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When storing records, be sure to separate those items requiring permanent storage, such as board minutes and articles of incorporation, from other documents created during the same year, and shift them into a more secure location where they can be more clearly identified This added storage step avoids throwing out important corporate documents along with other payroll documents when the document destruction policy specifies that the other items be eliminated In situations where a large number of storage boxes are required for each year s documents, it is common to simply put an identifying index number on each box
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This section was adapted with permission from Willison et al, pages 1283 1284 of the Sixth Edition of Controllership (Hoboken, NJ: John Wiley and Sons, 1999)
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Payroll Recordkeeping / 201
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Authorization for Destruction of Records Form
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Authorization for Destruction of Records
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and Destruction Certificate
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No Date To: (Controller) Authority is requested for destruction of the following records:
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Form Number
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Date of Records Description of Records From To
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Destruction Recommended by Destruction Approved by I hereby certify that I have this day destroyed the accounts, records, and memoranda listed above, and further that no accounts, records, or memoranda other than those named were destroyed herewith (Witness) (Location) (Signed) (Position)
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202 / Accounting for Payroll
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and then list each box s contents on a separate index document However, it is possible that the index number will be improperly transcribed onto the master index document, so anyone referring to it will not know where some documents are stored To avoid this problem, it is useful to list the general contents of each box on the outside of the box, using a marker pen This way, there is no risk of losing track of documents and someone without access to the master index to still find stored documents with minimal search time
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Summary
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This chapter summarized the basic document storage requirements for all types of payroll-related documents Most of these requirements are based on a small number of federal laws and regulations However, there are cases where more stringent state laws will require that additional information be retained or kept for longer periods than what is mandated by the federal government To be sure, contact your local state government to see if any of these overriding state laws apply to your specific situation
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Payroll Journal Entries
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Once a payroll has been completed, one must figure out how to transfer the information on the payroll reports into the general ledger, so that company management can determine the total amount of payroll expense for each department, as well as any payroll-related liabilities In addition, accruals must be consistently generated for period-end financial reporting that accurately shows the amount of various unpaid expenses, such as vacation time Of particular concern is how to keep errors from creeping into journal entries, so that payroll information is consistently and accurately reported in the financial statements This chapter shows how to create journal entries for each of a wide range of payroll-related transactions, as well as where to find the underlying information, and how to ensure that the entries are made in a reliable and consistent manner
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Benefits Accrual Journal Entry
Create a benefits accrual journal entry1 whenever there are employee benefit expenses that have been incurred during the reporting period but for which an associated supplier billing has not yet been received For example, a company s provider of disability insurance may only bill the company on a quarterly basis, so the payroll staff should create an entry for the first two months of the quarter that accrues the cost of the insurance and then reverses the accumulated liability when the bill arrives A sample of this transaction is shown below: Debit Medical insurance expense Dental insurance expense Disability insurance expense Life insurance expense Accrued benefits liability xxx xxx xxx xxx xxx Credit