Starting from 1st July till 14th July, all employers are required to issue payment summaries to their employees. Before issuing payment summaries it is advisable to reconcile the payroll accounts to ensure that there are no discrepancies between the payment summaries issued and your payroll expense accounts.

Once you have finalised the payroll for the financial year and are ready to generate the payment summaries, get the trial balance from 1st July 2011 to 30th June 2012. Also get the payroll summary report for the whole financial year.

Reconcile Gross Wages Expense:
The total of gross wages for the employees on the yearly payroll summary report should match the wages expense totals on the trial balance. If both these balances are not matching then there is some error in your wages expense account and you will need to check the wages expense account and find out why it’s not matching. First thing to look for is any credit entries in the wages expense account, as it’s an expense account, it should be normally debited.

Another reason of the discrepancy could be if any staff expenses reimbursements, owners drawings etc are being expensed to wages account rather than being put to the relevant accounts. You might want to look at all the debits in the wages expense account and any look for any debit entries that don’t look like the usual payroll, one good way to identify these kinds of entries is to look by dates, normally payroll would be processed at a particular day/date of each week/fortnight/month and any journals that are on the different dates than the payroll processing date for that payroll period should be the first ones to look at. Once you identify those journals transfer them out to the relevant accounts.

Reconcile Superannuation Expense:
The superannuation expense account should also be reconciled the same way, one common error for mismatching superannuation expense accounts is due to the reason that sometimes when paying the superannuation in MYOB, instead of posting the payment to the liability account, payment is posted to the expense account.

I have already covered the reconciliation of the PAYG Withheld account in my previous blog, please read through that to ensure PAYG withheld is reconciled as well.

An easier method for the reconciliation is to start reconciling by each month rather than the full year as there will be less data to sort through.

Once the wages expense and superannuation accounts balances are matching with the payroll summary report for the whole financial year, annual payroll is now reconciled and your company file is now tidied up to generate the payment summaries.

By following this, not only will you generate the correct payment summaries but will also reduce your accountant's bill for the time your accountant would have spent doing the same.

If you are still unsure about reconciling the payroll account and issuing the payment summaries, we are here to help, contact HS Bookkeeping Service on 1300 664 796.

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