Presentation on theme: "Preparing Payroll Records"— Presentation transcript:
1Preparing Payroll Records CHAPTER 13Preparing Payroll Records
2Define accounting terms related to payroll records OBJECTIVES:Define accounting terms related to payroll recordsIdentify accounting practices related to payroll recordsComplete a payroll time cardCalculate payroll taxesComplete payroll register and an employee earnings recordPrepare payroll checks
3Ways Employees Are Paid Salary - $ per week, month, or yearWages - $ per hourPay Period - How often an employee is paid - usually bi-weekly, can be weekly, bi-monthly, or monthlyPayroll - The total amount earned by all employees for a pay periodOvertime Pay: increased pay for extra hours worked, either 8+ hours per day or 40+ hours per weekUsually not eligible if salariedPayroll time cards:Record the time employees workTime is recorded to nearest quarter hour
4CH 13-1: Preparing Payroll Time Cards Must keep special payroll records to support the recording of payroll transactions in a journal:Employee earnings record – individualPayroll register – all employeesRecords are used:To inform employees of their annual earningsFor business to prepare payroll records for government
5ANALYZING A PAYROLL TIME CARD Lesson 13-1 (GJ)ANALYZING A PAYROLL TIME CARD
6CALCULATING EMPLOYEE HOURS WORKED 1. Calculate regular hours.2. Calculate overtime hours.3. Add Hours Reg and Hours OT columns and enter totals.4. Add Hours column.12**Round times to nearest quarter hour3Lesson 13-1, page 3134
7Gross Pay (total before deductions) = Hours X Rate Employee A worked 40 hours and was paid $8.00 an hour.40 x 8 = $ Gross PayEmployee B worked 40 regular hours and 2 overtime hours at $8.00 an hour.40 x 8 = $ Regular2 x 12 = Overtime (OT = $8 x 1.5 = $12)$ Gross PayNet Pay = Gross Pay – Deductions
8CALCULATING EMPLOYEE TOTAL EARNINGS 1. Enter the rate for regular time.2. Calculate regular earnings.Reg hours * Reg rate3. Enter the rate for overtime.4. Calculate overtime earnings.OT hours * OT Rate5. Calculate Total Earnings.***AKA***Gross Pay or Gross Earnings12345Lesson 13-1, page 314
9TERMS REVIEW salary pay period payroll total earnings TO DO: Work Together, pg 315On your own, pg 315
10CHAPTER 13-2: Determining Payroll Tax Withholdings Payroll taxes: taxes based on payroll of the businessBusiness is required by law to withhold certain payroll taxes from employee salariesAll are based on employee total earnings must keep accurate and detailed recordsErrors incorrect tax payments state and federal government penaltiesLiability for the employer until paid to government
11Employer must keep payroll records for: Federal Government Employee Income Tax:Must withhold federal income taxes from total earningsForwarded periodically to federal governmentMany states also require state income taxes withheldEmployer must keep payroll records for:Federal GovernmentState GovernmentCounty GovernmentLocal Government
12Form W-4: Employee’s Withholding Allowance Certificate Withholding allowance: deduction from total earnings for each person legally supported by tax payer, including employeeMust be filled out by every employee kept currentDetermines amount employer withholds from the employee’s pay check.
13Five Filing Statuses – to determine amount of tax withheld SingleMarriedMarried Filing SeparatelyWidow/WidowerHead of Household
14ITEM 7 on W-4Claiming Exemption from Withholding for certain low-income, part-time employeesEmployer would not withhold income tax because you would owe none at the end of the year.Must STILL fill out W-4TO qualify:Cannot earn over $700Cannot have earned any interest or dividendsCannot be claimed by another personInternational student / foreign employee from temporary visa
15EMPLOYEE’S WITHHOLDING ALLOWANCE CERTIFICATE Lesson 13-1 (GJ)EMPLOYEE’S WITHHOLDING ALLOWANCE CERTIFICATE213451. Name and Address4. Withholding Allowances2. Social Security Number5. Signature and Date3. Marital Status
16EMPLOYEE’S INCOME TAX WITHHOLDING—SINGLE PERSONS
17EMPLOYEE’S INCOME TAX WITHHOLDING—MARRIED PERSONS Selby:Married$4At least But Less than1,120 1,14063Lesson 13-2, page 319
18Payroll Taxes Paid by Employee FICA (Federal Insurance Contributions Act)Social Security 6.5% (old-age, survivors, disability)Medicare 1.5% (hospital insurance)Total 8% (paid by both employee AND employer)Tax Base for 1997 is $65,400 (used for book)$97,500$102,000Medicare – proportional at all levels (no tax base)Federal Income TaxRates are from 15% to 38.6 %Amount Paid depends on:Exemptions claimedFiling StatusGross PayState Income Tax - PA 2.8%Local Income Tax – Upper Saucon 1% - Lower Saucon 2%
19Social Security and Medicare - Same rate as employee Taxes Paid by EmployerSocial Security and Medicare - Same rate as employeeFederal Unemployment – 0.8% (first $7000)State Unemployment – 5.4% (first $7000)(more details later)
20EMPLOYEE SOCIAL SECURITY AND MEDICARE TAX Calculate Social Security Tax DeductionTotal Social Security Social SecurityEarnings Tax Rate = Tax Deduction$1, 6.5% = $73.91Calculate Medicare Tax DeductionTotal Medicare MedicareEarnings Tax Rate = Tax Deduction$1, 1.5% = $17.06
21TERMS REVIEW *************************** TO DO: Work Together, 321 payroll taxeswithholding allowancesocial security taxMedicare taxtax base***************************TO DO:Work Together, 321On your own, 321Application Problems 13-1, 13-2, pg 331
22Chapter 13-3: Preparing Payroll Records Payroll Register: Summarizes Gross & Net Pay and deductions for all employees for 1 payroll period.Remember: Partners are not employees and are not paid salaries – how are they paid????*****Payroll is an expense of the business*****
23PAYROLL REGISTER 1. Pay Period Date 8. Health Insurance Lesson 13-1 (GJ)PAYROLL REGISTER121113456789103121. Pay Period Date8. Health Insurance2. Payment Date9. Other Deductions3. Employee Personal Data10. Total Deductions4. Earnings11. Net Pay5. Federal Income Tax12. Total, Prove, and Rule6. Social Security Tax13. Check Number7. Medicare Tax
24Voluntary/Other Deductions – Column 8 Union dues - USavings /Retirement – S or RInsurance – Life - LUnited Way - UWUS Savings Bonds - BCompany Stock optionsHealth, Travel fund, etc.Anything employer and employee agree upon.
25Employee Earnings Record Business form used to record details affecting payments made to each employeeNew record prepared each quarter for each employeeInfo needed to prepare it is taken from the payroll registerMust send quarterly reports to government agencies showing:Employee taxable earningsTaxes withheld
26EMPLOYEE EARNINGS RECORDS 55. Earnings, Deductions, Net Pay1. Last day of Quarter12. Employee Personal Data3. Beginning Accumulated Earnings234. Pay Period4676. Updated Accumulated Earnings = Acc. Earnings + TOTAL earningsLesson 13-3, page 3247. Total and Prove
27TERMS REVIEW payroll register net pay employee earnings record TO DO: Work Together, pg 326On your own, pg 326Lesson 13-3, page 326
28Chapter 13-4: Preparing Payroll Checks A separate checking account is set up for payroll.One check is made out for the TOTAL net wages and deposited into the payroll checking account.Then individual checks are made to each employee from this account.Helps to protect and control payroll paymentsINFO is taken from payroll register
29PAYROLL BANK ACCOUNT 1 2 1. Prepare the check stub. Lesson 13-1 (GJ)PAYROLL BANK ACCOUNT11. Prepare the check stub.22. Prepare the check.Lesson 13-4, page 327
30Voucher checkThis is a check with a description of the attached check.An employer must give an employee a voucher check for his wages.It must show gross pay (regular and overtime), deductions, and net pay.Employee's Earnings Record:This is a record of one employee’s pay for the entire quarter.
31EMPLOYEE’S PAYROLL CHECK 11. Enter on check stub information from payroll register.22. Prepare employee’s payroll check for net amount of earnings.Lesson 13-4, page 328
32Automatic Check Deposit The employee authorizes the employer to deposit his payroll check into a particular checking or savings account.EFT: Electronic Fund TransferA check is never made out; it is a computer transaction.The employee receives a check stub with payroll information.