Heintz & Parry
Chapter
20th Edition
Payroll
Accounting:
Employee
Earnings and
Deductions
College
Accounting
1
Distinguish between
employees and
independent contractors.
8
PAYROLL RECORD KEEPING
• Payroll costs are major expenditures for
most businesses
– Records provide data for analyzing and
controlling these expenditures
• Laws require records to be kept
– For the business as a whole
– For each employee
EMPLOYEES OR INDEPENDENT
CONTRACTORS?
EMPLOYEES
• Work under the control and direction of an
employer
– Examples:
•
•
•
•
Secretaries
Sales Clerks
Plant Supervisors
Maintenance Workers
INDEPENDENT CONTRACTORS
• Perform services for a fee and do not work
under the control and direction of the
company paying for the services
– Examples
• Lawyers
• Public Accountants
• Real Estate Agents
2
Calculate employee
earnings and deductions.
OVERTIME
• Fair Labor Standards Act (FLSA)
– Requires employers to pay overtime
(1½ times the regular rate) to any
hourly employee who works over 40
hours in a week
– Some salaried employees are exempt
from the FLSA rules
EMPLOYEES vs. INDEPENDENT
CONTRACTORS
• Employees involve:
– More laws and regulations
– Taxes that must be deducted
– Payroll records to maintain
– Numerous reports to file
• Only one form must be filed for
independent contractors
– Form 1099
SALARIES AND WAGES
• Salaries
– Compensation for managerial or
administrative services
– Expressed in biweekly, monthly, or
annual terms
• Wages
– Compensation for skilled and unskilled
labor
– Expressed in terms of hours, weeks, or
units produced
COMPUTING TOTAL EARNINGS
• When compensation is based on time, a
record must be kept of the time worked by
each employee
– Examples:
• Time cards, plastic cards or badges with
special magnetic strip barcodes
• The hours worked are multiplied by the
rate of pay to determine total earnings
COMPUTING TOTAL EARNINGS
EXAMPLE: Helen Kuzmik worked 55 hours this week. Kuzmik’s
regular rate of pay is $12 per hour. She is paid 1½ times the
regular rate for hours in excess of 8 on Monday through Friday
and any hours worked on Saturday, and twice the regular rate
for hours on Sunday. Helen worked 4 hours on Sunday.
40 hours × $12 per hour =
11 hours × $18 per hour =
$480
$198
COMPUTING TOTAL EARNINGS
EXAMPLE: Helen Kuzmik worked 55 hours this week.
Kuzmik’s regular rate of pay is $12 per hour. She is paid 1½
times the regular rate for hours in excess of 8 on Monday
through Friday and any hours worked on Saturday, and
twice the regular rate for hours on Sunday. Helen worked 4
hours on Sunday.
40 hours × $12 per hour =
11 hours × $18 per hour =
4 hours × $24 per hour =
$480
198
96
$12 × 1½ = $18 overtime rate
4 Sunday hours, twice the regular rate
($12 × 2 = $24 Sunday rate)
COMPUTING TOTAL EARNINGS
EXAMPLE: Helen Kuzmik worked 55 hours this week.
Kuzmik’s regular rate of pay is $12 per hour. She is
paid 1½ times the regular rate for hours in excess of 8
on Monday through Friday and any hours worked on
Saturday, and twice the regular rate for hours on
Sunday. Helen worked 4 hours on Sunday.
40 hours × $12 per hour =
11 hours × $18 per hour =
4 hours × $24 per hour =
$480
198
96
Total earnings for the week
$774
COMPUTING TOTAL EARNINGS
EXAMPLE: Linda Swaney has a salary of
$2,288 a month plus 1½ times the regular
hourly rate for hours in excess of 40 per
week.
In order to compute her overtime
rate, we must determine her regular
hourly rate.
Also called “gross pay.”
COMPUTING TOTAL EARNINGS
EXAMPLE: Linda Swaney has a salary of
$2,288 a month plus 1½ times the regular
hourly rate for hours in excess of 40 per
week.
COMPUTING TOTAL EARNINGS
EXAMPLE: Linda Swaney has a salary of
$2,288 a month plus 1½ times the regular
hourly rate for hours in excess of 40 per
week.
Step #1—Determine her annual salary.
Step #2—Determine her weekly salary.
$2,288 per month × 12 months
$27,456 annual salary ÷ 52 weeks
= $27,456 annual pay
= $528.00 pay per week
COMPUTING TOTAL EARNINGS
COMPUTING TOTAL EARNINGS
EXAMPLE: Linda Swaney has a salary of
$2,288 a month plus 1½ times the regular
hourly rate for hours in excess of 40 per week.
EXAMPLE: Linda Swaney has a salary of
$2,288 a month plus 1½ times the regular
hourly rate for hours in excess of 40 per week.
Step #3—Compute regular hourly pay.
$528 per week ÷ 40 hours per week
= $13.20 pay per regular hour
DEDUCTIONS FROM TOTAL
EARNINGS
• Three categories:
– Federal (and possibly state and city)
income tax withholding
– Employee FICA tax withholding
– Voluntary deductions
• Gross pay – Deductions = Net pay
– Also called take-home pay
WITHHOLDING ALLOWANCES
• Exempt a specific dollar amount of an
employee’s gross pay from federal income
tax withholding
• Computed on Form W-4 Employee’s
Withholding Allowance Certificate
– Based on the marital status and the
number of allowances claimed
• In general, each employee is permitted one
personal withholding allowance, one for a
spouse who does not also claim an
allowance, and one for each dependent
Step #4—Compute overtime rate.
$13.20 per hour × 1½
= $19.80 overtime pay per hour
INCOME TAX WITHHOLDING
• Required by federal law
• Applied toward the payment of the
employee’s federal income tax
• Amount withheld determined by:
– Total earnings
– Marital status
– Number of withholding allowances
claimed
– Length of the pay period
WAGE-BRACKET METHOD
EXAMPLE: Ken Istone, who is married and
claims 6 allowances, has gross earnings of
$545 for the week ending December 19, 20--.
Determine the amount of federal income tax
to be withheld using the wage-bracket
method.
MARRIED Persons—WEEKLY Payroll Period
If the wages are—
MARRIED Persons—WEEKLY Payroll Period
And the # of withholding allowances claimed is—
If the wages are— And the # of withholding allowances claimed is—
But less 0 1
2
3 4 5
6 7
8 9 10
At least than
Step The
#2 amount of income tax to be withheld is—
$ 390 the$column
0 0 0
0
0 0 0
18 11 “6 5
Find
400 24 headed
0
0 0 0
400
25 19 12
6 0 0 0
410 allowances.”
withholding
At least
But less
than
$ 390
400
$ 400
410
540
550
560
570
580
550
560
570
580
590
44
46
47
49
50
35 26
36 27
38 28
39 30
41 31
20
21
22
23
24
14
15
16
17
18
1
2
3
4
5
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
540
550
560
570
580
550
560
570
580
590
44
46
47
49
50
35 26
36 27
38 28
39 30
41 31
20
21
22
23
24
14
15
16
17
18
1
2
3
4
5
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
630
640
640
650
58
59
48
50
29
31
23 16 10
24 17 11
4
5
0
0
0
0
0
0
630
640
640
650
58
59
48
50
29
31
23 16 10
24 17 11
4
5
0
0
0
0
0
0
2
3 4 5
6 7
8 9 10
0 1
The amount of income tax to be withheld is—
5
0
0 0
0
0 0 0
24 18 11
0
0 0 0
25 19 12
6 0 0
0
7
8
9
10
11
Step #1
Find the row for
wages of “at least $540,
but less than $550.”
39
40
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
MARRIED Persons—WEEKLY Payroll Period
If the wages are—
But less
At least than
$ 390
$ 400
400
410
540
550
560
570
580
550
560
570
580
590
And the # of withholding allowances claimed is—
2
3 4 5
8 9 10
0 1
6 7
The amount of income tax to be withheld is—
5
0 0 0 0
0 0 0
24 18 11
0 0 0
25 19 12
6 0 0
0 0
44 35
46 36
47 38
49 39
50Step
41
26
27
28
30
31
#3
20
21
22
23
24
14
15
16
17
18
7
8
9
10
11
1
2
3
4
5
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
640
650
58
59
48
50
39
40
29
31
23 16
24 17
EMPLOYEE FICA TAX WITHHOLDING
• Includes amounts for:
– Social Security
• Provides pension and disability benefits
– Medicare
• Provides health insurance
• Required by the Federal Insurance
Contributions Act (FICA)
Find the amount where they
cross. This is the amount
to be withheld.
630
640
39
40
7
8
9
10
11
10
11
4
5
0
0
0
0
0
0
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
EMPLOYEE FICA TAX WITHHOLDING
• Tax rates are set by Congress
– Social Security
• 6.2% on maximum earnings of $106,800
– Medicare
• 1.45% on ALL earnings; there is no
maximum
• Rates can be changed annually by
Congress
EMPLOYEE FICA TAX WITHHOLDING
EXAMPLE: Sarah Cadrain had earnings of
$1,600 for the December 6–12 pay period,
bringing her earnings year-to-date to
$105,540.
Sarah’s earnings have not yet reached
the maximum of $106,800.
ALL of her earnings for this week are
subject to Social Security and Medicare tax.
EMPLOYEE FICA TAX WITHHOLDING
EXAMPLE: Sarah Cadrain had earnings of
$1,600 for the December 6–12 pay period,
bringing her earnings year-to-date to
$105,540.
Gross Pay × Tax Rate
=
Tax
$1,600
Social Security 6.2% $ 99.20
23.20
Medicare
1.45%
EMPLOYEE FICA TAX WITHHOLDING
EXAMPLE: The following week Cadrain earns
$1,660, bringing her earnings year-to-date to
$107,200 (over the Social Security
maximum).
Year-to-date earnings
$107,200.00
Social Security maximum
106,800.00
Amount not subject to S.S. tax $
400.00
$122.40
EMPLOYEE FICA TAX WITHHOLDING
EXAMPLE: The following week Cadrain earns
$1,660, bringing her earnings year-to-date to
$107,200 (over the Social Security
maximum).
Gross pay
$1,660.00
Amount not subject to S.S. tax
400.00
Amount subject to S.S. tax
$ 1,260.00
Tax rate
6.2%
Social Security tax
$
78.12
EMPLOYEE FICA TAX WITHHOLDING
EXAMPLE: The following week Cadrain earns
$1,660, bringing her earnings year-to-date to
$107,200 (over the Social Security
maximum).
Gross pay
$1,660.00
Tax rate
1.45%
Medicare tax
$ 24.07
Sarah’s total FICA tax is $102.19
($78.12 S.S. + $24.07 Med.)
EMPLOYEE FICA TAX WITHHOLDING
EXAMPLE: The following week Cadrain earns
$1,660, bringing her earnings year-to-date to
$107,200 (over the Social Security maximum).
Gross pay
$1,660.00
Since Medicare has no maximum
earnings, all of Cadrain’s gross
pay is subject to the Medicare tax.
VOLUNTARY DEDUCTIONS
• Deductions that are optional and depend
on specific agreements between the
employee and employer
• Examples:
– U.S. savings bond purchases
– Health insurance premiums
– Credit union deposits
– Pension plan payments
– Charitable contributions
COMPUTING NET PAY
COMPUTING NET PAY
EXAMPLE: Compute the net pay of Ken Istone
for the week ended December 19. His health
insurance premiums are $10 per week.
Gross pay
$545.00
Deductions:
Federal income tax withholding $ 1.00
EXAMPLE: Compute the net pay of Ken Istone
for the week ended December 19. His health
insurance premiums are $10 per week.
Gross pay
$545.00
Deductions:
Federal income tax withholding $ 1.00
Social Security tax withholding 33.79
All his pay is subject to S.S. tax
($545 × 6.2%)
From the wage bracket
withholding tables
COMPUTING NET PAY
COMPUTING NET PAY
EXAMPLE: Compute the net pay of Ken Istone
for the week ended December 19. His health
insurance premiums are $10 per week.
Gross pay
$545.00
Deductions:
Federal income tax withholding $ 1.00
Social Security tax withholding 33.79
7.90
Medicare tax withholding
$5
45
×
3
1.4
5%
EXAMPLE: Compute the net pay of Ken Istone for the
week ended December 19. His health insurance
premiums are $10 per week.
Gross pay
$545.00
Deductions:
Federal income tax withholding $ 1.00
Social Security tax withholding 33.79
7.90
Medicare tax withholding
10.00
Health insurance premiums
52.69
Total deductions
Net pay
$492.31
PAYROLL RECORDS
• Should provide the following information
on each employee
Describe and prepare
payroll records.
– Name, address, occupation, social security
number, marital status, and number of
withholding allowances
– Gross amount of earnings, date of payment,
period covered by each payroll
– Gross amount of earnings accumulated for the
year
– Amounts of taxes and other items withheld
PAYROLL REGISTER (LEFT SIDE)
PAYROLL RECORDS
Three types:
NAME
EARNINGS
#
MARITAL REGULAR OVER- TOTAL
TIME
ALLOW. STATUS
PAYROLL
REGISTER
PAYROLL CHECK
with earnings statement
A payroll register is a form used
to assemble the data required
at the end of each payroll period.
EMPLOYEE
EARNINGS
RECORD
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PAYROLL REGISTER (LEFT SIDE)
PAYROLL REGISTER (LEFT SIDE)
EARNINGS
#
MARITAL REGULAR OVER- TOTAL
TIME
ALLOW. STATUS
Cadrain, Sarah
M
4
EARNINGS
#
MARITAL REGULAR OVER- TOTAL
TIME
ALLOW. STATUS
Cadrain, Sarah
60.00 1,660.00
M
1,600.00
4
Since marital status and
number of allowances are
used to compute withholding
taxes, they are recorded
on the payroll register.
Earnings for this period
are shown, categorized by
regular and overtime
earnings.
NAME
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PAYROLL REGISTER (LEFT SIDE)
TAXABLE EARNINGS
EARNINGS
SOCIAL
TOTAL CUMULATIVE UNEMPLOYMENT
TOTAL
COMP.
SECURITY
1,660.00
107,200.00
1,260.00
This pay period has taken Cadrain’s earnings
above the Social Security maximum.
As computed earlier, only $1,260 of this
period’s earnings is subject to the
Social Security tax.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
NAME
PAYROLL REGISTER (RIGHT SIDE)
SOC. SEC. MEDICARE HEALTH
FEDERAL
TAX
TAX
INSURANCE
INCOME TAX
184.00
24.07
78.12
All deductions from
total earnings
are listed.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
UNITED
WAY
PAYROLL REGISTER (RIGHT SIDE)
HEALTH
INSURANCE
DEDUCTIONS
TOTAL
UNITED
WAY
286.19
NET PAY
CHECK
NO.
1,373.81
409
PAYROLL REGISTER (LEFT SIDE)
EARNINGS
#
MARITAL REGULAR OVER- TOTAL
TIME
ALLOW. STATUS
Cadrain, Sarah
60.00 1,660.00
M
1,600.00
4
760.00 140.00
S
900.00
Guder, James
1
NAME
Deductions are totaled
and subtracted from
total earnings to arrive
at net pay.
The payroll information for
the other employees
is recorded in the same manner.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PAYROLL REGISTER (LEFT SIDE)
PAYROLL REGISTER (RIGHT SIDE)
TAXABLE EARNINGS
EARNINGS
SOCIAL
TOTAL CUMULATIVE UNEMPLOYMENT
TOTAL
COMP.
SECURITY
1,660.00
900.00
1,260.00
900.00
107,200.00
43,400.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
DEDUCTIONS
TOTAL
UNITED
WAY
286.19
20.00
222.85
NET PAY
1,373.81
677.15
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
UNITED
WAY
20.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PAYROLL REGISTER (RIGHT SIDE)
HEALTH
INSURANCE
SOC. SEC. MEDICARE HEALTH
FEDERAL
TAX
TAX
INSURANCE
INCOME TAX
184.00
24.07
78.12
55.80
13.05
134.00
CHECK
NO.
409
410
PAYROLL REGISTER (LEFT SIDE)
EARNINGS
#
MARITAL REGULAR OVER- TOTAL
TIME
ALLOW. STATUS
Cadrain, Sarah
M
60.00 1,660.00
4
1,600.00
760.00 140.00
S
900.00
Guder, James
1
M
Istone, Ken
6
545.00
545.00
NAME
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PAYROLL REGISTER (LEFT SIDE)
PAYROLL REGISTER (RIGHT SIDE)
TAXABLE EARNINGS
EARNINGS
SOCIAL
TOTAL CUMULATIVE UNEMPLOYMENT
TOTAL
COMP.
SECURITY
1,660.00
900.00
107,200.00
43,400.00
545.00
27,025.00
1,260.00
900.00
545.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
DEDUCTIONS
TOTAL
UNITED
WAY
286.19
20.00
10.00
222.85
52.69
NET PAY
CHECK
NO.
1,373.81
409
677.15
410
492.31
411
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
TAXABLE EARNINGS
EARNINGS
SOCIAL
TOTAL CUMULATIVE UNEMPLOYMENT
TOTAL
COMP.
SECURITY
900.00
545.00
774.00
107,200.00
43,400.00
27,025.00
31,000.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
20.00
PAYROLL REGISTER (LEFT SIDE)
EARNINGS
#
MARITAL REGULAR OVER- TOTAL
TIME
ALLOW. STATUS
Cadrain, Sarah
60.00 1,660.00
M
1,600.00
4
760.00 140.00
S
900.00
Guder, James
1
M
Istone, Ken
6
545.00
545.00
480.00 294.00
774.00
M
Kuzmik, Helen
2
NAME
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PAYROLL REGISTER (LEFT SIDE)
1,660.00
UNITED
WAY
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PAYROLL REGISTER (RIGHT SIDE)
HEALTH
INSURANCE
SOC. SEC. MEDICARE HEALTH
FEDERAL
TAX
TAX
INSURANCE
INCOME TAX
184.00
24.07
78.12
55.80
13.05
134.00
33.79
7.90
10.00
1.00
1,260.00
900.00
545.00
774.00
PAYROLL REGISTER (RIGHT SIDE)
SOC. SEC. MEDICARE HEALTH
FEDERAL
TAX
TAX
INSURANCE
INCOME TAX
184.00
24.07
78.12
55.80
13.05
134.00
33.79
7.90
10.00
1.00
60.00
47.99
11.22
13.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
UNITED
WAY
20.00
20.00
PAYROLL REGISTER (RIGHT SIDE)
DEDUCTIONS
TOTAL
UNITED
WAY
286.19
20.00
222.85
10.00
52.69
HEALTH
INSURANCE
13.00
20.00
152.21
NET PAY
CHECK
NO.
1,373.81
677.15
409
410
492.31
411
412
621.79
PAYROLL REGISTER (LEFT SIDE)
EARNINGS
#
MARITAL REGULAR OVER- TOTAL
TIME
ALLOW. STATUS
Cadrain, Sarah
60.00 1,660.00
M
1,600.00
4
760.00 140.00
S
900.00
Guder, James
1
M
Istone, Ken
6
545.00
545.00
480.00 294.00
774.00
M
Kuzmik, Helen
2
NAME
Lee, Hoseoup
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PAYROLL REGISTER (RIGHT SIDE)
TAXABLE EARNINGS
EARNINGS
SOCIAL
TOTAL CUMULATIVE UNEMPLOYMENT
TOTAL
COMP.
SECURITY
545.00
774.00
31,000.00
1,260.00
900.00
545.00
774.00
440.00
22,340.00
440.00
900.00
107,200.00
43,400.00
27,025.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
DEDUCTIONS
TOTAL
UNITED
WAY
286.19
20.00
222.85
10.00
52.69
13.00
13.00
20.00
NET PAY
CHECK
NO.
1,373.81
677.15
409
410
492.31
152.21
621.79
411
412
56.66
383.34
413
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SOC. SEC. MEDICARE HEALTH
FEDERAL
TAX
TAX
INSURANCE
INCOME TAX
184.00
24.07
78.12
55.80
13.05
134.00
33.79
7.90
10.00
1.00
60.00
47.99
11.22
13.00
10.00
27.28
6.38
UNITED
WAY
20.00
20.00
13.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PAYROLL REGISTER (RIGHT SIDE)
HEALTH
INSURANCE
440.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PAYROLL REGISTER (LEFT SIDE)
1,660.00
440.00
M
3
PAYROLL REGISTER (LEFT SIDE)
EARNINGS
#
MARITAL REGULAR OVER- TOTAL
TIME
ALLOW. STATUS
Cadrain, Sarah
M
60.00 1,660.00
4
1,600.00
760.00 140.00
S
900.00
Guder, James
1
M
Istone, Ken
6
545.00
545.00
480.00 294.00
774.00
M
Kuzmik, Helen
2
NAME
Lee, Hoseoup
Swaney, Linda
3
2
M
440.00
S
528.00
440.00
198.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
726.00
PAYROLL REGISTER (LEFT SIDE)
PAYROLL REGISTER (RIGHT SIDE)
TAXABLE EARNINGS
EARNINGS
SOCIAL
TOTAL CUMULATIVE UNEMPLOYMENT
TOTAL
COMP.
SECURITY
1,660.00
900.00
545.00
774.00
440.00
726.00
31,000.00
1,260.00
900.00
545.00
774.00
22,340.00
27,500.00
440.00
726.00
107,200.00
43,400.00
27,025.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
DEDUCTIONS
TOTAL
UNITED
WAY
286.19
20.00
10.00
13.00
20.00
13.00
NET PAY
CHECK
NO.
1,373.81
409
222.85
52.69
677.15
410
492.31
152.21
621.79
411
412
56.66
383.34
595.46
130.54
413
414
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
TAXABLE EARNINGS
EARNINGS
SOCIAL
TOTAL CUMULATIVE UNEMPLOYMENT
TOTAL
COMP.
SECURITY
900.00
545.00
774.00
440.00
107,200.00
43,400.00
27,025.00
31,000.00
726.00
22,340.00
27,500.00
490.00
25,050.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
27.28
6.38
75.00
45.01
10.53
20.00
20.00
13.00
PAYROLL REGISTER (LEFT SIDE)
EARNINGS
#
MARITAL REGULAR OVER- TOTAL
TIME
ALLOW. STATUS
Cadrain, Sarah
60.00 1,660.00
M
1,600.00
4
760.00 140.00
S
900.00
Guder, James
1
M
Istone, Ken
6
545.00
545.00
480.00 294.00
774.00
M
Kuzmik, Helen
2
NAME
Lee, Hoseoup
Swaney, Linda
3
2
M
440.00
S
528.00
Tucci, Paul
5
M
490.00
440.00
198.00
726.00
490.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PAYROLL REGISTER (LEFT SIDE)
1,660.00
10.00
UNITED
WAY
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PAYROLL REGISTER (RIGHT SIDE)
HEALTH
INSURANCE
SOC. SEC. MEDICARE HEALTH
FEDERAL
TAX
TAX
INSURANCE
INCOME TAX
184.00
24.07
78.12
55.80
13.05
134.00
33.79
7.90
10.00
1.00
60.00
47.99
11.22
13.00
1,260.00
900.00
545.00
774.00
440.00
726.00
490.00
PAYROLL REGISTER (RIGHT SIDE)
SOC. SEC. MEDICARE HEALTH
FEDERAL
TAX
TAX
INSURANCE
INCOME TAX
184.00
24.07
78.12
55.80
13.05
134.00
33.79
7.90
10.00
1.00
60.00
47.99
11.22
13.00
10.00
27.28
6.38
75.00
45.01
10.53
2.00
30.38
7.11
13.00
10.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
UNITED
WAY
20.00
20.00
PAYROLL REGISTER (RIGHT SIDE)
DEDUCTIONS
TOTAL
UNITED
WAY
286.19
20.00
222.85
10.00
52.69
HEALTH
INSURANCE
13.00
13.00
20.00
10.00
NET PAY
CHECK
NO.
1,373.81
677.15
409
410
492.31
411
412
621.79
56.66
383.34
595.46
413
3
2
440.00
414
Lee, Hoseoup
Swaney, Linda
M
130.54
S
528.00
49.49
440.51
415
Tucci, Paul
5
M
490.00
490.00
Wiles, Harry
1
S
300.00
300.00
545.00
774.00
440.00
1,260.00
900.00
545.00
774.00
27,025.00
31,000.00
726.00
22,340.00
27,500.00
490.00
25,050.00
300.00
6,300.00
300.00
10.00
27.28
6.38
75.00
45.01
10.53
2.00
30.38
7.11
300.00
22.00
18.60
4.35
13.00
13.00
10.00
20.00
NET PAY
CHECK
NO.
1,373.81
677.15
409
410
20.00
20.00
13.00
10.00
492.31
411
412
PAYROLL REGISTER (LEFT SIDE)
EARNINGS
#
MARITAL REGULAR OVER- TOTAL
TIME
ALLOW. STATUS
Cadrain, Sarah
M
60.00 1,660.00
4
1,600.00
760.00 140.00
S
900.00
Guder, James
1
M
Istone, Ken
6
545.00
545.00
480.00 294.00
774.00
M
Kuzmik, Helen
2
NAME
152.21
621.79
56.66
383.34
595.46
413
3
2
440.00
414
Lee, Hoseoup
Swaney, Linda
M
130.54
S
528.00
49.49
440.51
415
Tucci, Paul
5
M
490.00
44.95
255.05
416
Wiles, Harry
1
S
440.00
198.00
726.00
490.00
300.00
300.00
5,143.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
UNITED
WAY
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PAYROLL REGISTER (RIGHT SIDE)
DEDUCTIONS
TOTAL
UNITED
WAY
286.19
20.00
222.85
10.00
52.69
SOC. SEC. MEDICARE HEALTH
FEDERAL
TAX
TAX
INSURANCE
INCOME TAX
184.00
24.07
78.12
55.80
13.05
134.00
33.79
7.90
10.00
1.00
60.00
47.99
11.22
13.00
440.00
726.00
490.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
HEALTH
INSURANCE
726.00
PAYROLL REGISTER (RIGHT SIDE)
TAXABLE EARNINGS
EARNINGS
SOCIAL
TOTAL CUMULATIVE UNEMPLOYMENT
TOTAL
COMP.
SECURITY
107,200.00
43,400.00
440.00
198.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PAYROLL REGISTER (LEFT SIDE)
900.00
EARNINGS
#
MARITAL REGULAR OVER- TOTAL
TIME
ALLOW. STATUS
Cadrain, Sarah
60.00 1,660.00
M
1,600.00
4
760.00 140.00
S
900.00
Guder, James
1
M
Istone, Ken
6
545.00
545.00
480.00 294.00
774.00
M
Kuzmik, Helen
2
NAME
152.21
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1,660.00
PAYROLL REGISTER (LEFT SIDE)
692.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
5,835.00
PAYROLL REGISTER (LEFT SIDE)
PAYROLL REGISTER (RIGHT SIDE)
TAXABLE EARNINGS
EARNINGS
SOCIAL
TOTAL CUMULATIVE UNEMPLOYMENT
TOTAL
COMP.
SECURITY
1,660.00
1,260.00
900.00
545.00
774.00
107,200.00
43,400.00
900.00
27,025.00
545.00
774.00
31,000.00
440.00
726.00
22,340.00
27,500.00
440.00
726.00
490.00
490.00
25,050.00
300.00
6,300.00
300.00
300.00
5,835.00
289,815.00
300.00
5,435.00
SOC. SEC. MEDICARE HEALTH
FEDERAL
TAX
TAX
INSURANCE
INCOME TAX
184.00
24.07
78.12
55.80
13.05
134.00
33.79
7.90
10.00
1.00
60.00
47.99
11.22
13.00
6.38
10.00
27.28
13.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
75.00
45.01
2.00
30.38
7.11
22.00
18.60
4.35
488.00
336.97
84.61
1,373.81
409
222.85
52.69
677.15
410
492.31
20.00
152.21
621.79
411
412
56.66
383.34
595.46
413
130.54
49.49
440.51
415
44.95
255.05
416
995.58
4,839.42
13.00
10.00
46.00
40.00
20.00
10.53
10.00
46.00
40.00
PAYROLL CHECK
CHECK
NO.
20.00
10.00
13.00
NET PAY
20.00
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PAYROLL REGISTER (RIGHT SIDE)
DEDUCTIONS
TOTAL
HEALTH
UNITED
INSURANCE
WAY
286.19
UNITED
WAY
• Employees may be paid in cash or by
check
– The employer furnishes an earnings
statement to each employee along with
his or her paycheck
• In many cases, payment is made by direct
deposit or electronic funds transfer (EFT)
by the employer to the employee’s bank
– Payment by check or direct deposit
provides better internal accounting
control than payment by cash
414
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
EMPLOYEE EARNINGS RECORD
PERIOD
ENDED
11/28
12/5
12/12
REGULAR
EARNINGS
OVERTIME
TOTAL
25,240.00
PERIOD
ENDED
11/28
25,860.00
12/5
26,480.00
12/12
CUMULATIVE
TOTAL
545.00
75.00
620.00
545.00
75.00
620.00
545.00
A separate 75.00
earnings620.00
record
EMPLOYEE EARNINGS RECORD
REGULAR
EARNINGS
OVERTIME
TOTAL
545.00
75.00
620.00
545.00
Let’s record75.00
the last 620.00
entry
of the year 75.00
for Ken Istone.
545.00
620.00
CUMULATIVE
TOTAL
25,240.00
25,860.00
26,480.00
is maintained for each employee.
GENDER DEPARTMENT OCCUPATION SOCIAL SECURITY #
M
F
Maintenance
Service
393-58-8194
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
GENDER DEPARTMENT OCCUPATION SOCIAL SECURITY #
M
F
Maintenance
Service
393-58-8194
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
EMPLOYEE EARNINGS RECORD
PERIOD
ENDED
11/28
EARNINGS
OVERTIME
TOTAL
REGULAR
545.00
75.00
12/12
545.00
545.00
75.00
75.00
12/19
545.00
12/5
CUMULATIVE
TOTAL
EMPLOYEE EARNINGS RECORD
DEDUCTIONS
TAXABLE EARNINGS
UNEMPLOYMENT
SOCIAL
FEDERAL
SOCIAL
COMPENSATION
SECURITY INCOME TAX SECURITY TAX
620.00
620.00
25,240.00
25,860.00
620.00
620.00
620.00
545.00
26,480.00
27,025.00
620.00
545.00
GENDER DEPARTMENT OCCUPATION SOCIAL SECURITY #
M
F
1.00
33.79
PAY RATE
$545/week
Deductions are noted.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
EMPLOYEE EARNINGS RECORD
UNITED
WAY
38.44
38.44
38.44
M
are recorded and the cumulative
earnings are updated.
DEDUCTIONS
MEDICARE
HEALTH
TAX
INSURANCE
9.00
9.00
MARITAL STATUS ALLOWANCES
for this period393-58-8194
MaintenanceEarnings
Service
9.00
EMPLOYEE EARNINGS RECORD
DEDUCTIONS
OTHER
OTHER
TOTAL
CHECK
#
AMOUNT
8.99
8.99
10.00
10.00
66.43
66.43
387
547.57
395
8.99
10.00
10.00
66.43
52.69
403
411
547.57
547.57
492.31
7.90
DATE OF BIRTH
DATE HIRED
8/17/64
1/3/87
NAME/ADDRESS
Ken M. Istone
1546 Swallow Drive
St. Louis, MO 63144-4752
EMPLOYEE NUMBER
NAME/ADDRESS
Ken M. Istone
1546 Swallow Drive Deductions are totaled and 3
net pay is recorded, along
St. Louis, MO 63144-4752
with the paycheck’s number.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
JOURNALIZING PAYROLL
TRANSACTIONS
4
Account for employee
earnings and deductions.
DATE
DESCRIPTION
PR DEBIT CREDIT
1
2
3
4
5
6
7
Journal entries are now made to record
the payroll expenses and liabilities.
8
9
10
11
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
JOURNALIZING PAYROLL
TRANSACTIONS
DATE
1
2
3
4
DESCRIPTION
JOURNALIZING PAYROLL
TRANSACTIONS
PR DEBIT CREDIT
The payroll register is the
source for the journal entry.
5
DATE
1
2
3
4
6
7
7
8
9
8
9
10
11
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
DATE
Dec.
DESCRIPTION
5,835.00
Social Security Tax Payable
488.00
5
Health Ins. Prem. Payable
336.97
84.61
46.00
6
United Way Contrib. Pay.
40.00
4
Medicare Tax Payable
7
8
9
Each deduction is recorded
in a separate liability account.
10
11
5,835.00
AY
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
JOURNALIZING PAYROLL
TRANSACTIONS
PR DEBIT CREDIT
19 Wages and Salaries Expense
Employee Income Tax Pay.
PR DEBIT CREDIT
P
SS
GRO
JOURNALIZING PAYROLL
TRANSACTIONS
1
2
3
DESCRIPTION
19 Wages and Salaries Expense
5
6
10
11
Dec.
DATE
1
2
3
4
Dec.
DESCRIPTION
PR DEBIT CREDIT
19 Wages and Salaries Expense
Employee Income Tax Pay.
5,835.00
Social Security Tax Payable
Medicare Tax Payable
5
Health Ins. Prem. Payable
6
United Way Contrib. Pay.
7
Cash
488.00
336.97
84.61
46.00
40.00
4,839.42
PAY
NET
8
9
10
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
11
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
WAGES AND SALARIES EXPENSE
EMPLOYEE INCOME TAX PAYABLE
WAGES AND SALARIES
EXPENSE
EMPLOYEE INCOME TAX
PAYABLE
DEBIT
CREDIT
Debit gross pay of
employees for each
pay period.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
DEBIT
CREDIT
Credited when federal
income tax is withheld
from employees.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
EMPLOYEE INCOME TAX PAYABLE
(CONT.)
SOCIAL SECURITY TAX PAYABLE
EMPLOYEE INCOME TAX
PAYABLE
SOCIAL SECURITY
TAX PAYABLE
DEBIT
CREDIT
DEBIT
CREDIT
Both the employer and employee
pay Social Security taxes.
Debited when withheld
taxes are paid to
the IRS.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SOCIAL SECURITY TAX PAYABLE
(CONT.)
SOCIAL SECURITY TAX PAYABLE
(CONT.)
SOCIAL SECURITY
TAX PAYABLE
SOCIAL SECURITY
TAX PAYABLE
DEBIT
CREDIT
DEBIT
Credited when taxes
are withheld from
employees’ earnings.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CREDIT
Also credited for taxes
imposed on the
employer.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SOCIAL SECURITY TAX PAYABLE
(CONT.)
MEDICARE TAX PAYABLE
SOCIAL SECURITY
TAX PAYABLE
MEDICARE TAX
PAYABLE
DEBIT
CREDIT
DEBIT
CREDIT
WORKS EXACTLY THE SAME AS
SOCIAL SECURITY TAX PAYABLE
Debited when taxes
are paid.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PAYROLL RECORD-KEEPING
METHODS
5
• Manual system:
Describe various
payroll record-keeping
methods.
– The same information is recorded several
times
– Can be very inefficient
• Payroll processing center:
– A business that sells payroll record-keeping
services
• Electronic system:
– A computer system that performs all payroll
record keeping and prepares payroll checks
ELECTRONIC PAYROLL SYSTEM
INPUT
PROCESSING
OUTPUT
EMPLOYEE:
SOCIAL
SECURITY #
HOURS
WORKED
ELECTRONIC PAYROLL SYSTEM
INPUT
PROCESSING
Payroll
Register
EMPLOYEE:
Only the employee’s
social security number
and hours worked
are input each
pay period.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SOCIAL
SECURITY #
HOURS
WORKED
OUTPUT
COMPUTER
Paychecks
Employee
Earnings
Record
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.