The payroll GL bridge
How payroll reaches your ledger, mapping runs to accounts, why payroll liability accounts should clear to zero, and reconciling payroll to the books.
How-toFor Bookkeepers, Firm staff
What the bridge does
Each payroll run generates a journal entry: gross wages and employer taxes as expense, withholdings and employer taxes as liabilities, and net pay as a reduction of cash. The GL bridge is the mapping that decides which accounts each component lands in.
Setting the mapping
- Map wage expense by department or class if you report on labour cost by segment — doing it here beats reclassifying every month.
- Keep employer taxes in their own expense account so labour cost is visible in full.
- Give each withholding type its own liability account. One combined account makes reconciliation guesswork.
- Map net pay to the bank account that actually funds payroll.
- Map benefit deductions to the liability account you pay the provider from, so the two sides meet.
Reconciling payroll to the ledger
Payroll liability accounts should return to zero — or to the amount genuinely still owed — after each deposit clears. A liability account that only grows is the clearest signal that deposits are being coded to expense instead of clearing the liability.
Monthly, as part of close:
- 1
Compare total wage expense in the ledger to the payroll reports for the period.
- 2
Check each payroll liability account balance against what is actually still owed.
- 3
Confirm tax deposits cleared the liability rather than posting to expense.
- 4
Confirm the net pay debits in the bank feed match the run totals.
- 5
Investigate any difference before closing.
Payroll differences compound across quarters and are far harder to unwind at year end, when W-2s depend on them.
Common questions
Tax deposits are being coded to an expense account instead of clearing the liability. The liability was already recorded when the run posted, so coding the deposit to expense records the same cost twice.
Recategorize the deposits to the liability account and check whether the pattern goes back further than this month.
Yes, when a pay period spans month end. The wages earned before month end belong to that month even if the check date falls in the next one.
See alsoRunning a monthly close
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