Payroll and related fringe benefits often constitute a substantial percentage of current liabilities. In addition, employee compensation is often the most significant expense that a company incurs.
The proper accounting and control of payroll are very important to a business. Payroll accounting involves more than paying employees' salaries and wages. Companies are required by law to maintain payroll records for each employee, file and pay payroll taxes, and comply with numerous state and federal tax laws applicable to employee compensation. Accounting for payroll has become much more complex as a result of these regulations.