1. CHAPTER EIGHT PAYROLL ACCOUNTING: EMPLOYEE EARNINGS AND DEDUCTIONS

2. PAYROLL RECORD KEEPING

3. PAYROLL RECORD KEEPING  Payroll is a major expenditure for most businesses. Records provide data for analyzing and controlling these expenditures.  Laws require records to be kept For business as a whole For each employee

4. EMPLOYEES OR INDEPENDENT CONTRACTORS?

5. EMPLOYEES Work under the control and direction of an employer Examples:

6. INDEPENDENT CONTRACTORS Perform services for a fee and do not work under the control and direction of the company paying for the services Examples:

7. EMPLOYEES vs. INDEPENDENT CONTRACTORS  Employees involve: More laws and regulations Taxes that must be deducted Payroll records to maintain Numerous reports to file  Only one form must be filed for independent contractors Form 1099

8. SALARIES & WAGES  Salaries: Compensation for managerial administrative services Expressed in biweekly, monthly, or annual terms  Wages: Compensation for skilled and unskilled labor Expressed in terms of hours, weeks, or units produced

9. OVERTIME  Fair Labor Standards Act (FLSA): Requires employers to pay overtime (1 1/2 times the regular rate) to any hourly employee who works over 40 hours in a week Some salaried employees are exempt from FLSA.

10. CALCULATING TOTAL EARNINGS  When compensation is based on time:  Records must be kept of the time worked by each employee. Examples: time cards, plastic cards with bar codes  The hours worked are multiplied by rate of pay to determine total earnings.

11. CALCULATING TOTAL EARNINGS Example: Helen Kuzmik worked 55 hours this week. She is paid overtime (1 1/2 times her regular rate) for any hours over 8 in one day or 40 hours in a week (11 hours) and double time for any hours worked on Sundays (4 hours). Her regular rate of pay is $12 per hour. 40 hours x $12 per hour 11 hours x $18 $480 $12 x 1 1/2 = $18 overtime rate

12. CALCULATING TOTAL EARNINGS 40 hours x $12 per hour 11 hours x $18 4 Sunday hours, paid at double the regular rate $12 x 2 = $24 Sunday rate 4 hours x $24 $480 198 96 Example: Helen Kuzmik worked 55 hours this week. She is paid overtime (1 1/2 times her regular rate) for any hours over 8 in one day or 40 hours in a week (11 hours) and double time for any hours worked on Sundays (4 hours). Her regular rate of pay is $12 per hour.

13. CALCULATING TOTAL EARNINGS 40 hours x $12 per hour 11 hours x $18 4 hours x $24 $480 198 96 $774 Total earnings for the week Also called “Gross Pay” Example: Helen Kuzmik worked 55 hours this week. She is paid overtime (1 1/2 times her regular rate) for any hours over 8 in one day or 40 hours in a week (11 hours) and double time for any hours worked on Sundays (4 hours). Her regular rate of pay is $12 per hour.

14. CALCULATING TOTAL EARNINGS EXAMPLE: Linda Swaney has a salary of $2,288 per month. If she works over 40 hours in a week, she is to be paid the overtime rate of 1 1/2 times her hourly rate. In order to compute her overtime rate, we must determine her regular hourly rate

15. CALCULATING TOTAL EARNINGS EXAMPLE: Linda Swaney has a salary of $2,288 per month. If she works over 40 hours in a week, she is to be paid the overtime rate of 1 1/2 times her hourly rate. Step #1 Determine her annual salary $2,288 per month x 12 months $27,456

16. CALCULATING TOTAL EARNINGS EXAMPLE: Linda Swaney has a salary of $2,288 per month. If she works over 40 hours in a week, she is to be paid the overtime rate of 1 1/2 times her hourly rate. Step #2 Determine her weekly salary $27,456 annual salary ÷ 52 weeks $528.00 per week

17. CALCULATING TOTAL EARNINGS EXAMPLE: Linda Swaney has a salary of $2,288 per month. If she works over 40 hours in a week, she is to be paid the overtime rate of 1 1/2 times her hourly rate. Step #3 Compute regular hourly rate $528.00 per week ÷ 40 hours per week $13.20 per hour

18. CALCULATING TOTAL EARNINGS EXAMPLE: Linda Swaney has a salary of $2,288 per month. If she works over 40 hours in a week, she is to be paid the overtime rate of 1 1/2 times her hourly rate. Step #4 Compute overtime rate $13.20 per hour x 1 1/2 $19.80 per hour of overtime

19. DEDUCTIONS FROM GROSS PAY  Three categories: Federal (and possibly state and city) income tax withholding Employee FICA tax withholding Voluntary deductions  Gross Pay - Deductions = Net Pay Also called “take-home pay”

20. INCOME TAX WITHHOLDING  Required by federal law: Applied toward payment of employee’s federal income tax  Amount withheld determined by: Total Earnings Marital Status Number of withholding allowance claimed Length of the pay period

21. WITHHOLDING ALLOWANCES  Exempt a specific dollar amount of gross pay from income tax withholding.  Computed on Form W-4 “Employee’s Withholding Allowance Certificate”  Based on marital status and number of allowances claimed One allowance for employee, spouse who does not claim an allowance, and each dependent child

22. WAGE-BRACKET METHOD EXAMPLE: Ken Istone, who is married and claims 6 allowances, has gross earnings of $545 for the week ending December 19, 20--. Determine the amount of federal income tax to be withheld using the wage-bracket method.

23. MARRIED Persons - WEEKLY Payroll Period If the wages are-- At least But less than And the # of withholding allowances claimed is-- The amount of income tax to be withheld is-- $ 390 $ 400 400 410 540 550 560 570 580 590 600 590 610600 610 620 630 640 650 0 29 31 52 53 55 56 58 59 61 62 64 65 67 12345678910 21 22 43 44 46 47 49 50 52 53 55 56 58 16 34 36 37 39 40 42 43 45 46 48 49 10 11 25 27 28 30 31 33 34 36 37 39 40 40 0 0000 0 00 0 0 000 0 5 1913 71 20 21 22 23 24 25 27 28 30 31 14 15 16 17 18 19 20 21 22 23 8 2 0 0 0 9 30 0 0 1040 11 5 0 00 00 12 6 0 00 15 13 7 1 00 14 8 2 00 15 9 3 00 16 10 4 00 17 115 0 0 Step #1 Find the row for wages of “at least $540, but less than $550.”

24. MARRIED Persons - WEEKLY Payroll Period If the wages are-- At least But less than And the # of withholding allowances claimed is-- The amount of income tax to be withheld is-- $ 390 $ 400 400 410 540 550 560 570 580 590 600 590 610600 610 620 630 640 650 0 29 31 52 53 55 56 58 59 61 62 64 65 67 12345678910 21 22 43 44 46 47 49 50 52 53 55 56 58 16 34 36 37 39 40 42 43 45 46 48 49 10 11 25 27 28 30 31 33 34 36 37 39 40 40 0 0000 0 00 0 0 000 0 5 1913 71 20 21 22 23 24 25 27 28 30 31 14 15 16 17 18 19 20 21 22 23 8 2 0 0 0 9 30 0 0 1040 11 5 0 00 00 12 6 0 00 15 13 7 1 00 14 8 2 00 15 9 3 00 16 10 4 00 17 115 0 0 Step #2 Find the column headed “6 withholding allowances.”

25. MARRIED Persons - WEEKLY Payroll Period If the wages are-- At least But less than And the # of withholding allowances claimed is-- The amount of income tax to be withheld is-- $ 390 $ 400 400 410 540 550 560 570 580 590 600 590 610600 610 620 630 640 650 0 29 31 52 53 55 56 58 59 61 62 64 65 67 12345678910 21 22 43 44 46 47 49 50 52 53 55 56 58 16 34 36 37 39 40 42 43 45 46 48 49 10 11 25 27 28 30 31 33 34 36 37 39 40 40 0 0000 0 00 0 0 000 0 5 1913 7 1 20 21 22 23 24 25 27 28 30 31 14 15 16 17 18 19 20 21 22 23 8 20 0 0 9 30 0 0 1040 11 5 0 00 00 12 6 0 00 15 13 7 1 00 14 8 2 00 15 9 3 00 16 10 4 00 17 115 0 0 Step #3 Find the amount where they cross. This is the amount to be withheld.

26. FICA TAX WITHHOLDING  Includes amounts for:  Social Security provides pension and disability benefits  Medicare provides health insurance  Required by the Federal Insurance Contributions Act (FICA)

27. FICA TAX WITHHOLDING  Tax rates are set by Congress:  Social Security 6.2% on maximum earnings of $87,000  Medicare 1.45% on ALL earnings  Rates are changed frequently

28. FICA TAX WITHHOLDING EXAMPLE: Sarah Cadrain had earnings of $1,600 for the pay period, December 6-12. Bringing her earnings year-to-date to $86,340 Sarah’s earnings have not yet reached the maximum of $87,000. ALL of her earnings for this week are subject to Social Security and Medicare tax.

29. FICA TAX WITHHOLDING EXAMPLE: Sarah Cadrain had earnings of $1,600 for the pay period, December 6-12. Bringing her earnings year-to-date to $86,340 $1,600 Gross Pay X Tax Rate Tax Social Security 6.2% Medicare 1.45% $99.20 23.20 $122.40

30. FICA TAX WITHHOLDING EXAMPLE: The following week Sarah earns $1,660, bringing her earnings year-to-date to $88,000 (over the Social Security maximum). $88,000 Year-to-date earnings 87,000 Social Security maximum Amount not subject to S.S. tax 1,000

31. FICA TAX WITHHOLDING EXAMPLE: The following week Sarah earns $1,660; bringing her earnings year-to-date to $88,000 (over the Social Security maximum). $1,660 Gross Pay 1,000 Amount not subject to S.S. tax Amount subject to S.S. tax 660 Tax Rate 6.2% Social Security Tax $ 40.92

32. FICA TAX WITHHOLDING EXAMPLE: The following week Sarah earns $1,660, bringing her earnings year-to-date to $88,000 (over the Social Security maximum). $1,660 Gross Pay Medicare has no maximum earnings. Therefore, all Sarah’s gross pay is subject to the Medicare tax.

33. FICA TAX WITHHOLDING EXAMPLE: The following week Sarah earns $1,660, bringing her earnings year-to-date to $88,000 (over the Social Security maximum). $1,660 Gross Pay Tax Rate 1.45% Medicare Tax $ 24.07 Sarah’s total FICA tax is $64.99 ($40.92 SS + $24.07 Med.)

34. VOLUNTARY DEDUCTIONS  Deductions that are optional: many depend on specific agreements between the employee and employer.  Examples: United States savings bond purchases Health insurance premiums Credit union deposits Pension plan payments Charitable contributions

35. COMPUTING NET PAY EXAMPLE: Let’s return to Ken Istone’s $545 gross pay for the week ended December 19 and determine his net pay. Gross Pay $545.00 Deductions: Federal Income Tax $ 7.00 From Wage Bracket Tables

36. COMPUTING NET PAY EXAMPLE: Let’s return to Ken Istone’s $545 gross pay for the week ended December 19 and determine his net pay. Gross Pay $545.00 Deductions: Federal Income Tax $ 7.00 Social Security Tax 33.79 All his pay is subject to S.S. tax: $545 x 6.2%

37. COMPUTING NET PAY EXAMPLE: Let’s return to Ken Istone’s $545 gross pay for the week ended December 19 and determine his net pay. Gross Pay $545.00 Deductions: Federal Income Tax $ 7.00 Social Security Tax 33.79 Medicare Tax 7.90 $545 x 1.45%

38. COMPUTING NET PAY EXAMPLE: Compute the net pay of Ken Istone for the week ended December 19. His health insurance premiums are $10 per week. Gross Pay Deductions: Federal Income Tax $ 7.00 Social Security Tax 33.79 Medicare Tax 7.90 Health Insurance Premiums 10.00 Total Deductions 58.69 Net Pay $545.00 $486.31

39. PAYROLL RECORDS  Name, address, occupation, Social Security #, marital status, and # of withholding allowances  Gross earnings, date of payment, period covered by each payroll  Gross earnings accumulated for the year  Amounts of taxes and other items withheld Should provide the following information on each employee:

40. PAYROLL RECORDS Three types: PAYROLL REGISTER PAYROLL CHECK with earnings statement EMPLOYEE EARNINGS RECORD

41. PAYROLL REGISTER ALLOW. # MARITAL STATUS NAME EARNINGS REGULAROVER- TIME TOTAL A Payroll Register is a form used to assemble the data required at the end of each payroll period.

42. PAYROLL REGISTER ALLOW. # MARITAL STATUS NAME Cadrain, Sarah 4 M EARNINGS REGULAROVER- TIME TOTAL Since marital status and # of allowances are used to compute withholding taxes, they are recorded on the Payroll Register.

43. PAYROLL REGISTER ALLOW. # MARITAL STATUS NAME Cadrain, Sarah 4 M EARNINGS REGULAROVER- TIME 1,600.00 60.00 TOTAL 1,660.00 Earnings for this period are shown, categorized by Regular and Overtime earnings.

44. PAYROLL REGISTER TOTAL EARNINGS 88,000.00 1,660.00 CUMULATIVE TOTAL TAXABLE EARNINGS UNEMPLOYMENT COMP. SOCIAL SECURITY 660.00 This pay period has taken Sarah’s earnings above the Social Security maximum. As computed earlier, only $660 of this period’s earnings is subject to the Social Security tax.

45. PAYROLL REGISTER FEDERAL INCOME TAX 40.92 234.00 DEDUCTIONS SOC. SEC. TAX MEDICARE TAX 24.07 HEALTH INSURANCE UNITED WAY All deductions from total earnings are listed.

46. PAYROLL REGISTER UNITED WAY TOTAL NET PAYCHECK NO. HEALTH INSURANCE DEDUCTIONS 298.991,361.01409 Deductions are totaled and subtracted from Total Earnings to arrive at Net Pay.

47. PAYROLL REGISTER ALLOW. # MARITAL STATUS NAME Cadrain, Sarah 4 M EARNINGS REGULAROVER- TIME 1,600.00 60.00 TOTAL 1,660.00 Guder, James1 S 760.00 140.00900.00 The payroll information for the other employees is recorded in the same manner.

48. PAYROLL REGISTER TOTAL EARNINGS 88,000.00 1,660.00 CUMULATIVE TOTAL TAXABLE EARNINGS UNEMPLOYMENT COMP. SOCIAL SECURITY 660.00 900.00 43,400.00900.00

49. PAYROLL REGISTER FEDERAL INCOME TAX 40.92 234.00 DEDUCTIONS SOC. SEC. TAX MEDICARE TAX 24.07 HEALTH INSURANCE UNITED WAY 146.00 55.80 13.0520.00

50. PAYROLL REGISTER UNITED WAY TOTAL NET PAYCHECK NO. HEALTH INSURANCE DEDUCTIONS 298.991,361.01409 20.00 234.85665.15410

51. PAYROLL REGISTER ALLOW. # MARITAL STATUS NAME Cadrain, Sarah 4 M EARNINGS REGULAROVER TIME 1,600.00 60.00 TOTAL 1,660.00 Guder, James1 S 760.00 140.00900.00 Istone, Ken 6 M 545.00545.00

52. PAYROLL REGISTER TOTAL EARNINGS 88,000.00 1,660.00 CUMULATIVE TOTAL TAXABLE EARNINGS UNEMPLOYMENT COMP. SOCIAL SECURITY 660.00 900.00 43,400.00900.00 545.00 27,025.00 545.00

53. PAYROLL REGISTER FEDERAL INCOME TAX 40.92 234.00 DEDUCTIONS SOC. SEC. TAX MEDICARE TAX 24.07 HEALTH INSURANCE UNITED WAY 146.00 55.80 13.0520.00 7.00 33.797.9010.00

54. PAYROLL REGISTER UNITED WAY TOTAL NET PAYCHECK NO. HEALTH INSURANCE DEDUCTIONS 298.991,361.01409 20.00234.85665.15410 10.00 58.69 486.31 411

55. PAYROLL REGISTER ALLOW. # MARITAL STATUS NAME Cadrain, Sarah 4 M EARNINGS REGULAROVER- TIME 1,600.00 60.00 TOTAL 1,660.00 Guder, James1 S 760.00 140.00900.00 Istone, Ken 6 M 545.00 Kuzmik, Helen2 M 480.00294.00774.00

56. PAYROLL REGISTER TOTAL EARNINGS 88,000.00 1,660.00 CUMULATIVE TOTAL TAXABLE EARNINGS UNEMPLOYMENT COMP. SOCIAL SECURITY 660.00 900.00 43,400.00900.00 545.00 27,025.00 545.00 774.00 31,000.00 774.00

57. PAYROLL REGISTER FEDERAL INCOME TAX 40.92 234.00 DEDUCTIONS SOC. SEC. TAX MEDICARE TAX 24.07 HEALTH INSURANCE UNITED WAY 146.00 55.80 13.0520.00 7.00 33.797.9010.00 69.00 47.9911.2213.00 20.00

58. PAYROLL REGISTER UNITED WAY TOTAL NET PAYCHECK NO. HEALTH INSURANCE DEDUCTIONS 298.991,361.01409 20.00234.85665.15410 10.0058.69 486.31 411 20.00 161.21 612.79 412 13.00

59. PAYROLL REGISTER ALLOW. # MARITAL STATUS NAME Cadrain, Sarah 4 M EARNINGS REGULAROVER- TIME 1,600.00 60.00 TOTAL 1,660.00 Guder, James1 S 760.00 140.00900.00 Istone, Ken 6 M 545.00 Kuzmik, Helen2 M 480.00294.00774.00 Lee, Hoseoup3 M 440.00440.00

60. PAYROLL REGISTER TOTAL EARNINGS 88,000.00 1,660.00 CUMULATIVE TOTAL TAXABLE EARNINGS UNEMPLOYMENT COMP. SOCIAL SECURITY 660.00 900.00 43,400.00900.00 545.00 27,025.00 545.00 774.00 31,000.00 774.00 440.00 22,340.00440.00

61. PAYROLL REGISTER FEDERAL INCOME TAX 40.92 234.00 DEDUCTIONS SOC. SEC. TAX MEDICARE TAX 24.07 HEALTH INSURANCE UNITED WAY 146.00 55.80 13.0520.00 7.00 33.797.9010.00 69.00 47.9911.2213.00 20.00 15.00 27.286.3813.00

62. PAYROLL REGISTER UNITED WAY TOTAL NET PAYCHECK NO. HEALTH INSURANCE DEDUCTIONS 298.991,361.01409 20.00234.85665.15410 10.0058.69 486.31 411 20.00161.21 612.79 412 13.00 61.66 378.34 413

63. PAYROLL REGISTER ALLOW. # MARITAL STATUS NAME Cadrain, Sarah 4 M EARNINGS REGULAROVER TIME 1,600.00 60.00 TOTAL 1,660.00 Guder, James1 S 760.00 140.00900.00 Istone, Ken 6 M 545.00 Kuzmik, Helen2 M 480.00294.00774.00 Lee, Hoseoup3 M 440.00 Swaney, Linda2 S 528.00198.00 726.00

64. PAYROLL REGISTER TOTAL EARNINGS 88,000.00 1,660.00 CUMULATIVE TOTAL TAXABLE EARNINGS UNEMPLOYMENT COMP. SOCIAL SECURITY 660.00 900.00 43,400.00900.00 545.00 27,025.00 545.00 774.00 31,000.00 774.00 440.00 22,340.00440.00 726.00 27,500.00 726.00

65. PAYROLL REGISTER FEDERAL INCOME TAX 40.92 234.00 DEDUCTIONS SOC. SEC. TAX MEDICARE TAX 24.07 HEALTH INSURANCE UNITED WAY 146.00 55.80 13.0520.00 7.00 33.797.9010.00 69.00 47.9911.2213.00 20.00 15.00 27.286.3813.00 81.00 45.0110.53

66. PAYROLL REGISTER UNITED WAY TOTAL NET PAYCHECK NO. HEALTH INSURANCE DEDUCTIONS 298.991,361.81409 20.00234.85665.15410 10.0058.69 486.31 411 20.00161.21 612.79 412 13.00 61.66 378.34 413 136.54 589.46 414

67. PAYROLL REGISTER ALLOW. # MARITAL STATUS NAME Cadrain, Sarah 4 M EARNINGS REGULAROVER TIME 1,600.00 60.00 TOTAL 1,660.00 Guder, James1 S 760.00 140.00900.00 Istone, Ken 6 M 545.00 Kuzmik, Helen2 M 480.00294.00774.00 Lee, Hoseoup3 M 440.00 Swaney, Linda2 S 528.00198.00 726.00 Tucci, Paul5 M 490.00 490.00

68. PAYROLL REGISTER TOTAL EARNINGS 88,000.00 1,660.00 CUMULATIVE TOTAL TAXABLE EARNINGS UNEMPLOYMENT COMP. SOCIAL SECURITY 660.00 900.00 43,400.00900.00 545.00 27,025.00 545.00 774.00 31,000.00 774.00 440.00 22,340.00440.00 726.00 27,500.00 726.00 490.00 25,050.00490.00

69. PAYROLL REGISTER FEDERAL INCOME TAX 40.92 234.00 DEDUCTIONS SOC. SEC. TAX MEDICARE TAX 24.07 HEALTH INSURANCE UNITED WAY 146.00 55.80 13.0520.00 7.00 33.797.9010.00 69.00 47.9911.2213.00 20.00 15.00 27.286.3813.00 81.00 45.0110.53 8.00 30.387.11 10.00

70. PAYROLL REGISTER UNITED WAY TOTAL NET PAYCHECK NO. HEALTH INSURANCE DEDUCTIONS 298.991,361.01409 20.00234.85665.15410 10.0058.69 486.31 411 20.00161.21 612.79 412 13.00 61.66 378.34 413 136.54 589.46 414 10.00 55.49 434.51 415

71. PAYROLL REGISTER ALLOW. # MARITAL STATUS NAME Cadrain, Sarah 4 M EARNINGS REGULAROVER TIME 1,600.00 60.00 TOTAL 1,660.00 Guder, James1 S 760.00 140.00900.00 Istone, Ken 6 M 545.00 Kuzmik, Helen2 M 480.00294.00774.00 Lee, Hoseoup3 M 440.00 Swaney, Linda2 S 528.00198.00 726.00 Tucci, Paul5 M 490.00 Wiles, Harry1 S 300.00 300.00

72. PAYROLL REGISTER TOTAL EARNINGS 88,000.00 1,660.00 CUMULATIVE TOTAL TAXABLE EARNINGS UNEMPLOYMENT COMP. SOCIAL SECURITY 660.00 900.00 43,400.00900.00 545.00 27,025.00 545.00 774.00 31,000.00 774.00 440.00 22,340.00440.00 726.00 27,500.00 726.00 490.00 25,050.00490.00 300.00 6,300.00300.00 300.00

73. PAYROLL REGISTER FEDERAL INCOME TAX 40.92 234.00 DEDUCTIONS SOC. SEC. TAX MEDICARE TAX 24.07 HEALTH INSURANCE UNITED WAY 146.00 55.80 13.0520.00 7.00 33.797.9010.00 69.00 47.9911.2213.00 20.00 15.00 27.286.3813.00 81.00 45.0110.53 8.00 30.387.11 10.00 24.00 18.604.35

74. PAYROLL REGISTER UNITED WAY TOTAL NET PAYCHECK NO. HEALTH INSURANCE DEDUCTIONS 298.991,361.01409 20.00234.85665.15410 10.0058.69 486.31 411 20.00161.21 612.79 412 13.00 61.66 378.34 413 136.54 589.46 414 10.00 55.49 434.51 415 46.95 253.05 416

75. PAYROLL REGISTER ALLOW. # MARITAL STATUS NAME Cadrain, Sarah 4 M EARNINGS REGULAROVER TIME 1,600.00 60.00 TOTAL 1,660.00 Guder, James1 S 760.00 140.00900.00 Istone, Ken 6 M 545.00 Kuzmik, Helen2 M 480.00294.00774.00 Lee, Hoseoup3 M 440.00 Swaney, Linda2 S 528.00198.00 726.00 Tucci, Paul5 M 490.00 Wiles, Harry1 S 300.00 5,143.00 692.00 5,835.00

76. PAYROLL REGISTER TOTAL EARNINGS 88,000.00 1,660.00 CUMULATIVE TOTAL TAXABLE EARNINGS UNEMPLOYMENT COMP. SOCIAL SECURITY 660.00 900.00 43,400.00900.00 545.00 27,025.00 545.00 774.00 31,000.00 774.00 440.00 22,340.00440.00 726.00 27,500.00 726.00 490.00 25,050.00490.00 300.00 6,300.00300.00 5,835.00270,615.00 300.004,835.00

77. PAYROLL REGISTER FEDERAL INCOME TAX 40.92 234.00 DEDUCTIONS SOC. SEC. TAX MEDICARE TAX 24.07 HEALTH INSURANCE UNITED WAY 146.00 55.80 13.0520.00 7.00 33.797.9010.00 69.00 47.9911.2213.00 20.00 15.00 27.28 6.38 13.00 81.00 45.0110.53 8.00 30.387.11 10.00 24.00 18.604.35 584.00 299.77 84.61 46.0040.00

78. PAYROLL REGISTER UNITED WAY TOTAL NET PAYCHECK NO. HEALTH INSURANCE DEDUCTIONS 298.991,361.01409 20.00234.85665.15410 10.0058.69 486.31 411 20.00161.21 612.79 412 13.00 61.66 378.34 413 136.54 589.46 414 10.00 55.49 434.51 415 46.95 253.05 416 46.0040.00 1,054.38 4,780.62

79. METHODS OF PAYMENT  Cash  Check: With attached earnings statement  Electronic Funds Transfer (EFT): Copy of check and earnings statement are given to employee Provides better internal control than payment by check

80. EMPLOYEE EARNINGS RECORD REGULAROVERTIME PERIOD ENDED EARNINGS TOTALCUMULATIVE TOTAL GENDERDEPARTMENT OCCUPATIONSOCIAL SECURITY # MF X MaintenanceService393-58-8194 12/05 12/12 11/28545.00 75.00 620.00 25,240.00 25,860.00 26,480.00 A separate earnings record is maintained for each employee.

81. EMPLOYEE EARNINGS RECORD REGULAROVERTIME PERIOD ENDED EARNINGS TOTALCUMULATIVE TOTAL GENDERDEPARTMENT OCCUPATIONSOCIAL SECURITY # MF X MaintenanceService393-58-8194 12/05 12/12 11/28545.00 75.00 620.00 25,240.00 25,860.00 26,480.00 Let’s record the last entry of the year for Ken Istone.

82. EMPLOYEE EARNINGS RECORD REGULAROVERTIME PERIOD ENDED EARNINGS TOTALCUMULATIVE TOTAL GENDERDEPARTMENT OCCUPATIONSOCIAL SECURITY # MF X MaintenanceService393-58-8194 12/05 12/12 11/28545.00 75.00 620.00 25,240.00 25,860.00 26,480.00 12/19 545.00 545.0027,025.00 Earnings for this period are recorded and the cumulative earnings are updated.

83. EMPLOYEE EARNINGS RECORD UNEMPLOYMENT COMPENSATION SOCIAL SECURITY TAXABLE EARNINGS FEDERAL INCOME TAX SOCIAL SECURITY TAX MARITAL STATUS ALLOWANCESPAY RATE DEDUCTIONS M$545/week 620.00 15.00 38.44 545.007.00 33.79 Deductions are noted.

84. EMPLOYEE EARNINGS RECORD MEDICAREHEALTH INSURANCE UNITED WAY OTHER DATE OF BIRTH DATE HIREDNAME/ADDRESS DEDUCTIONS 8/17/641/3/87 Ken M. Istone 1546 Swallow Drive St. Louis, MO 63144-4752 8.99 10.00 7.90 10.00

85. EMPLOYEE EARNINGS RECORD OTHERTOTALCHECK # AMOUNT NAME/ADDRESS EMPLOYEE NUMBER DEDUCTIONS Ken M. Istone 1546 Swallow Drive St. Louis, MO 63144-4752 3 84.43 387 395 403 547.57 58.69411486.31 Deductions are totaled, net pay is recorded, along with the paycheck’s #.

86. GENERAL JOURNAL DATEDESCRIPTIONPRDEBITCREDIT 1 2 3 4 5 6 7 8 9 10 11 Journal entries are now made to record the payroll expenses and liabilities.

87. GENERAL JOURNAL DATEDESCRIPTIONPRDEBITCREDIT 1 2 3 4 5 6 7 8 9 10 11 Payroll Register is the source for the journal entry.

88. GENERAL JOURNAL DATEDESCRIPTIONPRDEBITCREDIT 1 2 3 4 5 6 7 8 9 10 11 Dec.19Wages and Salaries Expense5,835.00 GROSS PAY

89. GENERAL JOURNAL DATEDESCRIPTIONPRDEBITCREDIT 1 2 3 4 5 6 7 8 9 10 11 Dec.19Wages and Salaries Expense5,835.00 Employee Income Tax Pay. Social Security Tax Payable Medicare Tax Payable Health Ins. Prem. Payable United Way Contrib. Pay. 584.00 299.77 84.61 46.00 40.00 Each deduction is recorded in a separate liability account.

90. GENERAL JOURNAL DATEDESCRIPTIONPRDEBITCREDIT 1 2 3 4 5 6 7 8 9 10 11 Dec.19Wages and Salaries Expense5,835.00 Employee Income Tax Pay. Social Security Tax Payable Medicare Tax Payable Health Ins. Prem. Payable United Way Contrib. Pay. Cash 584.00 299.77 84.61 46.00 40.00 4,780.62 NET PAY

91. GENERAL JOURNAL DATEDESCRIPTIONPRDEBITCREDIT 1 2 3 4 5 6 7 8 9 10 11 Dec.19Wages and Salaries Expense5,835.00 Employee Income Tax Pay. Social Security Tax Payable Medicare Tax Payable Health Ins. Prem. Payable United Way Contrib. Pay. Cash 584.00 299.77 84.61 46.00 40.00 4,780.62 If the payroll is paid from a separate payroll checking account, an additional entry is made. 19 Payroll Cash Cash 4,780.62

92. PAYROLL LIABILITIES EMPLOYEE INCOME TAX PAYABLE DEBIT CREDIT Credited when federal income tax is withheld from employees.

93. PAYROLL LIABILITIES EMPLOYEE INCOME TAX PAYABLE DEBIT CREDIT Debited when withheld taxes are paid to the IRS.

94. PAYROLL LIABILITIES SOCIAL SECURITY TAX PAYABLE DEBIT CREDIT Both the employer and employee pay Social Security taxes.

95. PAYROLL LIABILITIES SOCIAL SECURITY TAX PAYABLE DEBIT CREDIT Credited when taxes are withheld.

96. PAYROLL LIABILITIES SOCIAL SECURITY TAX PAYABLE DEBIT CREDIT Also credited to recognized employer’s matching tax.

97. PAYROLL LIABILITIES SOCIAL SECURITY TAX PAYABLE DEBIT CREDIT Debited when taxes are paid.

98. PAYROLL LIABILITIES MEDICARE TAX PAYABLE DEBIT CREDIT EXACTLY THE SAME AS SOCIAL SECURITY TAX PAYABLE

99. PAYROLL RECORD- KEEPING METHODS  Manual: Same information recorded several times Can be very inefficient  Payroll Processing Center: A business that sells payroll record-keeping services  Electronic System: A computer system that performs all payroll record-keeping and prepares payroll checks

100. ELECTRONIC PAYROLL SYSTEM INPUT PROCESSINGOUTPUT EMPLOYEE: SOCIAL SECURITY # HOURS WORKED Only employee’s Social Security # and hours worked are input each pay period.

101. ELECTRONIC PAYROLL SYSTEM INPUT PROCESSINGOUTPUT EMPLOYEE: SOCIAL SECURITY # HOURS WORKED COMPUTER Payroll Register Paychecks Employee Earnings Record