We’ve made the accounting part of running payroll even simpler! Read on for the details.
When you approve a payroll in Wave, Wave will automatically create a corresponding journal transaction in the Transactions page. The journal transaction contains several lines with each of the affected expense and liability accounts, and the credits/debits for each.
Great! So what do I have to do?
Whenever the withdrawal transaction from any payrolls that you run is pulled in by your bank account or uploaded to your Transactions page, all you have to do is categorize the transaction to Payroll Liabilities. That's it!
The journal transaction that Wave creates records the amount that will be paid out to your employees as a credit to Payroll Liabilities to reflect the obligation that the amount should be paid. Categorizing the imported expense transaction that's brought in from your bank to Payroll Liabilities debits the account, and shows that the obligation has been fulfilled.
If you approve a payroll, then a journal transaction will be created. If you delete that same payroll, a matching journal transaction will be created with the credits and debits reversed, to cancel out the original transaction. The journal transaction will also be tagged as “deleted” for ease of reference.
Now for a little bit of the nitty gritty. If you manually add a benefit or deduction to an approved payroll, it will appear in the created journal transaction as an uncategorized expense. When the journal transaction is created, head on over to the transactions page, and categorize the line item to the most appropriate expense category.