About Carlton Johnson, LPA, MFP, ABA Expertise Accounting for Small and Mid-sized Businesses
Bookkeeping - Setup and Maintenance
General Business Taxation
General Risk Management
Financial and Business Line Modeling
General Payroll
Employee vs. Independent Contractor Questions
Experience Concurrent Experience Includes:
9 Years in General Accounting
7 Years in Business Planning and Setup
6 Years in Financial Analysis and Modeling
Organizations Fellow of the Financial Academy of Financial Management
Education/Credentials Bachelor of Arts, Accounting, Morehouse College.
Licensed Public Accountant (PA), State of Delaware.
Master Financial Professional (MFP), American Academy of Financial Management
Accredited Business Accountant (ABA), Accreditation Council for Accountancy and Taxation
Question What is the proper way to account for deductions from employee paychecks for health & insurance contributions that technically are not income to our organization? The money deducted from the paychecks is paid out to 3rd parties. I use QuickBooks Pro and a payroll service.
Answer Hi Laura,
The accounting treatment for employee deductions from pay would be modeled as follows:
Dr. Wage Expense
Cr. Payable (EmplEE insurance)
Additionally, when considering any employee deduction, the wage expense should be debited with all deductions first accrued in their proper payable accounts.
When the employee contributions (payroll deductions) are to be paid to the 3rd parties the following model entry should be made:
Dr. Payable (EmplEE insurance)
Cr. Cash
Be sure your journal entries are descriptive to ensure another bookkeeper or accountant can follow the transaction - transaction descriptions are narratives that are useful when interpreting transactions.
Thanks,
Carlton Johnson, LPA, MFP, ABA
Licensed Public Accountant
Master Financial Professional
Accredited Business Advisor
