10/7/2017. Carrie Louise Hovell, CPP Payroll Benefits Administrator Infinitive Inc.

Transcription

1 Carrie Louise Hovell, CPP Payroll Benefits Administrator Infinitive Inc. 1

2 What is Accounting Accounting Principles Accounting Tidbits Accounting Process Financial Statements/Audits Controlling Check Fraud / Check 21 Review Questions 3 4 2

3 Accounting is the measurement and communication process used to report on the activity of the organization. The process of identifying, measuring and communicating economic financial information to permit informed judgments and decisions by the users of the information Basic Language of Business 5 Accounting Terminology & Concepts Accounting Flow 6 3

4 Accounting Terminology & Concepts Transaction 7 Accounting Terminology & Concepts Accounting Flow Transaction Double / Single Entry Accounting T Accounts Journal / Journalize General Ledger 8 4

5 Accounting Terminology & Concepts Post / Posting Account Journal Entry Adjusting Journal Entry Job Code Balance 9 Five Types of Accounts Assets Liabilities Capital Revenue Expenses 10 5

6 Five Types of Accounts Assets Liabilities Capital Revenue Expenses 11 Chart of Accounts A complete listing of account titles and account numbers in the ledger Example of a Chart of Accounts Account Type Account Number (Range) Assets Liabilities Equity Revenue Expenses

7 13 Overview Company Financial Statements Cash Flow Profits/Losses Assets Liabilities Net Worth Source Page

8 Classifications Source Page 11-3 Double-Entry System The Accounting Equation Balance Sheet Assets Liability = Equity What a business has in assets is either owned by creditors (liabilities) or investors (equity) Income Statement Revenue Expenses = Net Income (Loss) Statement of Retained Earnings Net Income Income Distributed + Contributed Capital = Equity 15 Balance Sheet Examples 16 8

9 Classifications Accounts Assets* Liabilities* Expenses* Revenue Equity (Capital) *Payroll Impact Source Page Payroll Specific Accounts Assets Cash (Payroll Checking Account) Liabilities Salaries/Wages Payable Deductions Employee Taxes Withheld Expenses Salaries/Wages Expense Employer Taxes Source Page

10 Examples Accounts Impacted by Payroll Salaries / Wage Expense Accrued Vacation Accrued Bonuses Employer Taxes Federal Income Tax Withheld State Income Tax Withheld Social Security Tax Withheld Medicare Withheld Source Page Examples Employer Taxes Social Security Tax Expense Medicare Tax Expense Unemployment Taxes Federal State Source Page

11 Examples Miscellaneous Deductions 401(k) Medical Dental Parking State Disability Insurance Garnishments Child Support Levies Accrued Payroll Remember: Accounts vary depending on company Source Page Account Balances T-Accounts = Recording Debits/Credits All entries must consist of a debit and credit All entries must balance T Account DEBIT CREDIT Source Page

12 Account Balances Sample Journal Entry As a T-Accounts Salary Expense 1, FITW SS W/H Medicare W/H Wages Payable 1, Salary Expense 1, Source Page 11-5 FIT W/H Liab SS W/H Liab Medicare W/H Liab Wages Payable , Account Balances Sample Journal Entry - One Department Source Page 11-5 Debit Credit Salary Expense 100, Federal Income Tax Payable 20, Social Security Tax Payable 6, Medicare Tax Payable 1, State Income Tax Payable 15, Medical Insurance 2, (k) Payable 10, Parking 1, Wages Payable 44,

13 Account Balances Source Page 11-5 Sample Journal Entry - Multiple Departments Debit Credit Salary Expense - Sales 30, Salary Expense - Operations 40, Salary Expense - Accounting 20, Salary Expense - HR 10, Federal Income Tax Payable 20, Social Security Tax Payable 6, Medicare Tax Payable 1, State Income Tax Payable 15, Medical Insurance 2, (k) Payable 10, Parking 1, Wages Payable 44, Account Balances Cash Debits Increase / Deposits Credits Decrease / Checks Traditional Balance Expense Debits Liabilities Credits Making a Payment Debit Liability or Debit Expense Credit Cash Source Page

14 Account Balances Normal Account Balances Source Page 11-5 ACCOUNT TYPE NORMAL BALANCE DEBIT (What it does to the account) CREDIT (What it does to the account) Asset Debit Increase Decrease Liabilities Credit Decrease Increase Equity/Capital/Net Worth Credit Decrease Increase Income/Revenue Credit Decrease Increase Expenses Debit Increase Decrease 27 Account Balances Source Page

15 Debit or Credit? Vowels Assets / Expenses Generally have a DEBIT Balance Consonants Liabilities / Capital / Revenue Generally have a CREDIT Balance Source Page Source Page 11-5 Debit or Credit Vowels Consonant Asset / Expense Generally have a debit balance Liabilities / Capital / Revenues Generally have a credit balance 30 15

16 Source Page 11-5 Certain accounts are expected to have a certain balance Basic T-Account Any Asset/Expense Liability/Revenue/Capital

17 All Little Cats Reach Exhaustion Assets Liabilities Capital Revenue Expense 33 Do I Eat Apples Debit Expense Income Assets 34 17

18 Dine In (Debit What Comes In) Carry Out (Credit What Goes Out) 35 Dine In Debit what comes in Carry Out Credit what goes out 36 18

19 37 Certainly Everyone Loves Rice Crispies Credit Equity Liability Revenue Capital 38 19

20 39 Cash Debits Increase / Deposits Credits Decrease / Checks Traditional Balance Expense Debits Liabilities Credits Making a Payment Debit liability or Debit Expense Credit Cash 40 20

21 Enter the normal balance (debit or credit): Wages/Salary Expense Wages/Salary Payable Social Security Tax Payable Cash Wage Garnishment Payable Accrued Payroll Liability FUTA Tax Payable Payroll Tax Expense 41 Asset, Liability, or Owner s Equity: Cash Loan Payable to a Bank Delivery Equipment Account Payable to a Creditor Office Furniture Owner s Financial Interest Petty Cash Mortgage Payable to a Bank FUTA Taxes Payable 42 21

22 43 Source Page 11-7 Journal A record of the transactions of a company during the accounting period Compound Entries Involves more than one debit or credit Subsidiary Ledgers General Ledger 44 22

23 Recording Transactions Accounts Record increases or decreases Entries must be two-sided Debits MUST equal Credits Source Page Pay Period End Date Gross Payroll Benefits Pay Date Employer Taxes Net Payroll (Cash) Source Page

24 Payment of Taxes Debit Tax Liabilities Accounts Credit Cash Payment of Payroll Debit Wages Payable Credit - Cash Source Page Bonus Payrolls Adjustment Payrolls Special Payrolls Manual Checks Wires Source Page

25 Source Page Used to determine the period of time that is covered by the financial statements Periods (increments) 1 Month 1 Quarter 1 Year (fiscal or calendar) Accounting Period 1 year in length is known as the accounting year. Fiscal is a 12 month period and may not coincide with the calendar year. 49 Source Page 11-9 To record an estimated payroll expense in the correct period Completed at the end of the period Accrual is a portion of the regular payroll Can include: Salary Allowances Employer Taxes Employer Contributions to Benefits (such as 401(k)) Earnings or Expenses to be accrued vary by company 50 25

26 Source Page This depends on company policy If the Employer allows the Employee to accumulate leave, then the Employer incurs a liability when accrued When the employee uses vacation, the liability is reduced by the amount paid to the employee 51 Source Page Estimate (the accrual) is reversed at the beginning of the next period Actual (complete) payroll will post in the current month 52 26

27 Source Page System of Checks & Balances within an Organization Ensure Accuracy of Financial Records Ensure Security of Company s Assets Encourage employees to comply with Company policies and procedures 53 Basic Components Segregation of Job Duties Rotation of Job Duties Payroll Distribution Phantom Employees Negative Pay Deductions Source Page

28 Basic Components Payroll Bank Account Blank Checks Time Reporting Computer System Edits Using an Internal Auditor Source Page Source Page Performed just after month end Confirm all entries have been posted Payments are on a schedule Easier to reconcile if you understand the schedule 56 28

29 Source Page Reconcile Payroll Liability Accounts General Ledger balances to the payroll journals / payroll register Is there a variance? Once Identified Is the difference valid in the account? REMEMBER All variances are not an ERROR!!!

30 Balance Sheet Source Page Balance Sheet The financial position of company at any given point in time Assets = Liabilities + Owner s Equity Assets Liabilities = Equity 59 Balance Sheet Sample Balance Sheet ABC Company Balance Sheet December 31, XXXX Current Assets Cash 5, Accounts Receivable 20, Inventory 2, Prepaid Expenses 1, Total Current Assets 28, Fixed Assets Office Equipment 27, Less: Accumulated Depreciation 2, Total Non-Current Assets 24, TOTAL ASSETS 52, Liabilities Accounts Payable 13, Long-Term Notes Payable 10, Total Liabilities 23, Equity Owner's Equity 37, Owner's Drawing Account (8,200.00) Total Owner's Equity 29, TOTAL LIABILITIES AND OWNER'S EQUITY 52,

31 Income Statement Source Page Income Statement Reports revenues and expenses of a business for a certain point of time Income = Revenue - Expenses 61 Income Statement Sample Income Statement ABC Company Income Statement For the Period Ended December 31, XXXX Sales, Net 101, Cost of Goods Sold 59, Gross Profit 42, Operating Expenses 29, Operating Income 13, Interest Expense 2, Income Before Taxes 11, Income Tax Expense 2, Net Income 8,

32 Auditing Independent CPAs Adequately depicts the Company s Financial Condition Review notes to financial statement Helps guard against any possible conflicts of interest Review Internal Controls Source Page Auditing Independent CPAs Payroll Compliance Test Review Procedures Internal Controls Source Page

33 65 Source Page Impact of Technology Easier to reproduce company checks Three Groups of Security Group 1 Features manufactured directly into the check paper Group 2 Features printed onto the paper Paper converted from raw material to check stock Check MICR or OCR lines, payee, and amount information is completed Group 3 AKA Positive Pay Bank-Sponsored electronic data checking 66 33

34 67 Payroll Impact Source Page Check 21 Effective October 28, 2004 Substitute Check Includes front/back of check Loss of the check float Impact on Account Interest Checks clearing accounts faster 68 34

35 69 Carrie Louise Hovell, CPP Infinitive, Inc