How Payroll Entries Work in Balabook

Step 1: Add Employees

1. Navigate to Employees > Employment.
2. Add earnings and any optional allowances for your employees.
3. Default accounts will automatically populate based on your payroll settings.‍

Note: You can override default accounts for individual employees or specific earnings if you want to track certain salary components separately.

Step 2: Create a Draft Pay Run

1. Go to Payroll > Pay Runs > Create Pay Run.
2. Select the employees and the payroll period.
3. Balabook will automatically calculate:
   
   • Gross salary
   • Employee income tax deductions
   • Employee and employer social insurance contributions
   • Other statutory contributions (e.g., holiday fund, cohesion fund)‍

Important: Draft pay runs do not create any journal entries in the general ledger. The system calculates amounts but does not post them until the pay run is approved.

Step 3: Approve Pay Run

Approving a pay run triggers the creation of all necessary accounting entries. The following accounts are affected:

-Payroll Payable (Liability): Records net salary owed to employees.
-Earnings Expense (Expense): Records the total gross salary expense
-Social Insurance Expense / Liability: Tracks employer and employee social insurance contributions
-Income Tax Liability: Tracks employee income tax deductions
Result: Balances in all relevant accounts are updated in the general ledger.

Step 4: Record Payment

1. Navigate to Payroll > Pay Runs > Record Payment.
2. Select the account from which funds are disbursed (e.g., bank account).
3. Recording the payment:
   
   • Reduces Payroll Payable (liability)
   • Reduces the cash/bank account
   • Marks net salaries as paid, completing the payroll transaction

Understanding Journal Entries

• Payroll Payable: Net salary owed to employees
• Earnings Expense: Employee gross salary recorded as an expense
• Social Insurance Expense / Liability: Tracks all contributions to social insurance
• Income Tax Liability: Employee income tax deductions

Notes:

-Pay runs generate a single consolidated journal entry for all employees.
-Individual pay run entries cannot be viewed like invoices or payment records.
-To review transactions: Open the General Ledger and Filter by account and period to see all debit and credit postings