You will need to define the holding account.  If it is left blank you will get several messages that you have not defined the account.  If you print checks it will post the direct deposit to the default payroll out of balance account 2.000 to keep the entry in balance.

Currently each payroll check is posted to the cash account for payroll. By defining it to a holding account, does that mean there will have to be a journal entry to transfer to the cash account for payroll?

When I preview the direct deposit report, it shows a $0 balance for gross and net.  Does this not show the amount of each pay?

Once the employee is set up for direct deposit and the direct deposit advice is printed it will post the direct deposit employees to the holding account.  After you create the direct deposit file and the bank confirms the information was processed you would use the post direct deposit option to move the amount from the holding account to the cash account.  This will occur in total

Thank you very much for all your help.