LESSON 3-1. Completing Payroll Records for Employee Earnings and Deductions. CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

Transcription

1 LESSON 3-1 Completing Payroll Records for Employee Earnings and Deductions

2 2 Payroll Deductions pages Salary money paid for employee services Pay period period covered by a salary payment Payroll total amount earned by all employees Payroll taxes taxes based on the payroll of a business Withholding allowance deduction from total earning for each person legally supported by a taxpayer BOTH the business AND the EMPLOYEES must pay taxes Employers are required to withhold certain payroll taxes from employee salaries each pay period Employers periodically pay the taxes withheld to the appropriate government agency Businesses must provide a yearly statement to each employee by January 31 st detailing total salary earned and total taxes withheld W-2 LESSON 3-1

3 3 Payroll deductions Tax base maximum amount of earnings on which a tax is calculated Social security tax is calculated on employee earnings up to a maximum amount Employers are required to withhold federal income tax and two FICA (Federal Insurance Contributions Act) taxes Social security tax - provides for old-age, survivors, disability Medicare tax hospital insurance Federal income tax Total earnings, marital status, and # of withholding allowances determine the amount of federal income tax to be withheld Withholding allowance deduction from total earnings for each person legally supported by a taxpayer LESSON 3-1

4 4 PAYROLL DEDUCTIONS page 61 LESSON 3-1

5 5 CALCULATING EMPLOYEE EARNINGS Businesses can establish different pay periods Weekly Bi-weekly every two weeks (Zytech s pay period) Semi-monthly twice a month Monthly Employees who are paid by the hour usually earn overtime page after working more than 40 hours in a calendar week LESSON 3-1

6 6 CALCULATING EMPLOYEE EARNINGS page 62 Regular Hours Regular Rate = Regular Earnings 80 $7.00 per hour = $ Overtime Hours Regular Rate $ = Overtime Earnings = $52.50 Regular Earnings Overtime + = Earnings Total Earnings $ $52.50 = $ LESSON 3-1

7 7 COMMISSIONS RECORD page Record heading information. 2. Obtain amounts and calculate totals. 3. Calculate commission on net sales. 3 LESSON 3-1

8 8 PREPARING A PAYROLL REGISTER pages Payroll period ending date 2. Date of payment 3. Employee information 4. Hours and earnings 5. Total earnings by department 6. Payroll deductions 7. Total deductions 8. Net pay 9. Totals payroll register business form used to record payroll information 9 LESSON 3-1

9 USING THE FEDERAL INCOME TAX WITHHOLDING TABLE page Locate the range containing the total earnings. 2. Find the column with the correct number of withholding allowances. 3. Find the intersection of the row and column. LESSON 3-1

10 PREPARING AN EMPLOYEE EARNINGS RECORD page Write last day of quarter. 2. Enter heading information. 3. Record beginning accumulated earnings. 4. Write ending day of pay period. 5. Enter total earnings, deductions, and net pay. 6. Calculate and record accumulated earnings. LESSON 3-1

11 11 TERMS REVIEW page 68 salary pay period payroll payroll taxes withholding allowance tax base payroll register employee earnings record LESSON 3-1

12 How do you record Payroll and Payroll Taxes? Until the payroll is recorded in the accounts (journalized and posted), the accounting records are not affected. What happens if businesses do not pay taxes on time?

13 Payroll bank account Special payroll checking account and checks are used After the biweekly payroll register has been completed, a check is written from the general checking account payable to the payroll checking account No special account is needed in the general ledger because the payroll checking account has a zero balance after checks are written for each pay period Information for the journal entry comes from payroll register column totals

14 14 Automatic check deposit / EFT Automatic check deposit depositing a payroll check directly into an employee s bank account Electronic Funds Transfer (EFT) computerized system that transfers fund without the use of checks or other paper documents No check is issued and employee receives statement of earnings/deductions similar to payroll check stub

15 JOURNALIZING PAYMENT OF A PAYROLL page Write the date. 2. Record the salary expense accounts. 3. Enter the check number. 4. Write the salary expense amounts. 5. Enter the liability accounts. 6. Record the liability amounts. 7. Write the net pay.

16 16 Employer Payroll Taxes Most employers have four separate payroll taxes: Employer social security tax (same as amt. withheld from employee) Employer Medicare tax (same as amt. withheld from employee) Federal unemployment tax (0.8%) State unemployment tax (5.4%)

17 17 Calculating Employer Payroll Taxes The department salary column totals of the payroll register are used to calculate the employer s payroll taxes for each department Tax base of $7,000 employer pays all of the unemployment tax on the first $7,000 made by each employee

18 CALCULATING EMPLOYER PAYROLL TAXES page Audio Department Payroll Taxes Expense

19 JOURNALIZING EMPLOYER PAYROLL TAXES page Write the date. 2. Write expense account titles. 3. Write the source document. 4. Record the amount of payroll taxes. 5. Write the liability account titles. 6. Enter the liability amounts.

20 Payment of Federal Income Tax, Social Security Tax, and Medicare Tax 20 Frequency and method of payment depends on the total amount of tax paid each year Businesses with large amounts of payroll tax must pay every few days (semiweekly schedule depositer) Small businesses pay once a month ($50,000 or less) Payment must be made by the 15 th day of the following month, along with Form 8109 (Federal Tax Deposit Coupon) All businesses must transfer the money using EFT many use the EFTPS (Electronic Federal Tax Payment System) Businesses depositing more than $200,000 in a calendar year must use EFTPS

21 Payment of Federal Income Tax, Social Security Tax, and Medicare Tax 21 Exceptions to previous standards: If less than $2,500 tax liability is accumulated during a three-month quarter, the deposit may be paid at the end of the month following the end of the quarter If a tax liability of $100,000 or more is accumulated on any day, the amount must be deposited on the next banking day

22 JOURNALIZING PAYMENT OF FEDERAL INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX LIABILITY page Write the date. 2. Enter the liability accounts. 3. Write the check number. 4. Enter the liability amounts. 5. Record the amount paid. Employee withheld taxes (income, social security for employer/employee, medicare for employer/employee) are paid in one payment -Liability accounts are debited/cash is credited

23 JOURNALIZING PAYMENT OF UNEMPLOYMENT TAX LIABILITY 23 If the annual federal unemployment tax for a business is $500 or more at the end of a quarter, it must pay the tax by the end of the following month Any unpaid federal unemployment tax must be paid by Jan. 31 of the following year Requirements vary from state to state Employers are usually required to pay the state unemployment tax during the month following each calendar quarter Zytech monthly schedule depositor for payroll taxes Pay dates July 9 and 23 payroll taxes deposited by August 15 th

24 JOURNALIZING PAYMENT OF FEDERAL UNEMPLOYMENT TAX LIABILITY page Write the date. 2. Enter the liability accounts. 3. Write the check numbers. 4. Enter the liability amounts. 5. Record the amounts paid.

25 25 TERMS REVIEW page 76 automatic check deposit electronic funds transfer (EFT)

26 26 What are we doing in this chapter??? 1. Record Payroll Information (Payroll Register) 2. Journalize the payment of payroll and withheld taxes for employees (Cash Payments Journal) 3. Calculate Employer taxes (table) 4. Journalize Employer taxes owed (General Journal) 5. Journalize Payment of income tax (employee withheld amt.), social security tax (employee + employer), medicare tax (employee + employer) Cash Payments Journal 6. Journalize Payment of unemployment taxes (Cash Payments Journal)

27 Salary Expense and Employee Taxes Withheld Record payroll information using the payroll register 2. Use the information from the payroll register to journalize the payment of payroll (Cash Payments Journal) 1. Debit salary expense for each department (column totals on payroll register) 2. Credit payable accounts for taxes, health insurance life insurance, etc. (column totals for all of the deductions on the payroll register) 3. Credit cash for the net pay column total on the payroll register (this should also equal salary expense total all deductions)

28 28 Employer taxes Employers are responsible for paying the business s tax liability AND the taxes withheld for the employee Employer is responsible for paying four (4) taxes (table) Employer social security (6.2%) and medicare tax (1.45%) will be the same as the amounts withheld for the employee (use the salary total columns for each department on the payroll register and multiple by tax rate OR take the totals from the respective columns in the payroll register Use the unemployment taxable salaries given in the problem information to calculate unemployment taxes using 0.8% for federal and 5.4% for state Recording employer taxes (General Journal) Payroll tax expense is recorded by department Taxes payable are recorded for the total business (not by dept)

29 29 Payment of taxes 1. Journalize Payment of income tax (employee withheld amt.), social security tax (employee + employer), medicare tax (employee + employer) Cash Payments Journal You need to double the amounts recorded for Soc. Sec. tax payable and Medicare tax payable in the CPJ 2. Journalize payment of unemployment taxes (table) - Cash Payments Journal