Wave Payroll: All about the bookkeeping
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Wave Payroll: All about the bookkeeping
You're ready to approve a payroll in Wave - what's next? This guide will walk you through the steps to take before and after approving a payroll, as well as explain how Wave automatically handles y...
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in the past we would have to merge the two transactions.. Now I am unable to merge the two transactions (the bank and the payroll clearing account). Do I keep them both and review and save them both? Or does one need to get deleted?
thanks!
Hey @707Fence !
Essentially the initial journaled transaction is categorized under a liability account. So, when a payroll is approved, the liability account is credited (increased) by, the amount that you owe the employees. This is the accounting equivalent of saying “I approved payroll, so now I owe my employees the wages from that payroll”.
Wave will also create a withdrawal transaction in the Transactions page whose account is set to the funding account from Account Mapping, and whose category is set to Payroll Liabilities. The date of this transaction will match the withdrawal date for the Direct Deposit. Where the journal transaction credited Payroll Liabilities, this transaction debits it by the amount of the withdrawal. This is the accounting equivalent of saying “Ok, now I’ve actually paid my employees.”
The triplicate transaction (I believe you are referring to this) is if you have a bank account connected, it will pull in the same withdrawal transaction, so you would have to either merge the two transactions, or delete the bank-imported transaction, as Wave will have already accounted for it. People recommend merging by selecting the check boxes beside the two withdrawal transactions and selecting merge at the top instead of deleting, but it doesn't exactly matter to be honest. Some people don't like the idea of deleting a transaction.
Hi JulianP,
I really appreciate your reply. I have been merging the two transactions in the past.. however new this year (2021) I have only had one transaction appear in my accounting. The third one has not shown up. So just making sure I am not missing it. Maybe the software updated and it no longer makes two withdrawal transactions?
thanks!
Hello, because Wave introduced the "Wave Payroll Clearing" account around the end of December, the timing was such that I now have a credit balance on the clearing account that has not been matched with the payment from the bank account.
I tried to match the payment with the clearing account, but Wave blocks that.
Hey @ZimboDave !
As you noticed, Wave Payroll Bookkeeping changed a bit. Below I broke down the new workflow.
Essentially, the initial journal transaction captures all of the expenses tied to the payroll, and also recognizes them as amounts owing by crediting (increasing) “Payroll liabilities”. This is the accounting equivalent of saying “I’ve incurred expenses through an approved payroll, so now I owe my employees the wages from that payroll”.
Wave will also create a withdrawal transaction in the Transactions page whose account is set to “Wave Payroll Clearing”, and whose category is set to Payroll Liabilities. The date of this transaction will match the withdrawal date for the Direct Deposit. Where the journal transaction credited Payroll Liabilities, this transaction debits it by the amount of the withdrawal. This is the accounting equivalent of saying “Ok, now I’ve actually paid my employees.” This transaction is recorded to the “Wave Payroll Clearing” account because the actual withdrawal from your bank account may not have been posted immediately. Basically, we use this “clearing” account to ensure that the Payroll Liabilities are cleared on the day that payroll ran.
Once the actual withdrawal from your bank accounts posts and is imported to Wave, that withdrawal will be automatically categorized as a “Transfer to Wave Payroll Clearing ''. Why? When Wave recorded the withdrawal to the “Wave Payroll Clearing” account (the one that was categorized to “Payroll Liabilities”), this temporarily gave the “Wave Payroll Clearing” account a negative balance. When the actual withdrawal from your bank account imports into Wave, and gets categorized as a “Transfer to Wave Payroll Clearing”, the balance is restored to the “Wave Payroll Clearing” account. In this way, all of the bookkeeping is handled accurately, and automatically!
@707Fence I'm tagging you in this post as well as this info may come in handy.
Since we are using cash basis accounting, these transactions are technically incorrect. Is there any way we can turn this feature off?
Additionally, the journal entry transactions are being pulled in to my balance sheet, which makes it look like I have payroll liabilities even though everything has been paid. These journal entries should not be pulled in to the financial reports. Since I cannot delete the auto-generated "Journal transactions", how can I remove the extraneous data from my 2020 Balance Sheet?
This is the best software I ever used,.
Hey @MKCRealEstate , Wave is based in accrual basis accounting and although we do have cash basis reports, I'm afraid that you can't turn off the features such as the automatic Payroll accounting.
If the Journal Transactions don't work for your business, you can always create a reverse Journal Transaction to reverse these amounts.
Thanks @WIlson_r3 , we're so happy you love Wave!
I have paid an employee an advance on his next 2 paychecks. Where do I book the advance payment so that when the deduction is created during the payroll run it will offset it?