We utilize Peachtree accounting.

Semi-Monthly we receive a notification from our payroll service that an electronic withdrawal from our bank account will occur for payment of unemployment tax.

When we receive the notification, a bill is entered into the accounting system which Debits SUTA payable and credits Accounts Payable.

When we record the bill as paid, the accounting system Debits Accounts Payable and credits cash (bank account).

The problem is that that the balance sheet shows SUTA payable with a negative balance

Our entry clerk tells me that it was setup that way. It seems that a debit & credit is missing from the process but don't know where I should focus.

Any thoughts to resolve the issue would be appreciated.

I am suspecting that the original entry for the SUTA is not being recorded when the payroll was done. When payroll is done, there's two entries. One records the salaries expense and credits all the places that are owed. i.e. it should put all the deductions into payables to the various government agencies or insurance company, or whatever's being deducted. Then there should be another entry which debits the extra payroll taxes the company has to pay and again credits a payable for the various government agencies, for the stuff like the matching FICA, federal unemployment, matching 401k's and the like. Which entry the SUTA belongs in will depend on state -- some states have this deducted from the employee's check and some have only the employer pay it (like here), and some have both.

It looks like something in that entry is missing. i.e. the SUTA due is not being recorded in the payable to begin with.

Peachtree can actually do this for you, if you use it for payroll. But you're using a payroll service. They should be sending you reports with each payroll and those numbers would be on that report somewhere. You should check to see if the clerk is actually making the proper entries from that report. Since you're not doing payroll through Peachtree, this has to be done manually into the general ledger module of it. I don't know if your clerk is responsible for those types of entries -- some places that would be the type of thing your CPA would be doing, and the account would be negative until that entry gets done. But if the clerk needs to be doing it, you may want to check with the payroll service about where all the necessary numbers are.

Is there a reason this is being put through A/P first? i.e. when you get that notification, why not just debit SUTA Payable and credit the Cash. It's a wasted entry. Unless someone wants everything going through A/P so they can get a list of what's in there or something. Which would be perfectly legit. But sometimes I find people aren't doing this stuff for a reason like that -- it's merely cause they make everything complicated. If it were me and I was not directed otherwise, I think I'd make entries like that when doing the bank rec. It will show up on the bank statement after all.