REGARDING HOW PAYROLL WORKS WITH THE INTEGRATED ACCOUNTING

CC3 supports payroll in this way >>> From the Main Menu > Post Labor to RO, when this Posts an entry is created in the journal that Debits the asset account Work In Process (WIP) Labor and Credits the liability account Payroll Liability. At the same time, an entry is added to the Worker Time Report. Therefore, there is a direct relationship between the Worker Time report and the balance in the Payroll Liability account. The labor expense itself is debited when the RO is actually closed. Finally, when Tax Payroll is posted to the system, the Payroll Liability will be relieved through a debit to Payroll liability as part of the series of entries that represents the tax payroll posting.

A liability account needs to be setup in the Chart of Accounts for Payroll Liability – Main Menu > General Ledger > Setup Accts, well use account #240 for the example here. That account is identified in Main Menu > Setup/Edit List > Setup Accounting in the lower left corner titled “Payroll Liability”. With that set, a Credit will be posted to the journal to acct 240 whenever you post labor to an RO. Again, at the same time an entry is made to the Worker Time Report that shows that accumulated payroll for a given period. At the end of the payroll period, you run the worker time report that shows the amount you owe each tech, the “payroll liability” to each tech if you will. Once Tax Payroll checks are processed, a series of entries must be posted to the system, that include a necessary debit to relieve the Payroll Liability.

But when does the actual labor expense get posted – specifically – to Cost of Goods Sold (COGS) labor ??? This occurs when the RO is actually closed – entries are created the debit COGS Labor with the opposing Credit to the asset account WIP Labor (account # 150 for example) – which is exactly how true classical accounting should work. Labor cost should not we recorded until the car is finished, and any labor put into the job before it is finished should be recorded as WIP.

You can see all of these entries in the journal occuring with “Jobcost Payroll” appearing in the Invoice column for entries that are created when you Post the Labor and “WIP Labor Out” appearing in the Invoice column when an RO is closing.

One question we do get is “Will total amount in the Worker Time Report always equal the amount on the balance sheet for Payroll Liability ?” And the answer is “No not always, but often it does.” The reason for this “problem” is we refuse to split hairs too thin, that is, we have not created a “Cleared from Report yet to be posted to Tax Payroll” liability account. Specifically, there is a point in time when you Zap the Worker Time Report, but you havn’t yet posted the tax payroll, and there are still some entries on the Worker Time Report. Consider that you post payroll checks every Friday for the previous Monday to Friday week. On Monday morning early before you have posted any new time, you run, post, and Zap the Worker Time report. When you Zap the report, it does not create an entry, but waits for you to create the Debit entry of the ZAP when you post tax payroll. Your shop must move on, and to close files on Monday, Tuesday, Wednsday … you must post hours to the Worker Time Report. Until you post tax Payroll on the Thursday afternoon say right when you have the tax payroll report in your hand, the Payroll Liability account balance on the balance sheet WILL NOT match the amount in the Worker Time Report. After you post those debits, they will match, until you Zap again. If in that window of time they don’t match, you need to adjust the balance of the Payroll Liability account with journal entries – and get it to balance – because once it balances at that point in time, it will and should keep balancing.