Have you ever written a payroll check for one amount and when you received the bank statement, you saw the bank had cashed it for a different amount? If you have, how do you fix it in QuickBooks without messing up your Payroll and bank account? Here is the answer.
- Net Payroll Amount: $380.22
- Check #257 written as: $300.22 (person writing check did not include the eighty dollars)
- CNB Bank Cashed #257: $300.22
- Your QuickBooks CNB account shows the check as $380.22, $80 more than the bank account. Your Net Payroll shows you paid $380.22 to your employee. However, because of the error, you still owe your employee $80.00 net.
First, this is technically a bank error even though it was caused by the person writing the check in the wrong amount. This error caused a liability – you now owe your employee money.
Second, this is not a Payroll error. QuickBooks has the Net Payroll as $380.22 Net. This is the correct amount of Net Payroll and this does not get changed in QuickBooks.
What needs to happen is all related to the QuickBooks bank account and a payroll liability account. The QuickBooks bank account is now $80 more than the actual bank balance and you owe your employee $80. Follow the steps below to fix this error in QuickBooks.
Tip: For every entry you make to correct this error, the description/memo line should read something like this: Bank Error Payroll Check #257. You can also reference the employee name in the name box.
Steps to correct the error in QuickBooks:
- Create a new Other Current Liabilities account called Payroll Check Errors.
- Make the following Journal entry to “deposit” $80 into the QuickBooks CNB bank account and to create a liability of 80.00 in the Payroll Check Errors account you just created:
- Line 1: Account CNB Bank Debit 80.00
- Line 2: Account Payroll Check Errors 80.00
- Open the Write Check window and enter a check to the employee. The bank account will be CNB bank and the line account will be Payroll Check Errors. The amount will be $80. Record the check number of the actual check you will write to the employee.
To verify the error has been corrected:
Go to your register for CNB Bank account. You should see the original Payroll Check #257 for $480.22. You should see a Journal Entry “deposit” of $80. You should see a check to the employee for $80. Go to the Chart of Accounts and locate the Current Liability account of Payroll Check Errors. It should show a zero amount. If you view the register for this account, you should see the Journal Entry to record an $80 increase and a check to record an $80 decrease.
Reconcile the QuickBooks CNB Bank Account to CNB Bank Statment
When the bank statement arrives that shows that Payroll Check #257 has cleared, match the QuickBooks Payroll Check #257 ($480.22 written amount) AND the $80 Journal Entry “deposit” you made to the Bank Statement’s Payroll Check #257 ($400.22 cleared amount). Match the QuickBooks CNB account check for $80to the Statement check for $80. When you are done reconciling all items on the Statement, your account should balance.
If you have any questions, please contact me.
Copyright 2018 by Julie M. Watkins, Bookkeeper