Payroll
Payroll is the process and records used to calculate employee earnings, deductions, net pay and the employer’s related staff costs. Accounting records gross earnings as an expense or qualifying production cost, records employer contributions separately, and recognises amounts owed to employees and third parties. Payment settles those liabilities rather than creating the same expense again. Statutory rates and deductions depend on the jurisdiction and the question.
Worked example
Gross pay is $10,000, employee deductions $2,000 and employer contributions $1,000. Staff cost is $11,000; employees receive $8,000 and $3,000 is owed to the relevant authorities or schemes.
Common mistake
Employee deductions are part of gross pay, not an extra employer expense. Employer contributions are additional cost.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Direct | July 2027–August 2028 |
| ACCA | F2 | Direct | July 2027–August 2028 |
| ACCA | K1 | Direct | July 2027–August 2028 |
Related terms
Also called: Payroll accounting