Net pay
In accounting, net pay means gross pay less every withholding — income taxes, the employee's Social Security and Medicare, benefit deductions — and so what reaches the employee's bank. Always the remainder, never a separately computed figure.
Also called Take-home pay.
Not a rule. Bookkeeping convention — not codified. US GAAP governs recognition, measurement and presentation, not bookkeeping mechanics. Sources
The lessons that teach this
From the free founder back-office course, taught on one company's books, with exercises to work it yourself.
- PayrollGross to net pay$8,400 earned, $6,707.40 paid: federal income tax from each W-4, Social Security and Medicare on their own bases, and net pay as the remainder.12 min
- PayrollRecording payroll in the booksJE-11 posts $8,400 of wages against $1,692.60 withheld and $6,707.40 paid; AJE-4 adds $642.60 of employer FICA; the October deposit clears the liability.9 min
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
- Payroll journal entries, from gross to netGross wages, employer taxes, withholding and net pay as journal entries: what each payroll run books, how to accrue it at month end, and where benefits go.
- General ledger and double-entry bookkeeping, explainedHow double entry works: journal entries, debits and credits, normal balances, running balances, the trial balance, and why posted entries are reversed.
What it is not called
Each of these means something else. Use one here and an accountant reading the product notices.
- salary
- wages
Also in Payroll
Defined in Lexicon. This page is generated from that document, so the two can't disagree.