Payroll Accounting Making Accounting Relevant Businesses issue payroll checks to their employees to compensate them for work performed. Making Accounting Relevant Businesses issue payroll checks to their employees to compensate them for work performed. If you have a part-time job, what items appear on your pay stub? Do you verify that your gross earnings were properly calculated?

Section 1Calculating Gross Earnings What You’ll Learn  The importance of accurate payroll records.  How to calculate gross earnings. What You’ll Learn  The importance of accurate payroll records.  How to calculate gross earnings.

Why It’s Important For many businesses payroll is the largest expense. It is essential that the payroll system accurately determine the gross pay for each employee for every pay period. Why It’s Important For many businesses payroll is the largest expense. It is essential that the payroll system accurately determine the gross pay for each employee for every pay period. Section 1Calculating Gross Earnings (con’t.) Key Terms  payroll  pay period  payroll clerk  gross earnings  wage Key Terms  payroll  pay period  payroll clerk  gross earnings  wage  time card  electronic badge readers  commission  overtime rate  time card  electronic badge readers  commission  overtime rate

The Importance of Payroll Records Section 1Calculating Gross Earnings (con’t.)  The payroll is a list of the employees and the payments due to each employee for a specific pay period.  A pay period is the amount of time over which an employee is paid.  The payroll is a list of the employees and the payments due to each employee for a specific pay period.  A pay period is the amount of time over which an employee is paid.

The Importance of Payroll Records con.t’ Section 1Calculating Gross Earnings (con’t.) $ Business with many employees often hire a payroll clerk who is responsible for preparing the payroll. The payroll clerk:  Makes sure employees are paid on time.  Makes sure each employee is paid the correct amount.  Completes payroll records.  Submits payroll reports.  Pays payroll taxes. $ Business with many employees often hire a payroll clerk who is responsible for preparing the payroll. The payroll clerk:  Makes sure employees are paid on time.  Makes sure each employee is paid the correct amount.  Completes payroll records.  Submits payroll reports.  Pays payroll taxes.

The Importance of Payroll Records (con’t.) Section 1Calculating Gross Earnings (con’t.)

Calculating Gross Earnings The total amount of money an employee earns in a pay period is the employee’s gross earnings. An employee’s pay can be based on:  salary  hourly wage  commission  salary plus commission or bonus  overtime pay  salary  hourly wage  commission  salary plus commission or bonus  overtime pay Section 1Calculating Gross Earnings (con’t.)

Salary  A salary is a fixed amount of money paid to an employee for each pay period.  An employee who is paid a salary earns the same amount regardless of the number of hours worked during the pay period.  A salary is a fixed amount of money paid to an employee for each pay period.  An employee who is paid a salary earns the same amount regardless of the number of hours worked during the pay period. Section 1Calculating Gross Earnings (con’t.)

Hourly Wage  A wage is an amount of money paid to an employee at a specified rate per hour worked.  The number of hours worked multiplied by the hourly wage equals the gross earnings for the pay period.  A wage is an amount of money paid to an employee at a specified rate per hour worked.  The number of hours worked multiplied by the hourly wage equals the gross earnings for the pay period. Section 1Calculating Gross Earnings (con’t.)

Hourly Wage con’t.  Many employees are required to use time cards. A time card is a record of the times an employee arrives and leaves work each day.  Times may be recorded manually or by a time clock.  Some companies round arrival and departure times to the nearest quarter hour.  ie. 12:25 pm round to 12:30.  Many employees are required to use time cards. A time card is a record of the times an employee arrives and leaves work each day.  Times may be recorded manually or by a time clock.  Some companies round arrival and departure times to the nearest quarter hour.  ie. 12:25 pm round to 12:30. Section 1Calculating Gross Earnings (con’t.)

Hourly Wage con’t.  Refer to Figure 12-2 on p290.  On a time card:  ¼ hour equals.25  ½ of an hour equals.5  ¾ of an hour equals.75  Refer to Figure 12-2 on p290.  On a time card:  ¼ hour equals.25  ½ of an hour equals.5  ¾ of an hour equals.75 Section 1Calculating Gross Earnings (con’t.)

Hourly Wage con’t.  Electronic badge readers: The employee is issued an identification badge with a magnetic strip that contains employee information. When the employee inserts the identification badge into the badge reader, the magnetic strip is scanned and information is transferred directly to the computer badge+reader  Electronic badge readers: The employee is issued an identification badge with a magnetic strip that contains employee information. When the employee inserts the identification badge into the badge reader, the magnetic strip is scanned and information is transferred directly to the computer badge+reader Section 1Calculating Gross Earnings (con’t.)

Commission  A commission is an amount paid to an employee based on a percentage of the employee’s sales.  Some salespeople earn a base salary plus a commission or a bonus on the amount of their sales.  A commission is an amount paid to an employee based on a percentage of the employee’s sales.  Some salespeople earn a base salary plus a commission or a bonus on the amount of their sales. Section 1Calculating Gross Earnings (con’t.)

Overtime Pay  Employers are required to pay overtime when employees covered by these laws work more than 40 hours per week.  The overtime rate, set by the Fair Labor Standards Act of 1938, is 1½ (1.5) times the employee’s regular hourly pay rate.  Employers are required to pay overtime when employees covered by these laws work more than 40 hours per week.  The overtime rate, set by the Fair Labor Standards Act of 1938, is 1½ (1.5) times the employee’s regular hourly pay rate. Section 1Calculating Gross Earnings (con’t.)

Demonstration Problems 12-1 to 12-3

$7.95 $8.25 $

Check Your Understanding p292. Thinking Critically 1 & 2 Computing in the Business World Problem 12-1 Thinking Critically 1 & 2 Computing in the Business World Problem 12-1 Section 1Calculating Gross Earnings (con’t.)