Chapter 12

1. Chapter 12 Preparing Payroll Records

2. In Chapter 12 • You will learn: • Define accounting terms related to payroll records. • Identify accounting practices related to payroll records. • Complete a payroll time card. • Calculate payroll taxes. • Complete a payroll register and an employee earnings record. • Prepare payroll checks.

3. Reporting Current and Non-Current Liabilities Current Liabilities are debts that will be settled within the next year Long-term Liabilities are debts that will NOT be settled within the next year

4. Payroll related liabilities I wonder how much my check will be I worked 40 hours this week. My hourly rate is $12.50. I’ll take your time sheet and you’ll get your check on Friday

5. 1 2 3 4 CALCULATING EMPLOYEE HOURS WORKED page 342 1. Calculate the number of regular hours for each day and enter the amounts. 2. Calculate the number of overtime hours and enter the amounts. 3. Add Hours Reg and Hours OT columns and enter the totals. 4. Add the Hours column. LESSON 12-1

6. 1 2 4 3 5 CALCULATING EMPLOYEE TOTAL EARNINGS page 343 1. Enter the rate for regular time in the Rate column. 2. Calculate the regular earnings. Enter the amount. 3. Enter the rate for overtime. 4. Calculate the overtime earnings. Enter the amount. 5. Add the Amount column to calculate total earnings. Enter the amount of total earnings. LESSON 12-1

7. Where does your paycheck go? Gross Pay

8. EMPLOYEE’S WITHHOLDING ALLOWANCE CERTIFICATE page 346 3 2 1 4 5 1. Write the employee’s name and address 2. Write the employee’s social security number. 3. Check the appropriate marital status block. 4. Write the total number of withholding allowances claimed. 5. The employee signs and dates the form. LESSON 12-2

9. 2 3 EMPLOYEE’S INCOME TAX WITHHOLDING – MARRIED PERSONS page 348 1 1. Select the appropriate table. 2. Locate the employee’s total earnings. 3. Intersection of wages and number of allowances column. LESSON 12-2

10. Payday!

11. Think about your pay stub…. $500.00 $7.25 As authorized $500 * 6.2% $31.00 $100.00 $500 * 1.45% $361.75 40 hours @ $12.50 Assume 20% 20% of $500 = Other Employee-Authorized deductions to include: Health Insurance, Union Dues, 401k contributions, gifts to charity Gross Pay – FIT – FICA – Medicare = Net Pay $500.00 - $100.00 - $31.00 - $7.25 = $361.75 FICA (SS) = Social Security Taxes withheld. This amount is 6.2% of gross wages FIT = Federal Income Tax Withholding The amount is determined based on the employee’s wages, marital status and number of dependents FICA (Med) = Medicare Taxes withheld. This amount is 1.45% of gross wages Gross Pay = # of hours worked at hourly rate

12. Journal Entry for Salaries Expense $500.00 $31.00 $7.25 $100.00 Credit FICA Payable $361.75 Credit Other Payables Credit Medicare Payable Credit Cash Debit Salaries Expense Credit FIT Payable

13. Employer Payroll Tax Expense • In addition to the Gross Pay, the employer is responsible for: • Matching amounts for Social Security and Medicare • State and Federal Unemployment Taxes • Other State and Local taxes

14. Employer’s Payroll Tax Expense Total Withheld plus Employer’s Tax is paid to Governmental Agency Total Withheld . Matched by Employer Matched by Employer $7.25 Credit Cash $31.00 $7.25 $31.00 $500.00 $361.75 Credit FIT Payable $7.25 Credit Other Payables $100.00 Debit Salaries Expense Amounts withheld from Employees + Employer Match Paid to the Governmental Agency

15. PAYROLL REGISTER page 351 1 2 11 4 5 6 7 8 9 10 3 13 12 1. Pay period date 8. Health insurance premium deductions 2. Payment date 9. Other employee payroll deductions 10. Total deductions 3. Employee personal data 11. Net pay 4. Earnings 12. Total, prove, and rule 5. Federal income tax withheld 13. Check number 6. Social security tax withheld 7. Medicare tax withheld LESSON 12-3

16. 4 5 2 EMPLOYEE EARNINGS RECORDS page 353 1. Last day of quarter 2. Employee personal data 3. Beginning accumulated earnings 1 4. Pay period 3 5. Earnings, deductions, net pay 6 6. Updated accumulated earnings 7 7. Total and prove LESSON 12-3

17. PAYROLL BANK ACCOUNT page 356 1. Prepare the check stub. 1 2 2. Prepare the check. LESSON 12-4

18. EMPLOYEE’S PAYROLL CHECK page 357 1 2 1. Prepare the check stub of each employee’s payroll check. 2. Prepare each employee’s payroll check. LESSON 12-4

19. End – Chapter 12

20. Chapter 13 Payroll Accounting, Taxes and Reports

21. REMEMBER THE PAYROLL REGISTER page 369 LESSON 13-1

22. ANALYZING PAYMENT OF A PAYROLL page 370 LESSON 13-1

23. JOURNALIZING PAYMENT OF A PAYROLL page 371 December 15. Paid cash for payroll, $4,609.46. Check No. 335. 2 1 3 4 5 6 7 1. Write the date. 5. Write the total amount paid to employees. 2. Write the title of the account debited. 6. Write the titles of accounts credited. 3. Write the check number. 7. Write the amounts credited. 4. Write the account debited. LESSON 13-1

24. 1 UNEMPLOYMENT TAXABLE EARNINGS page 374 2 3 1. Enter accumulated earnings and total earnings for each employee. 2. Enter unemployment taxable earnings. 3. Total the Unemployment Taxable Earnings column. LESSON 13-2

25. UnemploymentTaxableEarnings FederalUnemploymentTax Rate FederalUnemploymentTax × = UnemploymentTaxableEarnings StateUnemploymentTax Rate StateUnemploymentTax × = UNEMPLOYMENT TAXES page 375 $790.00 × 0.8% = $6.32 $790.00 × 5.4% = $42.66 LESSON 13-2

26. JOURNALIZING EMPLOYER PAYROLL TAXES page 376 (continued on next slide) December 15. Recorded employer payroll taxes expense, $485.92, for the semimonthly pay period ended December 15. Taxes owed are: social security tax, $354.11; Medicare tax, $82.83; federal unemployment tax, $6.32; state employment tax, $42.66. Memorandum No. 63. LESSON 13-2

27. JOURNALIZING EMPLOYER PAYROLL TAXES (continued from previous slide) page 376 2 4 1 3 5 6 1. Write the date. 4. Write the debit amount. 2. Write the title of the expense account debited. 5. Write the titles of the liability accounts credited. 3. Write the memorandum number. 6. Write the credit amounts. LESSON 13-2

28. EMPLOYER ANNUAL REPORT TO EMPLOYEES OF TAXES WITHHELD page 378 LESSON 13-3

29. EMPLOYER’S QUARTERLY FEDERAL TAX RETURN page 379 (continued on next slide) 1 2 1. Heading 2. Number of employees LESSON 13-3

30. 3 4 5 6 7 EMPLOYER’S QUARTERLY FEDERAL TAX RETURN page 379 (continued on next slide) 3. Total quarterly earnings 6. Social security plus Medicare taxes 4. Income tax withheld 5. Employee and employer social security and Medicare taxes 7. Total taxes LESSON 13-3

31. 8 8 8 EMPLOYER’S QUARTERLY FEDERAL TAX RETURN page 379 (continued from previous slide) 9 8. Total taxes for each month 9. Total taxes LESSON 13-3

32. EMPLOYER ANNUAL REPORTING OF PAYROLL TAXES page 381 LESSON 13-3

33. PAYING THE LIABILITY FOR EMPLOYEE INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX page 383 LESSON 13-4

34. FORM 8109, FEDERAL DEPOSIT COUPON page 384 LESSON 13-4

35. JOURNALIZING PAYMENT OF LIABILITY FOR EMPLOYEE INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX page 385 January 15. Paid cash for liability for employee income tax, $757.00; social security tax, $1,451.38; and Medicare tax, $339.42; total, $2,547.80. Check No. 347. 1 5 3 2 4 1. Write the date. 3. Write the check number. 2. Write the titles of the three accounts debited. 4. Write the debit amounts. 5. Write the amount of the credit. LESSON 13-4

36. PAYING THE LIABILITY FOR FEDERAL UNEMPLOYMENT TAX page 386 LESSON 13-4

37. JOURNALIZING PAYMENT OF LIABILITY FOR FEDERAL UNEMPLOYMENT TAX page 387 January 31. Paid cash for federal unemployment tax liability for quarter ended December 31, $34.60. Check No. 367. 1 2 3 4 5 1. Write the date. 2. Write the title of the account debited. 3. Write the check number. 4. Write the debit amount. 5. Write the amount of the credit to Cash. LESSON 13-4

38. JOURNALIZING PAYMENT OF LIABILITY FOR STATE UNEMPLOYMENT TAX page 387 January 31. Paid cash for state unemployment tax liability for quarter ended December 31, $233.55. Check No. 368. 1 2 3 4 5 1. Date 2. Account debited 3. Check number 4. Debit amount 5. Credit amount LESSON 13-4