Payroll journal entries are accounting records that document all financial transactions related to payroll in a business. These entries are posted in the general ledger and reflect wages paid, taxes withheld, superannuation contributions, deductions, and employer liabilities.
Payroll journal entries serve as the official financial trail of how payroll expenses are recorded, ensuring accuracy in financial statements and compliance with Australian accounting standards, the Fair Work Act 2009, and ATO requirements.
Accurate payroll journal entries ensure:
Incorrect payroll entries can lead to misstated financial statements, compliance issues, and tax errors.
Each payroll journal entry includes several key elements that reflect both the employee's earnings and the employer's obligations.
Let’s say your business processes payroll for an employee with the following:
Accrual Entry (when payroll is recorded):
Payment Entry (when payment is made):
This separation allows employers to track wage liabilities and distinguish between payroll that has been processed versus paid.
Used when wages are earned but not yet paid. This is common for accounting periods that end before a pay cycle.
Posted when employees are actually paid. It clears the liabilities accrued in the earlier entry.
Used to correct errors, allocate overtime, or include back pay or bonuses missed in a previous pay run.
Used at the beginning of a new accounting period to reverse an accrual made in the prior period (to avoid double counting when payroll is actually paid).
Modern payroll systems like Microkeeper integrate directly with accounting software (e.g., Xero, MYOB, QuickBooks), streamlining payroll journal entries by:
Explore Microkeeper’s Payroll + Xero integration
Mistakes in payroll accounting can affect your profit and loss statement, balance sheet, and even tax reporting.
Yes. Even if you're a small business, accurate journal entries are necessary for proper financial reporting and BAS submissions.
You’re still responsible for recording the payroll expenses and liabilities in your general ledger. Some providers (like Microkeeper) offer automated journal exports.
Absolutely. These are separate liabilities and should be recorded to track payments to the ATO and employee funds correctly.
Payroll journal entries are the backbone of accurate, compliant financial reporting in any business. Whether you manage payroll in-house or use cloud-based software like Microkeeper, understanding how payroll entries impact your books helps ensure transparency, tax compliance, and smarter financial decision-making.
With automation, integration, and audit-ready tools, Microkeeper simplifies this process, giving you more time to focus on your people and business growth.
Disclaimer: This content is for general informational purposes only and should not be considered financial or legal advice. Please consult with a registered accountant or tax advisor for guidance specific to your business.