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Optional Step - Reconcile gross wages for accrual accounting


Note
: Reconciling gross wages is optional but recommended to address payroll variance.

When using the accrual method of accounting, you cannot reconcile the expense amounts in the Profit and Loss Statement directly to gross wages on the Payroll Check Activity report because the expense amounts contain wages that have not yet been paid. Therefore, you must also include the Salaries Payable account in your reconciliation.  

Since Salaries Payable is a balance sheet account, the balances at the fiscal year-end do not get cleared to a zero balance as does an expense account. Therefore, you cannot use the ending balance of the Salaries Payable account in your reconciliation. The amount you need to use depends on whether you are reconciling the month-to-date or the year-to-date gross wages.

Another consideration in your reconciliation is if you have any in/out pays included in gross wages (for example, automobile allowance). These types of amounts need to be deducted from gross wages on the Check Activity report when reconciling to the Profit and Loss Statement.  


The following examples illustrate:

  • The information you need to gather
  • A month-end reconciliation
  • A year-to-date reconciliation

Information you need

Report Information Example

P&L Statement

Wage Expense for month being reconciled

Ajera calculates wage expense from these three areas: Payroll Expense Account fields in company preferences, Expense Account field in pays for in-house payroll, and Account field in overhead groups.

$119,615.49

P&L Statement

Wage Expense for year being reconciled

$243,180.30

P&L Statement

Payroll Variance for month being reconciled

($1,000.17)

P&L Statement

Payroll Variance for year being reconciled

($1,782.35)

Check Activity

In/Out Pay for month being reconciled

Examples of this kind of pay may include excess group life insurance premiums or personal use of a company car. To view the in/out pays in use, from the Company menu, click Payroll > Pays.

$112.00

Check Activity

In/Out Pay for year being reconciled

$168.00

Trial Balance

Salaries Payable at January 1 of year being reconciled

($24,304.68)

Trial Balance

Salaries Payable at first day of month being reconciled

($45,761.19)

Trial Balance

Salaries Payable at end of month being reconciled

($51,082.69)

Check Activity

Gross Wages for month

$113,405.82

Check Activity

Gross Wages for year

$214,787.94

Month-end reconciliation

Report Information Example

Check Activity

Gross Wages

$113,405.82

Check Activity

In/Out Pay

($112.00)

 

Adjusted Gross Wages

$113,293.82

 

P&L Statement

All wage expense account amounts for current month

$119,615.49

P&L Statement

Payroll Variance account amount for current month

($1,000.17)

Trial Balance

Change in Salaries Payable for current month

($5,321.50)

 

Adjusted Wages Expense

$113,293.82

Year-to-date reconciliation

Report Information Example

Check Activity

Gross Wages

$214,787.94

Check Activity

In/Out Pay

($168.00)

 

Reconciled Wages Expense

 $214,619.94

 

P&L Statement

All Wage Expense Account amounts for year-to-date

$243,180.30

P&L Statement

Payroll Variance Account amount for year-to-date

($1,782.35)

Trial Balance

Change in Salaries Payable for year-to-date

($26,778.01)

 

Reconciled Wages Expense

$214,619.94

From the examples, you can see that the change in the Salaries Payable amount is different depending on the time period you are reconciling.

There may be times when your reconciliation is off a few cents. This is because of rounding differences between when time is entered and paid. Some companies see these small differences as immaterial and will leave the differences. Others will choose to adjust the wages expense to reconcile to the wages paid with a journal entry.

Gross wages do not reconcile

If your gross wages do not reconcile, follow these steps:

Determine if any entries need to be adjusted

  1. Print the Ledger report. Click Reports > Financial > Ledger, and select the month that you are reconciling (for example, April 2012).
  2. Drill down on any account you used to reconcile gross wages. Identify any items that have a description of Journal Entry.

You can review journal entries in Manage > Journal Entries > Existing tab (or click the entry on the Ledger report) to determine the session to print and review.

  1. Review payroll pays for any inactive pays that you may have used to process payroll. Identify these pays in Company > Payroll > Pays.

  2. Drill down on any active or inactive accounts you used to reconcile gross wages.

If these steps do not resolve the out-of-balance situation, contact Client Services or your Certified Consultant to discuss having Deltek analyze your data.

 

 

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