21st Century Accounting Help - Payroll

Prior Year Adjustments

Use the Payroll/Prior Year Adjustments window to correct Payroll year-to-date information accumulated during the prior year after you have started running Payrolls in the new year. The command is dimmed (not available) unless you have opened the first pay period in Quarter 1 of the new year.

General Ledger adjustments entered in the Prior Year Adjustments window are posted to the posting period and use the transaction date you enter. All Payroll adjustments entered in the Prior Year Adjustments window, whether or not they affect the G/L, are applied to the final pay period in Quarter 4 of the previous Payroll year. The window displays the prior payroll year and quarter that the adjustments will affect.

Do not close Quarter 4 of the previous year until you are satisfied with the YTD data from the previous Payroll year. You do not have to close Q4 to start running Payrolls in Q1 of the new year.

When you print reports to review Prior Year Adjustments, select the last pay period in Quarter 4 of the previous year (or select the previous year and Quarter 4 when you print 941 Information and Quarterly Wage Statements).

Adjustment Example

After closing the pay period and starting the new year, you may find a mistake in general ledger account distribution for the previous year. You can use the Prior Year Adjustments window to correct the general ledger and the employee's records. If you find an error in YTD records that will be reflected on W-2s or the final 941, you can use the Prior Year Adjustments window to correct the data.

Understanding Payroll Posting

To make adjustments correctly, you need to understand how the system posts amounts to the general ledger. Refer to the section in the Help "Payroll Data Flow" (in the Double-Entry Accounting Flow Help "book") to learn how payroll data entry affects the general ledger. You also need to understand how the system maintains the employee data that you see reflected in the Earnings Report. Become familiar with the Earnings Report so you'll know that your adjustments have the correct effect on employee pay detail. Print the Earnings Report immediately after you make an adjustment to verify the employee's records. Also print Taxes Activity if you adjust pay factors that are included in a tax's "Earnings Include" list to verify that each tax reflects the correct amounts.

For adjustments that affect the general ledger, you must enter both the debit and the credit side of a transaction, and the total of debits and credits must equal zero. The system posts amounts to the general ledger when you approve each entry. These general ledger account adjustments are reflected on the Earnings Report in the employee's pay period, quarter-to-date, and year-to-date amounts and appear as journal entries (with an entry number of EA plus the sequence number) in the General Ledger Activity report.

Adjustments that don't affect general ledger accounts are reflected in the employee's pay period, QTD, and YTD amounts on the Earnings Report.

Prior year adjustments are shown on the Employee Adjustments report. You can use the Prior Year Adjustments window to adjust amounts for the final pay period in Quarter 4 of the previous Payroll year. These amounts are reported on the following reports: Payroll Register, Remittance Checks, Earnings Report, Taxes Activity, Quarterly Wage Statement, 941 Information, W‑2s, Deductions Summary, Noncash Benefits Summary, and Income Summary.
Whenever you make employee adjustments that affect the 941 (such as an adjustment to wages or 941 taxes), the system updates 941 records for Quarter 4 of the previous Payroll year.