chapter eight payroll accounting: employee earnings and deductions
TRANSCRIPT
CHAPTER EIGHT
PAYROLL ACCOUNTING: EMPLOYEE EARNINGS
AND DEDUCTIONS
PAYROLL RECORD KEEPING
PAYROLLRECORD KEEPING
Payroll is a major expenditure for most businesses.• Records provide data for analyzing and
controlling these expenditures.
Laws require records to be kept• For business as a whole• For each employee
EMPLOYEESOR
INDEPENDENTCONTRACTORS?
EMPLOYEES
Work under the control and direction of an employer
Examples:
INDEPENDENT CONTRACTORS
Perform services for a fee and do not work under the control and direction of the company paying for the services
Examples:
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 & WAGES
Salaries:• Compensation for managerial 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
OVERTIME
Fair Labor Standards Act (FLSA): • Requires employers to pay overtime (1 1/2
times the regular rate) to any hourly employee who works over 40 hours in a week
• Some salaried employees are exempt from FLSA.
CALCULATING TOTAL EARNINGS
When compensation is based on time: Records must be kept of the time
worked by each employee.• Examples: time cards, plastic cards
with bar codes
The hours worked are multiplied by rate of pay to determine total earnings.
CALCULATING TOTAL EARNINGS
Example: Helen Kuzmik worked 55 hours this week. She is paid overtime (1 1/2 times her regular rate) for any hours over 8 in one day or 40 hours in a week (11 hours) and double time for any hours worked on Sundays (4 hours). Her regular rate of pay is $12 per hour.
40 hours x $12 per hour11 hours x $18
$480
$12 x 1 1/2 = $18 overtime rate
CALCULATING TOTAL EARNINGS
40 hours x $12 per hour11 hours x $18
4 Sunday hours, paid at double the regular rate$12 x 2 = $24 Sunday rate
4 hours x $24
$48019896
Example: Helen Kuzmik worked 55 hours this week. She is paid overtime (1 1/2 times her regular rate) for any hours over 8 in one day or 40 hours in a week (11 hours) and double time for any hours worked on Sundays (4 hours). Her regular rate of pay is $12 per hour.
CALCULATING TOTAL EARNINGS
40 hours x $12 per hour11 hours x $18 4 hours x $24
$48019896
$774Total earnings for the week
Also called “Gross Pay”
Example: Helen Kuzmik worked 55 hours this week. She is paid overtime (1 1/2 times her regular rate) for any hours over 8 in one day or 40 hours in a week (11 hours) and double time for any hours worked on Sundays (4 hours). Her regular rate of pay is $12 per hour.
CALCULATING TOTAL EARNINGS
EXAMPLE: Linda Swaney has a salary of $2,288 per month. If she works over 40 hours in a week, she is to be paid the overtime rate of 1 1/2 times her hourly rate.
In order to compute her overtime rate,we must determine her regular
hourly rate
CALCULATING TOTAL EARNINGS
EXAMPLE: Linda Swaney has a salary of $2,288 per month. If she works over 40 hours in a week, she is to be paid the overtime rate of 1 1/2 times her hourly rate.
Step #1 Determine her annual salary
$2,288 per month x 12 months
$27,456
CALCULATING TOTAL EARNINGS
EXAMPLE: Linda Swaney has a salary of $2,288 per month. If she works over 40 hours in a week, she is to be paid the overtime rate of 1 1/2 times her hourly rate.
Step #2 Determine her weekly salary
$27,456 annual salary ÷ 52 weeks
$528.00 per week
CALCULATING TOTAL EARNINGS
EXAMPLE: Linda Swaney has a salary of $2,288 per month. If she works over 40 hours in a week, she is to be paid the overtime rate of 1 1/2 times her hourly rate.
Step #3 Compute regular hourly rate
$528.00 per week ÷ 40 hours per week
$13.20 per hour
CALCULATING TOTAL EARNINGS
EXAMPLE: Linda Swaney has a salary of $2,288 per month. If she works over 40 hours in a week, she is to be paid the overtime rate of 1 1/2 times her hourly rate.
Step #4 Compute overtime rate
$13.20 per hour x 1 1/2
$19.80 per hour of overtime
DEDUCTIONS FROM GROSS PAY
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”
INCOME TAX WITHHOLDING
Required by federal law:• Applied toward payment of employee’s federal
income tax
Amount withheld determined by:• Total Earnings• Marital Status• Number of withholding allowance claimed• Length of the pay period
WITHHOLDING ALLOWANCES
Exempt a specific dollar amount of gross pay from income tax withholding.
Computed on Form W-4 “Employee’s Withholding Allowance Certificate”
Based on marital status and number of allowances claimed
•One allowance for employee, spouse who does not claim an allowance, and each dependent child
WAGE-BRACKET METHOD
EXAMPLE: Ken Istone, who is married and claims 6 allowances, has gross earnings of $545 for the week ending December 19, 20--. Determine the amount of federal income tax to be withheld using the wage-bracket method.
MARRIED Persons - WEEKLY Payroll PeriodIf the wages are--
At leastBut less
than
And the # of withholding allowances claimed is--
The amount of income tax to be withheld is--$ 390 $ 400
400 410
540 550 550 560 560 570 570 580 580 590
600 590 610 600
610 620 620 630 630 640 640 650
0
29 31
52 53 55 56 58 596162646567
1 2 3 4 5 6 7 8 9 10
2122
43 44 46 47 49 5052 53 55 56 58
16
34 36 37 39 40 4243 45 46 4849
10 11
2527283031333436373940
4 0 0 0 0 0 00 0 0 0 0
000
0 5
19 13 7 120212223242527283031
14151617181920212223
8 2 0 0 09 3 0 00
10 4 0 11 5 0
0 00 0
12 6 0 0 0
15
13 7 1 0 014 8 2 0 015 9 3 0 016 10 4 0 017 11 5 0 0
Step #1 Find the row for wages of “at least $540,
but less than $550.”
MARRIED Persons - WEEKLY Payroll PeriodIf the wages are--
At leastBut less
than
And the # of withholding allowances claimed is--
The amount of income tax to be withheld is--$ 390 $ 400
400 410
540 550 550 560 560 570 570 580 580 590
600 590 610 600
610 620 620 630 630 640 640 650
0
29 31
52 53 55 56 58 596162646567
1 2 3 4 5 6 7 8 9 10
2122
43 44 46 47 49 5052 53 55 56 58
16
34 36 37 39 40 4243 45 46 4849
10 11
2527283031333436373940
4 0 0 0 0 0 00 0 0 0 0
000
0 5
19 13 7 120212223242527283031
14151617181920212223
8 2 0 0 09 3 0 00
10 4 0 11 5 0
0 00 0
12 6 0 0 0
15
13 7 1 0 014 8 2 0 015 9 3 0 016 10 4 0 017 11 5 0 0
Step #2 Find the columnheaded
“6 withholding allowances.”
MARRIED Persons - WEEKLY Payroll PeriodIf the wages are--
At leastBut less
than
And the # of withholding allowances claimed is--
The amount of income tax to be withheld is--$ 390 $ 400
400 410
540 550 550 560 560 570 570 580 580 590
600 590 610 600
610 620 620 630 630 640 640 650
0
29 31
52 53 55 56 58 596162646567
1 2 3 4 5 6 7 8 9 10
2122
43 44 46 47 49 5052 53 55 56 58
16
34 36 37 39 40 4243 45 46 4849
10 11
2527283031333436373940
4 0 0 0 0 0 00 0 0 0 0
000
0 5
19 13 7 120212223242527283031
14151617181920212223
8 2 0 0 09 3 0 00
10 4 0 11 5 0
0 00 0
12 6 0 0 0
15
13 7 1 0 014 8 2 0 015 9 3 0 016 10 4 0 017 11 5 0 0
Step #3 Find the amountwhere they cross.
This is the amountto be withheld.
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)
FICA TAX WITHHOLDING
Tax rates are set by Congress: Social Security
• 6.2% on maximum earnings of $87,000
Medicare • 1.45% on ALL earnings
Rates are changed frequently
FICA TAX WITHHOLDING
EXAMPLE: Sarah Cadrain had earnings of $1,600 for the pay period, December 6-12. Bringing her earnings year-to-date to $86,340
Sarah’s earnings have not yet reachedthe maximum of $87,000.
ALL of her earnings for this week are subject to Social Security and Medicare tax.
FICA TAX WITHHOLDING
EXAMPLE: Sarah Cadrain had earnings of $1,600 for the pay period, December 6-12. Bringing her earnings year-to-date to $86,340
$1,600
Gross Pay X Tax Rate Tax
Social Security 6.2%
Medicare 1.45%
$99.20
23.20$122.40
FICA TAX WITHHOLDING
EXAMPLE: The following week Sarah earns $1,660, bringing her earnings year-to-date to $88,000 (over the Social Security maximum).
$88,000Year-to-date earnings
87,000Social Security maximum
Amount not subject to S.S. tax 1,000
FICA TAX WITHHOLDING
EXAMPLE: The following week Sarah earns $1,660; bringing her earnings year-to-date to $88,000 (over the Social Security maximum).
$1,660Gross Pay1,000Amount not subject to S.S. tax
Amount subject to S.S. tax 660Tax Rate 6.2%Social Security Tax $ 40.92
FICA TAX WITHHOLDING
EXAMPLE: The following week Sarah earns $1,660, bringing her earnings year-to-date to $88,000 (over the Social Security maximum).
$1,660Gross Pay
Medicare has no maximum earnings.Therefore, all Sarah’s gross payis subject to the Medicare tax.
FICA TAX WITHHOLDING
EXAMPLE: The following week Sarah earns $1,660, bringing her earnings year-to-date to $88,000 (over the Social Security maximum).
$1,660Gross Pay
Tax Rate 1.45%
Medicare Tax $ 24.07
Sarah’s total FICA tax is $64.99($40.92 SS + $24.07 Med.)
VOLUNTARY DEDUCTIONS
Deductions that are optional: many depend on specific agreements between the employee and employer.
Examples:• United States savings bond purchases• Health insurance premiums• Credit union deposits• Pension plan payments• Charitable contributions
COMPUTING NET PAYEXAMPLE: Let’s return to Ken Istone’s $545 gross pay for the week ended December 19 and determine his net pay.
Gross Pay $545.00Deductions:
Federal Income Tax $ 7.00
From Wage Bracket Tables
COMPUTING NET PAYEXAMPLE: Let’s return to Ken Istone’s $545 gross pay for the week ended December 19 and determine his net pay.
Gross Pay $545.00Deductions:
Federal Income Tax $ 7.00Social Security Tax 33.79
All his pay is subject to S.S. tax:$545 x 6.2%
COMPUTING NET PAYEXAMPLE: Let’s return to Ken Istone’s $545 gross pay for the week ended December 19 and determine his net pay.
Gross Pay $545.00Deductions:
Federal Income Tax $ 7.00Social Security Tax 33.79Medicare Tax 7.90 $545 x 1.45%
COMPUTING NET PAYEXAMPLE: Compute the net pay of Ken Istone for the week ended December 19. His health insurance premiums are $10 per week.
Gross PayDeductions:
Federal Income Tax $ 7.00Social Security Tax 33.79Medicare Tax 7.90Health Insurance Premiums 10.00
Total Deductions 58.69Net Pay
$545.00
$486.31
PAYROLL RECORDS
Name, address, occupation, Social Security #, marital status, and # of withholding allowances
Gross earnings, date of payment, period covered by each payroll
Gross earnings accumulated for the year Amounts of taxes and other items withheld
Should provide the following information on each employee:
PAYROLL RECORDS
Three types:PAYROLLREGISTER
PAYROLL CHECKwith earnings statement
EMPLOYEEEARNINGS RECORD
PAYROLL REGISTER
ALLOW.# MARITAL
STATUSNAME
EARNINGSREGULAR OVER-
TIMETOTAL
A Payroll Register is a form usedto assemble the data required
at the end of each payroll period.
PAYROLL REGISTER
ALLOW.# MARITAL
STATUSNAME
Cadrain, Sarah 4 M
EARNINGSREGULAR OVER-
TIMETOTAL
Since marital status and# of allowances are used tocompute withholding taxes,
they are recorded on thePayroll Register.
PAYROLL REGISTER
ALLOW.# MARITAL
STATUSNAME
Cadrain, Sarah 4 M
EARNINGSREGULAR OVER-
TIME
1,600.00 60.00
TOTAL
1,660.00
Earnings for this periodare shown, categorized by
Regular and Overtimeearnings.
PAYROLL REGISTER
TOTALEARNINGS
88,000.001,660.00
CUMULATIVE TOTAL
TAXABLE EARNINGSUNEMPLOYMENT
COMP.SOCIAL
SECURITY
660.00
This pay period has taken Sarah’s earningsabove the Social Security maximum.
As computed earlier, only $660 of this period’s earnings is subject to the
Social Security tax.
PAYROLL REGISTER
FEDERAL INCOME TAX
40.92234.00
DEDUCTIONSSOC. SEC.
TAXMEDICARE
TAX
24.07
HEALTH INSURANCE
UNITED WAY
All deductions fromtotal earnings are listed.
PAYROLL REGISTER
UNITED WAY
TOTAL NET PAY CHECK NO.
HEALTH INSURANCE
DEDUCTIONS
298.99 1,361.01 409
Deductions are totaledand subtracted from
Total Earnings to arriveat Net Pay.
PAYROLL REGISTER
ALLOW.# MARITAL
STATUSNAME
Cadrain, Sarah 4 M
EARNINGSREGULAR OVER-
TIME
1,600.00 60.00
TOTAL
1,660.00
Guder, James 1 S 760.00 140.00 900.00
The payroll information forthe other employees
is recorded in the same manner.
PAYROLL REGISTER
TOTALEARNINGS
88,000.001,660.00
CUMULATIVE TOTAL
TAXABLE EARNINGSUNEMPLOYMENT
COMP.SOCIAL
SECURITY
660.00
900.00 43,400.00 900.00
PAYROLL REGISTER
FEDERAL INCOME TAX
40.92234.00
DEDUCTIONSSOC. SEC.
TAXMEDICARE
TAX
24.07
HEALTH INSURANCE
UNITED WAY
146.00 55.80 13.05 20.00
PAYROLL REGISTER
UNITED WAY
TOTAL NET PAY CHECK NO.
HEALTH INSURANCE
DEDUCTIONS
298.99 1,361.01 409
20.00 234.85 665.15 410
PAYROLL REGISTER
ALLOW.# MARITAL
STATUSNAME
Cadrain, Sarah 4 M
EARNINGSREGULAR OVER
TIME
1,600.00 60.00
TOTAL
1,660.00
Guder, James 1 S 760.00 140.00 900.00
Istone, Ken 6 M 545.00 545.00
PAYROLL REGISTER
TOTALEARNINGS
88,000.001,660.00
CUMULATIVE TOTAL
TAXABLE EARNINGSUNEMPLOYMENT
COMP.SOCIAL
SECURITY
660.00
900.00 43,400.00 900.00
545.00 27,025.00 545.00
PAYROLL REGISTER
FEDERAL INCOME TAX
40.92234.00
DEDUCTIONSSOC. SEC.
TAXMEDICARE
TAX
24.07
HEALTH INSURANCE
UNITED WAY
146.00 55.80 13.05 20.00
7.00 33.79 7.90 10.00
PAYROLL REGISTER
UNITED WAY
TOTAL NET PAY CHECK NO.
HEALTH INSURANCE
DEDUCTIONS
298.99 1,361.01 409
20.00 234.85 665.15 410
10.00 58.69 486.31 411
PAYROLL REGISTER
ALLOW.# MARITAL
STATUSNAME
Cadrain, Sarah 4 M
EARNINGSREGULAR OVER-
TIME
1,600.00 60.00
TOTAL
1,660.00
Guder, James 1 S 760.00 140.00 900.00
Istone, Ken 6 M 545.00 545.00
Kuzmik, Helen 2 M 480.00 294.00 774.00
PAYROLL REGISTER
TOTALEARNINGS
88,000.001,660.00
CUMULATIVE TOTAL
TAXABLE EARNINGSUNEMPLOYMENT
COMP.SOCIAL
SECURITY
660.00
900.00 43,400.00 900.00
545.00 27,025.00 545.00
774.00 31,000.00 774.00
PAYROLL REGISTER
FEDERAL INCOME TAX
40.92234.00
DEDUCTIONSSOC. SEC.
TAXMEDICARE
TAX
24.07
HEALTH INSURANCE
UNITED WAY
146.00 55.80 13.05 20.00
7.00 33.79 7.90 10.00
69.00 47.99 11.22 13.00 20.00
PAYROLL REGISTER
UNITED WAY
TOTAL NET PAY CHECK NO.
HEALTH INSURANCE
DEDUCTIONS
298.99 1,361.01 409
20.00 234.85 665.15 410
10.00 58.69 486.31 411
20.00 161.21 612.79 41213.00
PAYROLL REGISTER
ALLOW.# MARITAL
STATUSNAME
Cadrain, Sarah 4 M
EARNINGSREGULAR OVER-
TIME
1,600.00 60.00
TOTAL
1,660.00
Guder, James 1 S 760.00 140.00 900.00
Istone, Ken 6 M 545.00 545.00
Kuzmik, Helen 2 M 480.00 294.00 774.00
Lee, Hoseoup 3 M 440.00 440.00
PAYROLL REGISTER
TOTALEARNINGS
88,000.001,660.00
CUMULATIVE TOTAL
TAXABLE EARNINGSUNEMPLOYMENT
COMP.SOCIAL
SECURITY
660.00
900.00 43,400.00 900.00
545.00 27,025.00 545.00
774.00 31,000.00 774.00
440.00 22,340.00 440.00
PAYROLL REGISTER
FEDERAL INCOME TAX
40.92234.00
DEDUCTIONSSOC. SEC.
TAXMEDICARE
TAX
24.07
HEALTH INSURANCE
UNITED WAY
146.00 55.80 13.05 20.00
7.00 33.79 7.90 10.00
69.00 47.99 11.22 13.00 20.00
15.00 27.28 6.38 13.00
PAYROLL REGISTER
UNITED WAY
TOTAL NET PAY CHECK NO.
HEALTH INSURANCE
DEDUCTIONS
298.99 1,361.01 409
20.00 234.85 665.15 410
10.00 58.69 486.31 411
20.00 161.21 612.79 41213.00
13.00 61.66 378.34 413
PAYROLL REGISTER
ALLOW.# MARITAL
STATUSNAME
Cadrain, Sarah 4 M
EARNINGSREGULAR OVER
TIME
1,600.00 60.00
TOTAL
1,660.00
Guder, James 1 S 760.00 140.00 900.00
Istone, Ken 6 M 545.00 545.00
Kuzmik, Helen 2 M 480.00 294.00 774.00
Lee, Hoseoup 3 M 440.00 440.00
Swaney, Linda 2 S 528.00 198.00 726.00
PAYROLL REGISTER
TOTALEARNINGS
88,000.001,660.00
CUMULATIVE TOTAL
TAXABLE EARNINGSUNEMPLOYMENT
COMP.SOCIAL
SECURITY
660.00
900.00 43,400.00 900.00
545.00 27,025.00 545.00
774.00 31,000.00 774.00
440.00 22,340.00 440.00
726.00 27,500.00 726.00
PAYROLL REGISTER
FEDERAL INCOME TAX
40.92234.00
DEDUCTIONSSOC. SEC.
TAXMEDICARE
TAX
24.07
HEALTH INSURANCE
UNITED WAY
146.00 55.80 13.05 20.00
7.00 33.79 7.90 10.00
69.00 47.99 11.22 13.00 20.00
15.00 27.28 6.38 13.00
81.00 45.01 10.53
PAYROLL REGISTER
UNITED WAY
TOTAL NET PAY CHECK NO.
HEALTH INSURANCE
DEDUCTIONS
298.99 1,361.81 409
20.00 234.85 665.15 410
10.00 58.69 486.31 411
20.00 161.21 612.79 41213.00
13.00 61.66 378.34 413
136.54 589.46 414
PAYROLL REGISTER
ALLOW.# MARITAL
STATUSNAME
Cadrain, Sarah 4 M
EARNINGSREGULAR OVER
TIME
1,600.00 60.00
TOTAL
1,660.00
Guder, James 1 S 760.00 140.00 900.00
Istone, Ken 6 M 545.00 545.00
Kuzmik, Helen 2 M 480.00 294.00 774.00
Lee, Hoseoup 3 M 440.00 440.00
Swaney, Linda 2 S 528.00 198.00 726.00
Tucci, Paul 5 M 490.00 490.00
PAYROLL REGISTER
TOTALEARNINGS
88,000.001,660.00
CUMULATIVE TOTAL
TAXABLE EARNINGSUNEMPLOYMENT
COMP.SOCIAL
SECURITY
660.00
900.00 43,400.00 900.00
545.00 27,025.00 545.00
774.00 31,000.00 774.00
440.00 22,340.00 440.00
726.00 27,500.00 726.00
490.00 25,050.00 490.00
PAYROLL REGISTER
FEDERAL INCOME TAX
40.92234.00
DEDUCTIONSSOC. SEC.
TAXMEDICARE
TAX
24.07
HEALTH INSURANCE
UNITED WAY
146.00 55.80 13.05 20.00
7.00 33.79 7.90 10.00
69.00 47.99 11.22 13.00 20.00
15.00 27.28 6.38 13.00
81.00 45.01 10.53
8.00 30.38 7.11 10.00
PAYROLL REGISTER
UNITED WAY
TOTAL NET PAY CHECK NO.
HEALTH INSURANCE
DEDUCTIONS
298.99 1,361.01 409
20.00 234.85 665.15 410
10.00 58.69 486.31 411
20.00 161.21 612.79 41213.00
13.00 61.66 378.34 413
136.54 589.46 414
10.00 55.49 434.51 415
PAYROLL REGISTER
ALLOW.# MARITAL
STATUSNAME
Cadrain, Sarah 4 M
EARNINGSREGULAR OVER
TIME
1,600.00 60.00
TOTAL
1,660.00
Guder, James 1 S 760.00 140.00 900.00
Istone, Ken 6 M 545.00 545.00
Kuzmik, Helen 2 M 480.00 294.00 774.00
Lee, Hoseoup 3 M 440.00 440.00
Swaney, Linda 2 S 528.00 198.00 726.00
Tucci, Paul 5 M 490.00 490.00
Wiles, Harry 1 S 300.00 300.00
PAYROLL REGISTER
TOTALEARNINGS
88,000.001,660.00
CUMULATIVE TOTAL
TAXABLE EARNINGSUNEMPLOYMENT
COMP.SOCIAL
SECURITY
660.00
900.00 43,400.00 900.00
545.00 27,025.00 545.00
774.00 31,000.00 774.00
440.00 22,340.00 440.00
726.00 27,500.00 726.00
490.00 25,050.00 490.00
300.00 6,300.00 300.00 300.00
PAYROLL REGISTER
FEDERAL INCOME TAX
40.92234.00
DEDUCTIONSSOC. SEC.
TAXMEDICARE
TAX
24.07
HEALTH INSURANCE
UNITED WAY
146.00 55.80 13.05 20.00
7.00 33.79 7.90 10.00
69.00 47.99 11.22 13.00 20.00
15.00 27.28 6.38 13.00
81.00 45.01 10.53
8.00 30.38 7.11 10.00
24.00 18.60 4.35
PAYROLL REGISTER
UNITED WAY
TOTAL NET PAY CHECK NO.
HEALTH INSURANCE
DEDUCTIONS
298.99 1,361.01 409
20.00 234.85 665.15 410
10.00 58.69 486.31 411
20.00 161.21 612.79 41213.00
13.00 61.66 378.34 413
136.54 589.46 414
10.00 55.49 434.51 415
46.95 253.05 416
PAYROLL REGISTER
ALLOW.# MARITAL
STATUSNAME
Cadrain, Sarah 4 M
EARNINGSREGULAR OVER
TIME
1,600.00 60.00
TOTAL
1,660.00
Guder, James 1 S 760.00 140.00 900.00
Istone, Ken 6 M 545.00 545.00
Kuzmik, Helen 2 M 480.00 294.00 774.00
Lee, Hoseoup 3 M 440.00 440.00
Swaney, Linda 2 S 528.00 198.00 726.00
Tucci, Paul 5 M 490.00 490.00
Wiles, Harry 1 S 300.00 300.00
5,143.00 692.00 5,835.00
PAYROLL REGISTER
TOTALEARNINGS
88,000.001,660.00
CUMULATIVE TOTAL
TAXABLE EARNINGSUNEMPLOYMENT
COMP.SOCIAL
SECURITY
660.00
900.00 43,400.00 900.00
545.00 27,025.00 545.00
774.00 31,000.00 774.00
440.00 22,340.00 440.00
726.00 27,500.00 726.00
490.00 25,050.00 490.00
300.00 6,300.00 300.00 300.00
5,835.00 270,615.00 300.00 4,835.00
PAYROLL REGISTER
FEDERAL INCOME TAX
40.92234.00
DEDUCTIONSSOC. SEC.
TAXMEDICARE
TAX
24.07
HEALTH INSURANCE
UNITED WAY
146.00 55.80 13.05 20.00
7.00 33.79 7.90 10.00
69.00 47.99 11.22 13.00 20.00
15.00 27.28 6.38 13.00
81.00 45.01 10.53
8.00 30.38 7.11 10.00
24.00 18.60 4.35
584.00 299.77 84.61 46.00 40.00
PAYROLL REGISTER
UNITED WAY
TOTAL NET PAY CHECK NO.
HEALTH INSURANCE
DEDUCTIONS
298.99 1,361.01 409
20.00 234.85 665.15 410
10.00 58.69 486.31 411
20.00 161.21 612.79 41213.00
13.00 61.66 378.34 413
136.54 589.46 414
10.00 55.49 434.51 415
46.95 253.05 416
46.00 40.00 1,054.38 4,780.62
METHODS OF PAYMENT
Cash Check:
• With attached earnings statement
Electronic Funds Transfer (EFT): • Copy of check and earnings statement are given
to employee• Provides better internal control than payment
by check
EMPLOYEE EARNINGS RECORD
REGULAR OVERTIMEPERIOD ENDED
EARNINGSTOTAL CUMULATIVE
TOTAL
GENDER DEPARTMENT OCCUPATION SOCIAL SECURITY #M F
X Maintenance Service 393-58-8194
12/05
12/12
11/28 545.00
545.00
545.00
75.00
75.00
75.00
620.00
620.00
620.00
25,240.00
25,860.00
26,480.00A separate earnings record
is maintained for each employee.
EMPLOYEE EARNINGS RECORD
REGULAR OVERTIMEPERIOD ENDED
EARNINGSTOTAL CUMULATIVE
TOTAL
GENDER DEPARTMENT OCCUPATION SOCIAL SECURITY #M F
X Maintenance Service 393-58-8194
12/05
12/12
11/28 545.00
545.00
545.00
75.00
75.00
75.00
620.00
620.00
620.00
25,240.00
25,860.00
26,480.00Let’s record the last entryof the year for Ken Istone.
EMPLOYEE EARNINGS RECORD
REGULAR OVERTIMEPERIOD ENDED
EARNINGSTOTAL CUMULATIVE
TOTAL
GENDER DEPARTMENT OCCUPATION SOCIAL SECURITY #M F
X Maintenance Service 393-58-8194
12/05
12/12
11/28 545.00
545.00
545.00
75.00
75.00
75.00
620.00
620.00
620.00
25,240.00
25,860.00
26,480.00
12/19 545.00 545.00 27,025.00
Earnings for this periodare recorded and the cumulative
earnings are updated.
EMPLOYEE EARNINGS RECORD
UNEMPLOYMENT COMPENSATION
SOCIAL SECURITY
TAXABLE EARNINGSFEDERAL
INCOME TAXSOCIAL
SECURITY TAX
MARITAL STATUS ALLOWANCES PAY RATE
DEDUCTIONS
M $545/week
620.00
620.00
620.00
15.00
15.00
15.00
38.44
38.44
38.44
545.00 7.00 33.79
Deductions are noted.
EMPLOYEE EARNINGS RECORD
MEDICARE HEALTH INSURANCE
UNITED WAY
OTHER
DATE OF BIRTH DATE HIRED NAME/ADDRESS
DEDUCTIONS
8/17/64 1/3/87Ken M. Istone
1546 Swallow DriveSt. Louis, MO 63144-4752
8.99
8.99
8.99
10.00
10.00
10.00
7.90 10.00
EMPLOYEE EARNINGS RECORD
OTHER TOTAL CHECK #
AMOUNT
NAME/ADDRESS EMPLOYEE NUMBER
DEDUCTIONS
Ken M. Istone
1546 Swallow DriveSt. Louis, MO 63144-4752
3
84.43
84.43
84.43
387
395
403
547.57
547.57
547.57
58.69 411 486.31
Deductions are totaled,net pay is recorded, along
with the paycheck’s #.
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Journal entries are now made to recordthe payroll expenses and liabilities.
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Payroll Register is the source for the journal entry.
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Dec. 19 Wages and Salaries Expense 5,835.00
GROSS PAY
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Dec. 19 Wages and Salaries Expense 5,835.00
Employee Income Tax Pay.
Social Security Tax Payable
Medicare Tax Payable
Health Ins. Prem. Payable
United Way Contrib. Pay.
584.00
299.77
84.61
46.00
40.00
Each deduction is recordedin a separate liability account.
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Dec. 19 Wages and Salaries Expense 5,835.00
Employee Income Tax Pay.
Social Security Tax Payable
Medicare Tax Payable
Health Ins. Prem. Payable
United Way Contrib. Pay.
Cash
584.00
299.77
84.61
46.00
40.00
4,780.62
NET PAY
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Dec. 19 Wages and Salaries Expense 5,835.00
Employee Income Tax Pay.
Social Security Tax Payable
Medicare Tax Payable
Health Ins. Prem. Payable
United Way Contrib. Pay.
Cash
584.00
299.77
84.61
46.00
40.00
4,780.62
If the payroll is paid from a separatepayroll checking account,
an additional entry is made.
19 Payroll Cash
Cash
4,780.62
4,780.62
PAYROLL LIABILITIES
EMPLOYEE INCOME TAX PAYABLE
DEBIT CREDIT
Credited when federalincome tax is withheld from
employees.
PAYROLL LIABILITIES
EMPLOYEE INCOME TAX PAYABLE
DEBIT CREDIT
Debited when withheld taxesare paid to the IRS.
PAYROLL LIABILITIES
SOCIAL SECURITY TAX PAYABLE
DEBIT CREDIT
Both the employer and employeepay Social Security taxes.
PAYROLL LIABILITIES
SOCIAL SECURITY TAX PAYABLE
DEBIT CREDIT
Credited when taxesare withheld.
PAYROLL LIABILITIES
SOCIAL SECURITY TAX PAYABLE
DEBIT CREDIT
Also credited to recognizedemployer’s matching tax.
PAYROLL LIABILITIES
SOCIAL SECURITY TAX PAYABLE
DEBIT CREDIT
Debited when taxesare paid.
PAYROLL LIABILITIES
MEDICARE TAX PAYABLE
DEBIT CREDIT
EXACTLY THE SAME AS SOCIAL SECURITY TAX PAYABLE
PAYROLL RECORD-KEEPING METHODS
Manual:• Same information 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
Only employee’s SocialSecurity # and hours
worked are input each pay period.
ELECTRONIC PAYROLL SYSTEM
INPUT PROCESSING OUTPUT
EMPLOYEE:
SOCIAL SECURITY #
HOURS WORKED
COMPUTER
Payroll Register
Paychecks
Employee Earnings Record