© 2015 Cengage Learning. All Rights Reserved. LESSON 3-1 Completing Payroll Records for Employee Earnings and Deductions Learning Objectives LO1 Explain how employees are paid. LO2 Calculate employee earnings. LO3 Prepare payroll reports. © 2015 Cengage Learning. All Rights Reserved.

© 2015 Cengage Learning. All Rights Reserved. Lesson 3-1 Paying Employees LO1 The amount paid to an employee for every hour worked is called a wage. A fixed annual sum of money divided among equal pay periods is called a salary. The number of days or weeks of work covered by an employee’s paycheck is called a pay period. The total amount earned by all employees for a pay period is called a payroll. Taxes based on the payroll of a business are called payroll taxes. © 2015 Cengage Learning. All Rights Reserved.

Percentages of Payroll Deductions Lesson 3-1 Payroll Deductions LO1 A deduction from total earnings for each person legally supported by a taxpayer, including the employee, is called a withholding allowance. The maximum amount of earnings on which a tax is calculated is called a tax base. Percentages of Payroll Deductions © 2015 Cengage Learning. All Rights Reserved.

Calculating Employee Earnings Lesson 3-1 Calculating Employee Earnings LO2 Employees are paid 1½ times the regular rate for over- time hours. The calculations shown below are for Juanita Denton’s biweekly pay period: © 2015 Cengage Learning. All Rights Reserved.

© 2015 Cengage Learning. All Rights Reserved. Lesson 3-1 Commissions Record LO2 To encourage increased sales, the managers are sometimes paid a commission on their net sales. Below is a typical commissions record: © 2015 Cengage Learning. All Rights Reserved.

Preparing a Payroll Register (Left Page) Lesson 3-1 Preparing a Payroll Register (Left Page) LO3 An accounting form that summarizes the earnings, deductions, and net pay of all employees for one pay period is called a payroll register. For each pay period: Enter the last day of the pay period. 1 4 1 For each employee: Enter the employee name and information from personnel records. 3 4 Enter regular, overtime, and commission earnings. 3 At the end of the payroll period: Total all columns. 9 9 © 2015 Cengage Learning. All Rights Reserved.

Preparing a Payroll Register (Right Page) Lesson 3-1 Preparing a Payroll Register (Right Page) LO3 For each pay period: 6 5 7 2 2 Record the date of payment For each employee: Extend total earnings to the appropriate department column. 5 Enter the payroll deductions in the Payroll Register. 6 Total the deductions. 7 8 Subtract total deductions from total earnings to determine net pay. 8 © 2015 Cengage Learning. All Rights Reserved.

Using the Federal Income Tax Withholding Tables Lesson 3-1 Using the Federal Income Tax Withholding Tables LO3 The federal income taxes withheld from the earnings of single individuals are greater than those withheld from married individuals. Federal income tax withholding can be determined from tables similar to the following: EXAMPLE: Guiren Heng is married and claims 2 withholding allowances. His earnings for the period are $1,759.86. 2 1 1 In the left 2 columns find at least $1,740 but less than $1,760. 2 Find the column with the correct number of allowances. 3 3 They intersect at $135-- the tax to be withheld. © 2015 Cengage Learning. All Rights Reserved.

Preparing an Employee Earnings Record Lesson 3-1 Preparing an Employee Earnings Record LO3 A business form used to record details of an employee’s earnings and deductions is called an employee earnings record. An employee’s total earnings and deductions for each pay period are summarized on one line of the employee earnings record. © 2015 Cengage Learning. All Rights Reserved.

Lesson 3-1 Audit Your Understanding 1. What three federal taxes are withheld from an employee’s pay? ANSWER Federal income tax, social security tax, and Medicare tax. © 2015 Cengage Learning. All Rights Reserved.

Lesson 3-1 Audit Your Understanding 2. How is the amount of federal income tax withholding determined? ANSWER By consulting withholding tax tables provided by the Internal Revenue Service. © 2015 Cengage Learning. All Rights Reserved.

Lesson 3-1 Audit Your Understanding 3. What is the formula for calculating net pay on the payroll register? ANSWER Total Earnings – Total Deductions = Net Pay. © 2015 Cengage Learning. All Rights Reserved.

Lesson 3-1 Audit Your Understanding 4. What amount is added to the accumulated earnings to get the new accumulated earnings to date? ANSWER Total earnings for the pay period. © 2015 Cengage Learning. All Rights Reserved.