payroll accounting chapter 11 2013 cpp review class chapter 11 carmela miller, cpp...
TRANSCRIPT
Payroll Accounting Agenda• Understanding Transaction/Flow• Chart of Accounts• Debit/Credit (Increase vs. Decrease)• Type of Accounts• Accruals/Reversals• T-Accounts• Financial Statements• Final Exam/Review
Accounting Principles
Accounting standards are set by FASB (Financial Accounting Standards Board) which sets standards for transactions and are known as GAAP (Generally Accepted Accounting Principles)• Business entity concept• Continuing concern concept• Time period concept• Cost principle• Objectivity principle• Matching principle• Realization principle• Consistency principle
Account Classifications
5 Types of Accounts– Assets What are some types of these Accounts?– Liabilities– Expenses– Revenue– Equity
Payroll is usually only affected by Assets, Liabilities or Expenses.
Recording Transactions
All of a company’s transactions are recorded and classified into various accounts using a “Double Entry” system that is based on 2 equations:
1. ASSETS-LIABILITIES = EQUITYThis equation provides the basis for the financial statement called a Balance Sheet. Balance Sheet shows the company’s financial position at a particular point in time.
Recording Transactions
2. REVENUE – EXPENSES = NET INCOME+ NET INCOME-INCOME DISTRIBUTED + CONTRIBUTED CAPITAL = EQUITY
This equation is the basis for 2 financial statements, the INCOME STATEMENT and the STATEMENT OF RETAINED EARNINGS.
Examples of Transactions
• Taking an order to purchase a truck• Manufacture of the truck• Shipping of the Truck• Receiving payment of the truck• Recording Depreciation of the truck
Transaction Flow
Debits and Credits
Debits are recorded on the Left Side of an AccountCredits are recorded on the right side of an Account
Debit Credit
Chart of Normal Account BalancesType of Account Normal Account Balance
Asset Debit
Liability Credit
Equity Credit
Revenue Credit
Expense Debit
Income Distributed Debit
Contributed Capital Credit
Table 11-2
Any Asset or Expense AccountDebit Credit
Increases Decreases
Any Liability or Revenue AccountDebit Credit
Decreases Increases
TransactionsName JE #_________Date
Date Acct Description DR CR1/15/2009 1400 Computer Equip 5,200 1000 Cash 5,200 To Record purchases of 5 computer monitors1/18/2009 2000 Accounts Payable 1,000 1000 Cash 1,000 To Record payment of A/P Chairs1/22/2009 6400 Travel & Entertainment 550.00 2000 Accts Payable – Visa 550.00 To Record Hotel Expenses1/29/2009 6110 Payroll Expenses 30,000 6120 Benefits 20,000 6180 Training 12,500 2100 Payroll Liabilities 62,500 CHECK 69,250 69,250
Transactions Cont.
NOTICE:
–Chronological Recording of daily transactions–Double Entry Accounting–Debits must = Credits–Compound Entry
General Ledger Record of business transactions by account to which
journal entries are periodically transferred. The GL keeps a running total of all the entries and
period-to-date balance for all the company’s accounts. In most businesses there are a number of subsidiary
ledgers that make up the General Ledger. (A/P, A/R, Billing, etc.)
Entries are not posted to the GL without first being entered into a Journal/Subsidiary ledger to ensure both debit and credit entries have been made.
Chart of Accounts
• Asset Accounts• Liability Accounts• Revenue Accounts• Expense Accounts• Equity Accounts
Type of AccountsAsset Accounts – Anything owned by the company
Computers Payroll Software Equipment Furniture Cash in the payroll checking account Petty Cash
ASSET ACCOUNTS: DEBIT = INCREASE CREDIT = DECREASE
TYPE OF ACCOUNTSLiability Accounts – Debts owed by the company
Taxes withheld but not yet paid Contributions to a company benefit plan not yet
paid A leasing contract for a payroll hardware/software
system Accounts Payable
LIABILITY ACCOUNTS: DEBIT = DECREASE CREDIT = INCREASE
Type of Accounts
Equity Accounts – The net worth of the company, or the shareholders’ equity.
Retained Earnings Capital Accounts
Type of AccountsRevenue Accounts – Income recognized for goods sold and services rendered.
Gross Revenue Earned Income Services
REVENUE ACCOUNTS: DEBIT = DECREASE CREDIT = INCREASE
Type of Accounts
Expense Accounts – Cost of Goods or services used in the process of obtaining revenue for the company. Salaries Expense – Employees Benefit Expense Cost of employer paid benefit programs Lease Expense – payments for hardware/software system Depreciation Expense – Equipment
EXPENSE ACCOUNTS: DEBIT = INCREASE CREDIT = DECREASE
Chart of AccountsBalance Sheet
Asset Accounts (D)Liability Accounts (C)Equity Accounts (C)
ASSETS = LIABILITY + EQUITY
Profit/Loss (P&L)Revenue Accounts (C)Expense Accounts (D)
REVENUE – EXPENSES = PROFIT (LOSS)
Ward’s ConsultingTrial Balance
December 31, 2012
Account Title Debit Credit
Cash $7,000
Accounts Receivable $3,000
Office Supplies $3,000
Bank Loan $5,000
Accounts Payable $1,000
Common Stock $10,000
Consulting Revenue $7,000
Rent Expense $ 600
Salaries Expense $2,500
Supplies Used $1,200
Utilities Expense $ 700
TOTAL $23,000 $23,000
Accruals and Reversals
Matching Principle – Expenses should always be posted against Revenues they produced.
Accruals & Reversals – Record items in the period that they occurred
Financial Statement
Income StatementRevenue minus Expenses for a period of time.
Balance SheetAssets equals Liabilities plus Equity at a point in time.
Balance Sheet Mar 13, 13
ASSETS
Current Assets
Checking/Savings
Chase Bldg Acct 7,028.04
Chase Personal -6,003.50
Total Checking/Savings 1,024.54
Total Current Assets 1,024.54
TOTAL ASSETS 1,024.54
LIABILITIES & EQUITY
Equity
Retained Earnings 1,499.85
Net Income -475.31
Total Equity 1,024.54
TOTAL LIABILITIES & EQUITY 1,024.54
Profit and Loss StatementJan - Dec 12
Ordinary Income/Expense
Income
Rental Income 40,000.21
Total Income 40,000.21
Expense
Bank Service Charges 2.00
Insurance Expense
Building Insurance 5,626.34
Health Insurance 3,480.00
Total Insurance Expense 9,106.34
medical Expense 186.39
Reconciliation Discrepancies 0.00
Repairs and Maintenance 14,784.18
Small Tools and Equipment 133.35
Taxes
Income Taxes 641.00
Real Estate Property Taxes 9,446.40
Total Taxes 10,087.40
Utilities
Disposal Service 1,376.26
Electric 1,374.29
Gas 931.36
Phone 1,104.72
Water 863.58
Total Utilities 5,650.21
Total Expense 39,949.87
Net Ordinary Income 50.34
Other Income/Expense
Other Income
Bank Interest 0.98
Total Other Income 0.98
Net Other Income 0.98
Net Income 51.32
Expenses by Vendor
Type DateNum
Memo Account Clr Split Amount Balance
Advanced Disposall Chgo Central
Check 01/07/2013 EFT Disposal Service Chase Bldg Acct 125.41 125.41
Total Advanced Disposall Chgo Central 125.41 125.41
AT & T
Check 01/04/2013 EFT Phone Chase Bldg Acct 59.96 59.96
Total AT & T 59.96 59.96
Blue Cross Blue Shield
Check 01/02/2013 EFT Health Insurance Chase Bldg Acct 290.00 290.00
Total Blue Cross Blue Shield 290.00 290.00
TOTAL 475.37 475.37
General LedgerType Date Num Name Memo Split Amount Balance
Chase Bldg Acct 7,028.04
Total Chase Bldg Acct 7,028.04
Chase Personal -6,003.50
Total Chase Personal -6,003.50
Accumulated Depreciation 0.00
Total Accumulated Depreciation 0.00
Furniture and Equipment 0.00
Total Furniture and Equipment 0.00
Payroll Liabilities 0.00
Total Payroll Liabilities 0.00
Tenant Security Deposits Held 0.00
Total Tenant Security Deposits Held 0.00
Opening Balance Equity 0.00
Total Opening Balance Equity 0.00
Retained Earnings -1,499.85
Total Retained Earnings -1,499.85
Rental Income 0.00
Deposits 0.00
Total Deposits 0.00
Rental Income - Other 0.00
Total Rental Income - Other 0.00
Total Rental Income 0.00
Test your Knowledge• Classify each item that follows as an asset,
liability or owner’s equitya. Cash __________b. Loan Payable to a bank _________c. Delivery Equipment _________d. Account Payable to a creditor __________e. Office Furniture _____________f. Owner’s Financial Interest __________g. Petty Cash ___________h. Mortgage Payable to a bank ___________i. FUTA Taxes Payable ____________
Payroll Accounting
Review:
The Chapter 11, go over what credits and debits, know what are assets, liabilities and owner’s equity. Review what is a normal balance for your accounts.