Expert: Arthur Naman - 7/19/2008

Question
"How does payroll affect the balance sheet -- when the expense is incurred and paid in the same period?"

Answer
If all payroll taxes are paid in the same period in which the payroll expenses are incurred, there should be no effect on the balance sheet.

I am assuming you are talking about payroll tax liabilities. By that I mean if the expense is incurred in the same period in which those expenses are then paid.

Cash would be decreased when payments are made - thus a balance sheet account would be affected in that way.

Also, there would be an exception to this if payroll expense and taxes are accrued as is normally the case in an accrual accounting system if the accounting period ends on a different date than the end of the pay period or the payroll payment date .  Expenses might be accrued at that time and later paid at the time payroll is paid. Thus there would be an effect on payroll liabilities.

Please ask a follow-up question if any of this is not clear.