Payroll journal entry

Last updated: December 18, 2025

Payroll journal entries track payroll costs, like employee wages and payroll taxes, which are some of the largest expenses incurred by businesses. With these records, employers have a more complete picture of their company’s financial health at any given time.

Payroll journal entry key takeaways:

• Journal entries record each pay period’s expenses as debits or credits, which must always remain in balance.
• Initial entries, accrued entries and manual payment entries are the most common payroll journal entries.
• Paying employees in arrears and using payroll software, which automates the recordkeeping process, can help improve payroll journal accuracy.

What is a payroll journal entry?

Payroll journal entries are records of the various costs incurred during a payroll cycle. Each line item is marked as either a debit or a credit.

Debits usually reflect payroll expenses, whereas credits typically reflect pending payments to third parties. These entries must always be in balance, i.e., the total debits are equal to the total credits.

Types of payroll journal entries

Three of the most common payroll journal entries include:

• Initial or primary payroll entry – Records employees’ gross wages and all withholdings from their pay, as well as the employer’s tax dues.
• Accrued wages and taxes entry – Documents the payments owed to employees and government agencies but not yet paid.
• Manual payments entry – Records payments made outside of the regular payroll cycle for pay adjustments, terminations, etc.

How to record payroll journal entries

All items that increase an employee’s net pay, such as gross earnings or expense payments, are reported as debits. These are offset by credits for items that reduce the employee’s net pay, such as statutory deductions and voluntary benefits. The final credit in a balanced journal entry is the employee’s actual net pay.

Journal entries for payroll: Tips and best practices

Employers looking to simplify payroll accounting entries should use accrued pay rather than current pay. Doing so not only minimizes potential rework and risk for payroll teams but also reduces employee pay inquiries.

Current pay

Employees receive their pay during the current pay cycle or when that cycle ends. This approach limits the time available to prepare payroll journal entries. Consequently, employers and payroll practitioners may need to estimate some of their figures and reconcile payroll during the next cycle if discrepancies arise.

Arrears pay

Employees are paid on a designated date following the close of a payroll cycle, i.e., the paycheck reflects work completed during the previous pay cycle, not the current one. This method gives payroll teams ample time to calculate employee pay, deductions and paid time off (PTO) accruals using the actual hours worked. Back-end payroll adjustments are minimized as a result.

Automate payroll journal entries with payroll software

Another way to simplify payroll journal entries is to invest in payroll software. Solutions like those available through ADP automate the payroll process, including wage calculations, tax deductions and employee payments. All this information is saved within the system and available for review via dashboards and payroll reports, so there’s no need to record journal entries manually. Our payroll solutions also integrate with many popular accounting software products, making it easy to share payroll data with general ledgers.

Frequently asked questions about payroll journal entries

This guide is intended to be used as a starting point in analyzing payroll journal entries and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.