Payroll Accounting for Business Owners
Trace gross pay, employee deductions, employer costs, and settlement.
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Start with the question in front of you.
Owners reviewing payroll reports and accounting entries.
This NP guide combines plain-language explanations, fictional business examples, and practice activities. Read the example, try the exercise, then compare your reasoning with the explanation provided.
What you will learn
- Reconcile gross wages to net pay.
- Separate employer costs from employee deductions.
- Follow payroll liabilities through payment and month-end review.
A useful idea before you download
Federal reference figures in this edition were verified September 28, 2026. Review current official guidance when processing payroll.
Payroll costs extend beyond the amount employees receive. Gross wages already include employee deductions. Employer taxes, employer-funded benefits, and processing fees add separate costs. The guide includes dated 2026 federal references and labels hypothetical amounts explicitly.
Follow the numbers
In the worked example, employer payroll taxes are $620 Social Security + $145 Medicare + $200 assumed state unemployment + $40 assumed federal unemployment = $1,005. Total employer cost is $10,000 wages + $1,005 taxes + $600 benefits + $75 fee = $11,680.
Try this in your business
Compare one payroll register with its journal entry and bank settlement. Trace every deduction and employer contribution to the appropriate liability or expense.
Keep a note of the evidence you used and the question you still need to resolve. Bring that question to your next bookkeeping review.
How to use the guide
- Read the explanation and worked example.
- Complete the practice before checking the answer.
- Choose one action for your next financial review.
A common question
Are the unemployment amounts universal payroll rates?
No. The $200 and $40 are teaching assumptions. Actual payroll calculations depend on applicable rates, wage bases, worker facts, and current rules.
Need help with your own books?
Use the guides to understand the work, then get support with QuickBooks Online setup, cleanup, or monthly bookkeeping.
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Get the Free GuidesEducational material with illustrative examples. Apply the appropriate rules and facts to your business. © 2026 Net Profits Consulting LLC. We Count More Than Numbers.
