Reimbursing mileage through payroll

I need to set a payroll item to reimburse mileage to employees; because we claim the GST on that mileage, I had to figure out a work around which is as follows:

- Payroll Item was set up as "Addition" and used a Clearing Account rather than an expense account; a journal entry is then done to reverse the amount from the Clearing Account and expense it (minus the GST)

Up until this point, everything looks fine -- the problem is when I have to do a monthly Payroll Reconciliation, (this is mandatory as part of our company's audit requirements). 

The Payroll Summary and Trial Balance do not match because of the GST; the Payroll Summary shows the entire payroll amount including GST because that's the actual amount that was paid out -- the Trial Balance only shows the expense accounts therefore the GST portion isn't there. 

Does anyone have a better way to set up KM reconciliation through payroll that would still ensure the Payroll Summary and  Trial Balance match?  (Reimbursing through Accounts Payable isn't an option for reasons that are too much to get into).

Answer

"Payroll Item was set up as "Addition" and used a Clearing Account rather than an expense account"

Yes.

"a journal entry is then done to reverse the amount from the Clearing Account and expense it (minus the GST)"

Never. Your Payroll item will typically Debit an Expense account; your set up now is Debit = looks like a Deposit to the Clearing Bank. That means you Enter a Check as if you just Bought that mileage or whatever it is you are reimbursing the employee for.

The process "pretends" to:

You Bought something using the clearing account, and in the Write Check you get to use all regular details the same as Real Checking. Now the Clearing bank is running negative.

The Payroll Addition will increase the paycheck by a Debit to it, which "refills" the Clearing bank to 0.

That's why it is called Clearing.

"The Payroll Summary and Trial Balance do not match because of the GST; the Payroll Summary shows the entire payroll amount including GST because that's the actual amount that was paid out -- the Trial Balance only shows the expense accounts therefore the GST portion isn't there. "

You are not supposed to use JE when you also need GST, as well.

"Reimbursing through Accounts Payable"

Nothing here is AP; it is not related to Purchases you have made but did not yet pay for.

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