1. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Chapter 3 Objectives 1.I can define accounting terms related to a departmental payroll system. 2.I can identify accounting concepts and practices related to a departmental payroll system. 1 LESSON 3-1

2. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Chapter 3 Objectives (cont) 3.I can prepare commissions records and calculate commission on net sales. 4.Complete payroll records. 5.I can journalize payroll transactions. 2 LESSON 3-1

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

4. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Accounting Terms Salary—Money paid for employee services. Usually contract for year. Salary (usually no overtime pay) Salary PLUS commission Hourly (can usually work overtime) Pay Period—WHEN do you get paid Monthly, Semimonthly, Biweekly, etc. 4 LESSON 3-1

5. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Payroll Deductions Federal Income Tax Based upon withholding allowances (legally supported by taxpayer) and marital status State Income Tax based on % Social Security Tax based on % Medicare Tax based on % Health Insurance OPTIONAL Life Insurance OPTIONAL 5 LESSON 3-1

6. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Taxes Tax Base—The maximum amt. of earnings on which Soc. Sec. tax is calculated. For the book it is $ 87,000.00 As of 2012 it is 6.2% of the first $110,100.00 NOTE: No base for medicare 6 LESSON 3-1

7. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7 LESSON 3-1 PAYROLL DEDUCTIONS page 61

8. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON 3-1 Regular HoursRegular RateRegular Earnings  CALCULATING EMPLOYEE EARNINGS 80  $7.00 per hour  $560.00 Overtime Earnings = Overtime HoursRegular Rate1.5  = $52.505  $7.00  1.5 Regular Earnings Overtime Earnings Total Earnings  $560.00  $52.50  $612.50 page 62 AVERAGE WORK DAY= 8 hours (8:00 a.m.-5:00 p.m.) AVERAGE WORK WEEK= 5 days (Monday-Friday) AVERAGE PAY PERIOD=40 hours for TWO weeks or 80 Hrs

9. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 LESSON 3-1 1.Record heading information. 3.Calculate commission on net sales. COMMISSIONS RECORD page 63 2.Obtain amounts and calculate totals. 1 2 3

10. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 10 LESSON 3-1 9.Totals 8.Net pay PREPARING A PAYROLL REGISTER pages 64-65 12 3 5 678 4 2.Date of payment 3.Employee information 4.Hours and earnings 5.Total earnings by department 6.Payroll deductions 7.Total deductions 1.Payroll period ending date 9 9

11. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 11 LESSON 3-1 2.Find the column with the correct number of withholding allowances. 1.Locate the range containing the total earnings. 3.Find the intersection of the row and column. USING THE FEDERAL INCOME TAX WITHHOLDING TABLE page 66 2 1 3

12. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 12 LESSON 3-1 3.Record beginning accumulated earnings. 1.Write last day of quarter. 4.Write ending day of pay period. 2.Enter heading information. 5.Enter total earnings, deductions, and net pay. 6.Calculate and record accumulated earnings. PREPARING AN EMPLOYEE EARNINGS RECORD page 67 12 3 4 5 6

13. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CHAPTER 3 TERMS Salary Pay period Payroll Payroll taxes Withholding allowance Tax base Payroll register Employee earnings record 13 LESSON 3-1 page 68

14. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Audit Your Understanding 1.What three federal taxes are withheld from an employee’s pay? 2.How is the amount of federal income tax withholding determined? LESSON 3-1 14

15. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Audit Your Understanding 3.What is the formula for calculating net pay on the payroll register? 4.What amount is added to the accumulated earnings to get the new accumulated earnings to date?? 15 LESSON 3-1