Back to blog

Payroll Journal Entry Template for Small Business

What this template covers

This is a straightforward payroll journal entry template that works for most small businesses. It covers the standard payroll accounts: gross wages, federal and state withholdings, FICA (Social Security and Medicare), unemployment taxes, and net pay. If your payroll includes additional items like health insurance, retirement contributions, or garnishments, you can add those as extra lines following the same pattern.

The standard payroll journal entry template

Here is the basic structure. Every payroll journal entry has two sides: debits (expenses and assets used up) and credits (liabilities created and cash paid out).

Debits (expenses):

  • Salary/Wages Expense - gross pay amount
  • Payroll Tax Expense: FICA (Employer) - employer's share of Social Security and Medicare
  • Payroll Tax Expense: FUTA - federal unemployment tax (employer only)
  • Payroll Tax Expense: SUTA - state unemployment tax (employer only)

Credits (liabilities and cash):

  • Federal Income Tax Payable - federal withholding from employee paychecks
  • State Income Tax Payable - state withholding from employee paychecks
  • FICA Payable - employee share + employer share of Social Security and Medicare
  • FUTA Payable - federal unemployment tax owed
  • SUTA Payable - state unemployment tax owed
  • Cash/Checking - net pay (the amount deposited to employees)

A worked example

Let's say you are a small business with three employees. You just ran biweekly payroll and your payroll provider's report shows these totals:

  • Gross wages: $6,000
  • Federal income tax withheld: $720
  • State income tax withheld: $240
  • Employee FICA (Social Security + Medicare): $459
  • Employer FICA: $459
  • FUTA (employer): $36
  • SUTA (employer): $60
  • Net pay deposited: $4,581

Here is the journal entry:

Debits:

  • Salary Expense: $6,000.00
  • FICA Expense (Employer): $459.00
  • FUTA Expense: $36.00
  • SUTA Expense: $60.00

Credits:

  • Federal Income Tax Payable: $720.00
  • State Income Tax Payable: $240.00
  • FICA Payable: $918.00 (employee $459 + employer $459)
  • FUTA Payable: $36.00
  • SUTA Payable: $60.00
  • Cash: $4,581.00

Total debits: $6,555.00. Total credits: $6,555.00. Balanced.

Customizing the template for your business

The template above covers the basics. Depending on your payroll, you might need additional lines for:

  • Health insurance. If you offer employer-sponsored health insurance, you may have both an employer expense (debit) and an employee deduction (credit to a health insurance payable account).
  • 401(k) or retirement contributions. The employee's deduction is a credit to a retirement plan payable liability. If you match, the employer match is an additional expense (debit).
  • Garnishments. Court-ordered wage garnishments are employee deductions. Credit a garnishment payable liability account.
  • Workers' compensation. Some states require workers' comp as part of payroll. This is an employer expense.
  • Multiple pay types. If you have both salaried and hourly employees, you might want separate expense accounts (Salary Expense and Hourly Wages Expense) for better reporting.

The pattern is always the same: expenses and asset reductions on the debit side, liabilities and cash reductions on the credit side. Add lines as needed, keeping the entry balanced.

Tips for getting it right

  • Use the same accounts every period. Consistency matters for reporting. If you debit "Payroll Tax Expense" one month and "FICA Expense" the next, your P&L will be hard to read. Pick your account names and stick with them.
  • Reconcile to the payroll report. After you create the journal entry, compare each line to the payroll provider's summary. Every number should match. If gross wages on the report say $6,000, your debit should be $6,000.
  • Post to the correct period. Use the pay date or the last day of the pay period as the journal entry date, not the date you happen to enter it. This keeps your financials accurate month to month.
  • Check the balance. Debits must equal credits. If they do not, you have either missed an account or entered a number wrong. Do not force it to balance by adjusting a number. Find the discrepancy.

Automating the template

If you build this journal entry by hand every pay period, you know how repetitive it is. The accounts are the same, the structure is the same. Only the amounts change.

PostBooks automates this pattern. Upload your payroll CSV or PDF, set up your account mapping once (it maps payroll line items to your chart of accounts), and PostBooks generates a balanced journal entry every time. Export as CSV, IIF for QuickBooks Desktop, or push directly to QuickBooks Online or Xero. The template stays consistent, the math is always right, and you save time every pay period.

Back to blog