Let’s start off by defining the term payroll. The Balance Small Business states “Payroll is the function of a business paying its employees.” This includes distributing money in the form of checks and direct deposits. It also includes keeping records on those payments and paying taxes on behalf of those employees. So in order to track these payroll activities, different accounts are set up based on liability and expenses. In this blog, you can read about the description for each type of payroll account.

Accounts to track on payroll may include:

  • Gross Wage Expense: This is the amount paid to an employee every pay period before any deductions are made.
  • Health Insurance Expense: This is the total amount of health insurance paid to an insurance provider (examples: Blue Cross, Kaiser, etc.). This can include medical, vision, and dental. If there are more than a handful of transactions, creating sub ledger accounts for each insurance type is recommended.
  • 401(k) Matching Expense: For companies that offer a 401(k) plan, this includes the number of contributions made to match employee contributions in this account. This money is paid to an investment company that is responsible for maintaining the company 401(k).
  • Federal Tax Withholding: This account should reflect the total amount of income taxes withheld from all employee paychecks. Funds are withheld from employee paychecks each pay period and left in this account until remitted to the IRS for payment.
  • State Tax Withholding: This account serves the same function as the federal tax withholding, except it is for state taxes. If employees are obligated to pay local taxes, there should be a separate account for it too.
  • FICA Tax Payable: Deductions from employee paychecks for Social Security and Medicare taxes will accumulate in this account. These funds are remitted to the IRS based on applicable deadlines.


Do business by the book and hire an accountant for your payroll needs. At MARIELA RUIZ CPA PLLC, we offer payroll, bookkeeping, and other accounting services for businesses in Mission, TX and surrounding areas. If you have questions about professional tax services, please call (956) 997-0067 today.