CENTURY 21 ACCOUNTING © Thomson/South-Western 1 LESSON 3-1 CHAPTER 3: CALCULATING AND RECORDING DEPARTMENTAL PAYROLL DATA Define accounting terms related to a departmental payroll system Identify accounting concepts and practices related to a departmental payroll system Prepare a commission record and calculate commission on net sales Complete payroll records Journalize payroll transactions

CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 3-1 Completing Payroll Records for Employee Earnings and Deductions

CENTURY 21 ACCOUNTING © Thomson/South-Western 3 LESSON 3-1 SALARY: money paid for services Pay period: period covered by salary pymt Payroll: total amount earned by all employees for pay period Payroll taxes: taxes based on payroll Employers must pay gov agencies all taxes withheld from salaries + employer payroll taxes Must provide Form W-2: given to employees by Jan 31 Must keep records showing: Each employee’s earnings Amounts withheld Net amount paid Total amount of payroll taxes that business must pay

CENTURY 21 ACCOUNTING © Thomson/South-Western 4 LESSON 3-1 PAYROLL DEDUCTIONS Federal income tax Determined by: total earnings, marital status, number of withholding allowances claimed by employee Withholding allowance: deduction from total earnings for each person legally supported by taxpayer State Income tax – 5% (for Zytech) PA = 3.07%

CENTURY 21 ACCOUNTING © Thomson/South-Western 5 LESSON Find the column with the correct number of withholding allowances. 1.Locate the range containing the total earnings. 3.Find the intersection of the row and column. USING THE FEDERAL INCOME TAX WITHHOLDING TABLE page

CENTURY 21 ACCOUNTING © Thomson/South-Western 6 LESSON 3-1 PAYROLL DEDUCTIONS: FICA taxes – Federal Insurance Contributions Act System for old-age survivors, disability, and hospital insurance Tax base: Max amount of earnings on which a tax is calculated Social Security 6.2% up to max of $87,000 per calendar year matched by employer Medicare: 1.45%; no tax base matched by employer

CENTURY 21 ACCOUNTING © Thomson/South-Western 7 LESSON 3-1 PAYROLL DEDUCTIONS Other deductions: City/State deductions Health insurance Life insurance Pension plans Savings deposits US Savings bonds United Way donations

CENTURY 21 ACCOUNTING © Thomson/South-Western 8 LESSON 3-1 PAYROLL DEDUCTIONS page 61

CENTURY 21 ACCOUNTING © Thomson/South-Western 9 LESSON 3-1 Regular HoursRegular RateRegular Earnings  CALCULATING EMPLOYEE EARNINGS 80  $7.00 per hour  $ Overtime Earnings = Overtime HoursRegular Rate1.5  = $  $7.00  1.5 Regular Earnings Overtime Earnings Total Earnings  $  $52.50  $ page 62

CENTURY 21 ACCOUNTING © Thomson/South-Western 10 LESSON 3-1 SALARY Basic Salary may be supplemented by: Commissions Cost of living Share of profit Bonus Store Manager: paid regular biweekly salary, no OT Annual bonus Supervisors: paid regular biweekly salary, no OT 1% commission on dept monthly sales

CENTURY 21 ACCOUNTING © Thomson/South-Western 11 LESSON Record heading information. 3.Calculate commission on net sales. COMMISSIONS RECORD – PAGE 63 page 63 2.Obtain amounts and calculate totals Sales Journal Cash Receipts General Journal

CENTURY 21 ACCOUNTING © Thomson/South-Western 12 LESSON Totals 8.Net pay PREPARING A PAYROLL REGISTER- form used to record payroll info pages Date of payment 3.Employee information 4.Hours and earnings 5.Total earnings/salary by department 6.Payroll deductions 7.Total deductions 1.Heading 9 9 Federal- tax tables; State – 5% Soc Sec – total * 6.2%; Med – total *1.45%

CENTURY 21 ACCOUNTING © Thomson/South-Western 13 LESSON Record beginning accumulated earnings (year to date/ tax base) 1.Write last day of quarter. 4.Write ending day of pay period. 2.Enter heading information. 5.Enter total earnings, deductions, and net pay. 6.Calculate and record accumulated earnings. PREPARING AN EMPLOYEE EARNINGS RECORD – used to record details affecting payments made to an employee page

CENTURY 21 ACCOUNTING © Thomson/South-Western 14 LESSON 3-1 TERMS REVIEW salary pay period payroll payroll taxes withholding allowance tax base payroll register employee earnings record TO DO: Audit, 68 Work Together, 68 On your own, 69 App 3-1, 3-2, 3-3 page 68

CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 3-2 Recording a Payroll and Payroll Taxes

CENTURY 21 ACCOUNTING © Thomson/South-Western 16 LESSON 3-1 Payroll Bank Account: Use special account and special checks for payroll After biweekly register is complete  check is written on general checking account payable to Payroll for TOTAL NET pay Deposited in special account  payroll checks are then written against this account Reduced to 0 once all checks have been deposited/cashed No special account needed in general ledger

CENTURY 21 ACCOUNTING © Thomson/South-Western 17 LESSON 3-1 Automatic Check Deposit Depositing payroll checks directly to specific bank and account Send check to bank EFT – Electronic Funds Transfer Computerized cash payments directly to bank account Eliminates need for preparing checks Each employee receives statement of earnings and deductions NEITHER change the accounting procedures for recording payroll

CENTURY 21 ACCOUNTING © Thomson/South-Western 18 LESSON Write the date. 2.Record the salary expense accounts. 3.Enter the check number. 4.Write the salary expense amounts. 5.Enter the liability accounts. 6.Record the liability amounts. 7.Write the net pay. JOURNALIZING PAYMENT OF A PAYROLL page

CENTURY 21 ACCOUNTING © Thomson/South-Western 19 LESSON 3-1 Unemployment Taxes PAID BY EMPLOYER ONLY! Federal Unemployment 6.2% State deductible – 5.4% EFFECTIVE RATES: (on first $7000 earned) Federal: 0.8% States: 5.4% ************************************************************ Report earnings by dept Payroll taxes expense  reported by department

CENTURY 21 ACCOUNTING © Thomson/South-Western 20 LESSON 3-1 Audio Department Payroll Taxes Expense CALCULATING EMPLOYER PAYROLL TAXES page 72

CENTURY 21 ACCOUNTING © Thomson/South-Western 21 LESSON Write the date. 3.Write the source document. 4.Record the amount of payroll taxes. 2.Write expense account titles. 6.Enter the liability amounts. 5.Write the liability account titles. JOURNALIZING EMPLOYER PAYROLL TAXES (transactions – pg 73) page

CENTURY 21 ACCOUNTING © Thomson/South-Western 22 LESSON 3-1 JOURNALIZING PAYMENT OF FEDERAL INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX LIABILITY Frequency of pymt to fed, state, local gov depends on amount owed each year If total amount paid in previous 4 quarters is <$50,000  monthly schedule depositor (Zytech) must pay total amount due by 15th day of following month w/Form 8190  Federal Tax Deposit Coupon If total amount paid is >$50,000  semiweekly schedule depositor Must deposit within following week If >$200,000  must deposit directly to IRS EFTPS: Electronic Federal Tax Payment System TWO EXCEPTIONS: If less than $2500 tax liability is accumulated during 3-month quarter  deposit may be paid at end of month following end of quarter If tax liability is $100,000 or more is accumulated on any day, the amount must be deposited the next business day

CENTURY 21 ACCOUNTING © Thomson/South-Western 23 LESSON Write the date. 3.Write the check number. 5.Record the amount paid. 4.Enter the liability amounts. 2.Enter the liability accounts. JOURNALIZING PAYMENT OF FEDERAL INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX LIABILITY – (PAGE 74) page

CENTURY 21 ACCOUNTING © Thomson/South-Western 24 LESSON Record the amounts paid. 1.Write the date. 3.Write the check numbers. 4.Enter the liability amounts. 2.Enter the liability accounts. JOURNALIZING PAYMENT OF FEDERAL UNEMPLOYMENT TAX LIABILITY page FEDERAL: if annual pymt >$100, must make quarterly pymts in month following each quarter STATE: varies, but usually required to pay during month following each quarter

CENTURY 21 ACCOUNTING © Thomson/South-Western 25 LESSON 3-1 TERMS REVIEW automatic check deposit electronic funds transfer (EFT) TO DO: Audit, 76 Work Together, 76 On your own, 76 App prob 3-4, 3-5 page 76