A payroll journal is a detailed record of accounting transactions related to payroll. Smaller organizations may record their payroll transactions directly in the general ledger, but larger companies will find that the sheer volume of these transactions will clog the general ledger; instead, they record payroll-related transactions in the payroll journal, and then just record a single summary-level entry in the general ledger that reflects all of the transactions recorded in the payroll journal. In accounting software systems, the software posts transaction totals from the payroll journal to the general ledger, usually when requested by a user.
If you need to investigate a specific payroll transaction and your company is using a payroll journal, you will need to conduct the research within the payroll journal, since the detail-level information will not be available in the general ledger.
The payroll staff creates journal entries that are recorded in the payroll journal, especially from the periodic payrolls. There may also be any number of special entries at the end of each month, such as accruals for vacation pay or sick pay.
Once entries have been made into the payroll journal and the accounting staff posts a summary of this information into the general ledger, the information appears in the income statement (for wages, payroll taxes, and benefits expenses) and in the balance sheet (for accrued wages, payroll taxes, and benefits).
In a fully computerized accounting system, it may not be necessary to print out the payroll journal detail; instead, all research concerning specific payroll transactions is conducted on-line. If it is considered necessary to print out and retain the journal, be sure to keep it securely stored, since it contains confidential compensation information.
In some accounting software packages, the payroll journal may be invisible, since the database is structured so that you simply enter transactions, without being concerned with the specific journal within which they are recorded.