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CHAPTER 8

CHAPTER 8. PAYROLL ACCOUNTING. Outline. Payroll Accounting Deductions From Pay and Voluntary Payroll Deductions Recording Payroll Employer’s Payroll Taxes Adjusting Entry - Accrual for Employer’s Share of Taxes Independent Contractors Controlling Salaries and Wages Expense

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CHAPTER 8

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  1. CHAPTER 8 PAYROLL ACCOUNTING

  2. Outline • Payroll Accounting • Deductions From Pay and Voluntary Payroll Deductions • Recording Payroll • Employer’s Payroll Taxes • Adjusting Entry - Accrual for Employer’s Share of Taxes • Independent Contractors • Controlling Salaries and Wages Expense • The Tip Credit

  3. Payroll Accounting • GROSS SALARIES - Salaries and wages earned by employees • DEDUCTIONS FROMPAY - Includes withheld taxes and voluntary deductions • NET PAY – The amount received by an employee after all deductions have been made • EMPLOYER’S PAYROLL TAXES – Payroll-related federal and provincial taxes and insurance payments which constitute an additional expense

  4. Deductions from pay • Federal withholding taxes • Provincial and local withholding taxes (Quebec has some municipal income taxes) • Canada Pension Plan, employee’s share • Employment Insurance, employee’s share • Voluntary deductions

  5. Voluntary Payroll Deductions • Supplemental medical insurance • Savings plans • Loan repayments • Charitable contributions

  6. RECORDING PAYROLL

  7. PAYROLL JOURNAL ENTRY

  8. EMPLOYER’S PAYROLL EXPENSES JOURNAL ENTRY Employer must send each month’s money to Ottawa by the 15th of the next month.

  9. Payroll Taxes – Employer’s Share • Canada Pension Plan or Quebec Pension Plan • Workplace Insurance • Employment Insurance • Employer Health Tax

  10. Adjusting Entry - Accrual for Employer’s Share of Taxes

  11. Independent Contractors • Persons working for several business entities without becoming the exclusive employee of any of them • Employer is not responsible for deducting employee payroll taxes • Examples include musicians or entertainers, temporary helpers, cleaners, consultants

  12. Controlling Salaries and Wages Expense Separation of responsibilities for the following payroll functions: • Control of personnel files • Preparation of payroll • Paying employees • Recording payroll information • Reconciling the payroll bank account Internal Control Procedures

  13. The Tip Credit • Great impact on the hospitality industry • Allows employers to consider tips as part of the employee’s minimum wage • Separate records of wages, tips deemed wages, and other tips must be maintained

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