QuickBooks Online Tips – Session 2025 May

Question:
How do you record in your bookkeeping when you accidentally pay an employee their gross pay instead of net pay, and they e-transfer you back the difference-including if they send back a little too much?

Answer:
Record the initial overpayment as usual, then treat the returned funds as a reimbursement from the employee. If they returned too much, record the extra amount as a liability (money you owe them) to be paid back or applied to future pay23.

QuickBooks Online Tips – Session 2025 May

1. Record the Correct Payroll

• Enter the correct gross pay, deductions, and net pay in your payroll records as you normally would. This ensures your books reflect the intended payroll, not the mistake45.

2. Record the Overpayment

• When you pay the employee the gross amount (instead of net), your bank account will show a larger withdrawal. Record this as a payment to the employee, but note the overpayment.

3. Record the Employee’s Repayment

• When the employee returns the excess amount, record it as a reimbursement. In your accounting software, this is typically done as a journal entry:

  • Debit (increase) your bank account for the returned amount

  • Credit (decrease) the payroll expense or a specific “Payroll Overpayment” account23.

4. Handling Over-Repayment

• If the employee returns more than the overpaid amount, record the extra as a liability (e.g., “Employee Payable”). You can either refund this to the employee or apply it to their next paycheck3.

Example Journal Entries

• Initial Overpayment:

  • Dr Payroll Expense (gross pay)

  • Cr Bank (gross pay sent)

• Employee Repayment:

  • Dr Bank (amount returned)

  • Cr Payroll Expense or Payroll Overpayment

• If Over-Repayment:

  • Dr Bank (extra amount)

  • Cr Employee Payable (liability to employee)

Always document the transaction clearly in your records. If unsure, consult your accountant or payroll provider to ensure compliance with local laws and proper reporting