You could get by with just recording your net pay as a transaction in your bank account. But, that doesn’t help you at the end of the year when you want to compare your earnings statement from your employer against your records for tax filing purposes.
So, you’ll want to account for all of the numbers in GNUCASH to keep things straight.
- You need an income account for your salary. Create one if you don’t have one.
- You need an expense account for each deduction on your paycheck. If you don’t have them create them.
- You may need an asset account for investment deductions.
Expense Accounts Example
I am a 1099 contractor earning 100% commissions, so I don’t have any standard withholdings like Social Security, Medicare/Medicaid, etc. I have to manage those withholdings on my own. What I do have are deductions from my broker which are considered a “Cost of Sale.” Each transaction has associated costs. This list is pretty standard for any real estate agent.
Replace these accounts with the deductions on your paycheck. Tax withholding, FICA, 401K Etc.
401K contributions are not an expense. They are an asset. You’ll want to make sure the account you create for that is an asset account, not an expense account.
Entering a Paycheck
When you import your bank transactions, you won’t be able to split your deposit (net pay) until after you confirm the transaction and import it.
- Import your transaction from your bank (or manually enter it.)
- Go to the transaction.
- Right click the transaction and select
- In the first line of the split, enter the actual net payment that was deposited into your account in the DEBIT column.
- For each deduction, add a new split line and enter the amount in the DEBIT column for each associated transfer account in your chart of accounts.
- Lastly, add one more line that represents the GROSS payment to you. Select the income account you created for this and enter the full GROSS amount in the CREDIT column.
Remember, in a register in GNUCASH, an easy way to remember the difference between debit and credit is to think of DEbit as a DEposit into the register.
Save your transaction and you should see your income account increase, your bank account increase, and all of your expense accounts increase. If the numbers went the opposite direction, you jumbled up your debits and credits.
401 K or other deductions
Remember, if there’s a 401K distribution or other savings plan, or if there’s an expense like health insurance, you’ll want to create asset and expense accounts for each deduction accordingly, then simply use the debit split line in the register to debit that amount in the corresponding accounts you created.