroll software reduces the risk of human error. 

The payroll accounting process generally includes

  • Setting up of new employees 
  • Collection of timecard information 
  • Verification of timecard information 
  • Summarisation of wages dues 
  • Entering of employee changes 
  • Calculation of taxes 
  • Calculation of wage deductions 
  • Deduction of manual payments 
  • Creation of a payroll register 
  • Payment of compensation by direct deposit 
  • Deposit any withheld taxes 

This process continues throughout the working month. This ensures that the organisation stays on top of things in terms of compliance with all regulatory bodies, while also making sure that employees are fully compensated without any hassles.  


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