Posting Payroll Entries – Part 2

Part 2 of this series of payroll entry blogs will look into how you can post manual payroll entries that recognize payroll-related 401(k) obligations.


As a reminder, if you subscribe to a separate 3rd party payroll provider that is NOT integrated into your bookkeeping platform, then you will have to post the payroll expenses into your financials yourself.

As always, there are certainly different ways you can go about this, depending really on your financial reporting needs each month.

So, if your company offers 401(k) benefits for the employees then you will need to post the corresponding payroll entries into your bookkeeping platform that will recognize the following:


  • Gross wage deductions resulting from the employee-sponsored portion of the retirement plan.
  • 401(k) expenses to the company resulting from the employer-matched portion of the retirement plan.
  • 401(k) liabilities resulting from BOTH the employer and employee sponsored portions of the retirement plan.


So, for example, let’s say an employee’s gross wages for a particular paycheck was $1000. Out of the $1000, 10% (or $100) was deducted for the employee portion of the 401(k) and 3% (or $30) was the portion that the employer will pay for. So, the total liabilities that are to be paid to the retirement plan are $130.

Therefore, the entry to post to recognize these expenses plus the corresponding accrued liability is:


Debit: Gross Wages ($100) – this is to recognize the wages that were deducted from the employee’s paycheck.

Debit: Employer sponsored 401(k) ($30) – this is also an expense account to recognize the portion that a company is paying for in this same retirement plan.

Credit: 401(k) Liability ($130) – this is the accrued liability that must be paid to the retirement plan at a later date.


Now, later on, let’s say the company does pay this $130 to the retirement plan. The entry to post this in your bookkeeping would be:


Debit: 401(k) Liability ($130)

Credit: Cash (Bank Account) ($130)


Overall, it is always a good idea to monitor your 401(k) liability account to ensure your payments to the retirement plan equal exactly what was deducted from your employee’s paychecks plus the employer-sponsored portions of this plan.


Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.


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