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Payroll Accounting: Gross Receipts and Hours Worked Methods for Tip Shortfall Allocation

This chapter covers payroll accounting methods for determining employee tip shortfalls using the Gross Receipts and Hours Worked methods. The Gross Receipts method involves calculating 8% of total receipts to assess tips owed, while the Hours Worked method does the same based on total hours worked. The process includes determining total shortfalls, allocating individual shortfall amounts, and recording payroll tax entries including FICA, Federal Unemployment, and State Unemployment for the specific payroll period.

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Payroll Accounting: Gross Receipts and Hours Worked Methods for Tip Shortfall Allocation

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  1. Chapter 11 Payroll Accounting

  2. 11-1 Gross Receipts Method The gross receipts method takes all the gross receipts for employees and multiplies that number by 8% to determine if there is a tip shortfall. Problem Data Using the provided data, determine the amount of tips that should be allocated to each employee using the gross receipts method.

  3. 11-1 Gross Receipts Method (continued) Step 1: Determine the amount of shortfall to be allocated.

  4. 11-1 Gross Receipts Method (continued) Step 2: Determining individual employee shortfall amounts.

  5. 11-1 Gross Receipts Method (continued) Step 3: Allocation of shortfall.

  6. 11-2 Hours Worked Method The hours worked method takes the total hours worked and multiplies it by 8% to determine if there is a shortfall. Problem Data Using the provided data, determine the amount of tips that should be allocated to each employee using the hours worked method.

  7. 11-2 Hours Worked Method (continued) Step 1: Determine the amount of shortfall to be allocated.

  8. 11-2 Hours Worked Method (continued) Step 2: Determining individual employee shortfall amounts.

  9. 11-2 Hours Worked Method (continued) Step 3: Allocation of shortfall.

  10. 11-3 Employer Payroll Taxes

  11. 11-4 Employer Payroll Entries • Record: • Payroll entry for the week ending January 14. • Payroll taxes associated with the January 14 payroll. FICA (8%); Fed. Unemp. (.8%); State Unemp. (5.4%). • Payment of the January 14 payroll on January 21. • Payment of the January 14 payroll taxes on January 21.

  12. 11-4 Employer Payroll Entries (continued)

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