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What You Need to Know about Payroll Accounting

Payroll Accounting

 

Employees are the lifeblood of a business. They are instrumental for day-to-day business operations as well as driving business growth. They execute daily tasks, interact with your customers, and bring in more business. As one of your business’s most valuable assets, they deserve to be compensated fairly and diligently. That is where payroll accounting comes in. You may be tempted to assume cutting checks on time is all there is to it, but the reality is much more complex.

Here’s what you need to know about payroll accounting.

 

Payroll Accounting Basics

 

Payroll accounting is essentially a company recording all its employees’ compensation. Here is what it includes:

 

  • Gross wages, salaries, commissions, bonuses
  • Accounting for payroll taxes and withholding including all applicable federal and provincial taxes, Canada Pension Plan (CPP) contributions
  • Accounting for employment insurance & leave under the Employment Insurance Act which funds maternity and paternity leave, sickness, and compassionate care

 

 

accountant in Edmonton

 

Once you hire an employee, you will need their Social Insurance Number (SIN) and have them fill out the federal and provincial TD1 forms. Of course, your payroll system can only be set up once you have a registered number from the CRA. The CRA will need to be sent your recorded tax collection.

 

The CRA also determines how much tax to collect from employees based on their classification. For example, you’ll collect different amounts of tax from full-time employees versus a contractor.

 

How to Avoid Payroll Errors

 

It is crucial to avoid any potential remittance errors on your payroll accounting in order to prevent issues from sprouting up. Calculation errors could easily lead the CRA to penalize your business.

 

Deductions need to be collected every pay period. This means that each employee’s pay stubs will need clearly indicated deductions from their individual income source. If any of your employees earns a base salary as well as commission, you will need to indicate the deductions you’ve made from each source.

 

Account for Exceptions

 

It’s important to be aware of the CPP requirements when doing your payroll accounting. Employees under the age of 18 aren’t eligible for CPP. The same goes for employees over the age of 70. You may also need to factor in possible exceptions with regard to employment insurance.

We are an Edmonton-based accounting firm that offers expert payroll accounting services to all kinds of businesses. Our comprehensive payroll services include setting up payroll structure, generating pay stubs, providing monthly Source Deduction report for CRA payment, T4 slip printing, payroll audit, WCB filing, and more.

 

Get in touch with us to learn more about our accounting services.

 

DPC-Chartered Professional Accountant

 

Your Local Accountant In Edmonton.