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Payroll Accounting, Taxes, and Reports Chapter 13.

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Presentation on theme: "Payroll Accounting, Taxes, and Reports Chapter 13."— Presentation transcript:

1 Payroll Accounting, Taxes, and Reports Chapter 13

2 Do Now  If you owed money to your parents but had to wait to be paid by your part-time job employer:  Which party would represent the government for payroll purposes (your employer, you, or your parents)? Why?  If you had to choose three columns from the payroll register to make a journal entry, which would they be?  Which type of journal would you use to record payroll?  If you owed money to your parents but had to wait to be paid by your part-time job employer:  Which party would represent the government for payroll purposes (your employer, you, or your parents)? Why?  If you had to choose three columns from the payroll register to make a journal entry, which would they be?  Which type of journal would you use to record payroll?

3 13-1: Recording a Payroll  Payroll information for each pay period recorded in payroll register  Each pay period, payroll information for each employee recorded on employee earnings record  Provide all payroll information needed to prepare payroll and payroll tax reports  Journal entries made to record payment of payroll and employer payroll taxes  Payroll information for each pay period recorded in payroll register  Each pay period, payroll information for each employee recorded on employee earnings record  Provide all payroll information needed to prepare payroll and payroll tax reports  Journal entries made to record payment of payroll and employer payroll taxes

4 13-1: Recording a Payroll  Column totals of payroll register provide debit and credit amounts needed to journalize a payroll  Based on total of Earnings Total column, each deduction column, and Net Pay column  Earnings total = “Salary Expense”  Deductions = Liability; “Payable”  Net Pay = Cash  Page 370 text reference  Column totals of payroll register provide debit and credit amounts needed to journalize a payroll  Based on total of Earnings Total column, each deduction column, and Net Pay column  Earnings total = “Salary Expense”  Deductions = Liability; “Payable”  Net Pay = Cash  Page 370 text reference

5 Exercises  13-1 WT: Text page 372, WP page 327  13-1 OYO: Text page 372, WP page 328  13-1 WT: Text page 372, WP page 327  13-1 OYO: Text page 372, WP page 328

6 Reading Activity  Read the following article and write down:  How often you’d want to be paid as employee…explain why  How often you’d like to pay employees as an employer…explain why  Read the following article and write down:  How often you’d want to be paid as employee…explain why  How often you’d like to pay employees as an employer…explain why

7 13-2: Recording Employer Payroll Taxes  Amount of taxes withheld from employee earnings are liabilities of employers until they are paid to government  Employers must also pay their own taxes  Employer payroll taxes are business expenses  Amount of taxes withheld from employee earnings are liabilities of employers until they are paid to government  Employers must also pay their own taxes  Employer payroll taxes are business expenses

8 13-2: Recording Employer Payroll Taxes  Employers pay 4 separate payroll taxes: 1.Employer social security tax 2.Medicare tax 3.Federal unemployment tax 4.State unemployment tax o Employer payroll taxes based on percentage of employee earnings  Employers pay 4 separate payroll taxes: 1.Employer social security tax 2.Medicare tax 3.Federal unemployment tax 4.State unemployment tax o Employer payroll taxes based on percentage of employee earnings

9 13-2: Recording Employer Payroll Taxes  Social security and Medicare taxes are only payroll taxes paid by both employees and employer  Employers pay total of those columns in payroll register for the pay period  Congress sets social security and Medicare tax rates for employees and employers and may change tax rates and tax base  Social Security = 6.2% on maximum tax base of $87,000  Medicare = 1.45%, no tax base  Social security and Medicare taxes are only payroll taxes paid by both employees and employer  Employers pay total of those columns in payroll register for the pay period  Congress sets social security and Medicare tax rates for employees and employers and may change tax rates and tax base  Social Security = 6.2% on maximum tax base of $87,000  Medicare = 1.45%, no tax base

10 13-2: Recording Employer Payroll Taxes  Employers must pay taxes for unemployment compensation  Total earnings subject to unemployment tax is unemployment taxable earnings  Applied to first $7,000 earned by each employee for calendar year  Visual aid on text page 374  Employers must pay taxes for unemployment compensation  Total earnings subject to unemployment tax is unemployment taxable earnings  Applied to first $7,000 earned by each employee for calendar year  Visual aid on text page 374

11 13-2: Recording Employer Payroll Taxes  Federal unemployment tax: federal tax used for state and federal administrative expenses of the unemployment program  Usually 6.2% of first $7,000 earned by each employee  Can deduct amounts paid to state unemployment funds to a maximum of 5.4%  Results in 0.8% being the effective federal unemployment tax rate in most states on the first $7,000 earned by each employee  Unemployment taxable earnings used to calculate federal unemployment tax  Federal unemployment tax: federal tax used for state and federal administrative expenses of the unemployment program  Usually 6.2% of first $7,000 earned by each employee  Can deduct amounts paid to state unemployment funds to a maximum of 5.4%  Results in 0.8% being the effective federal unemployment tax rate in most states on the first $7,000 earned by each employee  Unemployment taxable earnings used to calculate federal unemployment tax

12 13-2: Recording Employer Payroll Taxes  Example:  Unemployment Taxable Earnings: $  Federal Unemployment Tax Rate: 0.8%  $ X = $6.32  Federal Unemployment Tax = $6.32  Example:  Unemployment Taxable Earnings: $  Federal Unemployment Tax Rate: 0.8%  $ X = $6.32  Federal Unemployment Tax = $6.32

13 13-2: Recording Employer Payroll Taxes  State unemployment tax: state tax used to pay benefits to unemployed workers  5.4% on first $7,000 earned by each employee  Unemployment taxable earnings used to calculate federal unemployment tax are also used to calculate state unemployment tax  State unemployment tax: state tax used to pay benefits to unemployed workers  5.4% on first $7,000 earned by each employee  Unemployment taxable earnings used to calculate federal unemployment tax are also used to calculate state unemployment tax

14 13-2: Recording Employer Payroll Taxes  Example:  Unemployment Taxable Earnings: $  State Unemployment Tax Rate: 5.4%  $ X = $42.66  Federal Unemployment Tax = $42.66  Example:  Unemployment Taxable Earnings: $  State Unemployment Tax Rate: 5.4%  $ X = $42.66  Federal Unemployment Tax = $42.66

15 13-2: Recording Employer Payroll Taxes  Transaction to record employer payroll taxes expense is journalized on same date payroll is journalized  Salary expense and employer payroll taxes expense both recorded in same accounting period  Transaction to record employer payroll taxes expense is journalized on same date payroll is journalized  Salary expense and employer payroll taxes expense both recorded in same accounting period

16 Exercises  13-2 WT: Text page 377, WP page 329  13-1 OYO: Text page 377, WP page 330  13-2 WT: Text page 377, WP page 329  13-1 OYO: Text page 377, WP page 330


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