USA Accounting for Payroll when paid by 3rd Party


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I have Company ABC LLC which is owned and funded by XYZ, Inc. ABC at this point is a startup. For some reason XYZ will process all the payroll liabilities themselves via their payroll department. My issue is that in order to show the correct expenses of ABC - the startup, monies paid for payroll have to be accounted for otherwise at the end of each quarter/year the financial statements will be incorrect as the company has incurred payroll liabilities (although it has not actually physically made the payments)

My question is how to set up an account to show these ongoing liabilities? - thanks very much in advance.
 
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AGH the CPA

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what agreement does ABC have with XYZ re the payroll? Do they have to pay it back? Does it become part of the contributions? Need some more details before we can answer...
 

bklynboy

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Generally this is covered under an intercompany agreement where one company (usually parent) performs all the services such as payroll and bills those costs back to the subs. Its cheaper and easier to have one company handle the payments so that you eliminate duplicate services and staff. The sub books the expense and offsets with a interco payable (I assume parent disperses payroll through their bank account and not through ABC).
 
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The payroll amounts will accrue under long term liabilities to be paid back in years 3+ I just dont know how to structure the transactions - I assume the creation of a liability account where the gross payroll amounts paid by the parent will accrue after each payroll period. Also yes - the parents bank pays the amounts due.
 
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bklynboy

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Unusual it will be paid that long - I would set up a liability for the future payment as you state.
 

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