Alan is recording payroll that was processed outside of QuickBooks.
Which QuickBooks function would be most useful?
a. Payroll summary
b. Pay bills
c. Journal entries
d. New invoice
The Correct Answer and Explanation is :
The correct answer is c. Journal entries.
When payroll is processed outside of QuickBooks, you will need to manually record the payroll details within QuickBooks to ensure the financial records remain accurate. Journal entries are the most appropriate function in this case because they allow you to record transactions directly into the general ledger, which includes all payroll-related expenses such as wages, taxes, and deductions.
Explanation:
QuickBooks provides a range of tools for handling payroll, but if payroll was processed externally and you need to record the results in QuickBooks, the Journal Entry function is most useful. A journal entry allows you to manually input the details of the payroll transaction, such as:
- Debiting the appropriate expense accounts: For example, wages, taxes, benefits, etc.
- Crediting the liability accounts: Such as the payroll tax liabilities, benefits payable, or any other amounts that were deducted from employees’ paychecks and are due to be paid later.
By creating a journal entry, you can capture all the necessary payroll details (even when processed outside of QuickBooks) and ensure that your books reflect accurate financial information.
- Payroll Summary (a): This function is used for reviewing the payroll data, not for recording payroll when it’s processed externally. It shows payroll information like wages, taxes, and deductions for a specified period but doesn’t allow manual entry of payroll transactions.
- Pay Bills (b): This function is used for paying bills such as vendor invoices or service providers and is not suitable for recording payroll expenses.
- New Invoice (d): This function is for creating invoices for sales transactions, and it doesn’t apply to payroll transactions.
Thus, journal entries give the flexibility to record external payroll accurately within QuickBooks while ensuring your financial reports stay aligned with your business’s actual payroll expenses.