workers comp payments

[pccoffice]

When paying workers comp I know I credit the bank account. What account do I debit? A liability account or an expense account?

[NeilZ]

When paying workers comp I know I credit the bank account. What account do I debit? A liability account or an expense account?

OK .. not knowing what state you're in, or what they require for companies to do, this can't be answered without more data.

Scenario A: In some (most?) states, a company pays for a worker's compensation insurance policy. This is an expense much like property/liability insurance. At the two churches I oversee finances for, we have this setup as a separate budget line item, and as such, a separate expense account.

Background: Powerchurch's COA defaults to a 2-level header of PERSONNEL, and includes a 4-level header (group) account of EMPLOYER EXPENSES. This is where we keep employer expenses such as Payroll Taxes and Worker's Comp.

The Payroll module is what accesses the Payroll Taxes expense account, and it basically does a DEBIT of the Payroll Taxes account and a CREDIT to the Medicare Liablity account. You then do your Federal taxes by writing a check (or EFT) and debiting the liability account and crediting the checking account. The Payroll module has already taken care of debiting the Payroll Taxes expense account, so this shows up in the Income & Expense report.

Scenario B Now, some states have a 'salary' based Worker's Compensation system, where the amount paid by the company is based on the amount paid to the employee. In this case, it would be setup in Payroll to work much like the way Employer Medicare Tax would be. You'd have a percentage table setup (much like the Income tax table), and the system would use this to determine the amount to be paid by the employer. Again, the system would then DEBIT the Worker's Comp Expense account, and CREDIT the Worker's Cmp Liability account.

There is probably a third scenario, but I'm not sure what it encompasses.

So, my answer would be based on which one of the two scenario's you fall under.