1. Chapter Three Processing Payroll
Payroll Accounting
Chapter Three
Processing Payroll
Payroll Accounting

2. 3.1 Payroll Records
Records of payroll related matters are required to be retained by the business. Whether the business has a manual accounting system for payroll or a computerised system, the records are the same for all businesses.
Payroll Accounting

3. Hours Worked Record Recording hours of work can be undertaken by;
Time card.
Attendance book.
Timesheet.
Electronic timekeeping system report.
Payroll Accounting

4. Payroll Register
A Payroll Register is also known as a wages sheet or wages book.
Payroll Accounting

5. Employee Earnings Card
In a manual payroll system, the employer keeps a record of earnings by each employee. Details of the employee’s pay are recorded on an Employee Earnings Card each pay day.
Payroll Accounting

6. Pay Advice
Pay Advice accompanies every payment to the employee and shows gross pay, PAYG Withheld, deductions, net pay and superannuation contributions made by the employer.
Commonly known as a pay slip
Payroll Accounting

7. 3.2 Preparing the Payroll Register
Payroll Register details include ;
Updating employee pay history
Preparing pay advices
Preparation of accounting entries for payroll
Payment of wages – paid by cash, cheque or bank transfer
Payment of monthly payroll liabilities eg PAYG Withholding, superannuation, medical insurance etc
Payroll Accounting

8. 3.3 Accounting for Payroll
Key Points : Gross Pay is an expense incurred by a business for a particular pay period. Non-Taxable allowances are paid, these must be identified separately in the ledger.
Payroll Accounting

9. Key Points
Deductions are liabilities representing the withheld amounts ( eg ) PAYG. Net Pay is amounts owing to employees and are credited to the Wages Payable.
Payroll Accounting

10. Key Points
Payment of deductions requires a debit entry to the deduction liability.
Payment of Net Pays by cheque requires a journal entry for each pay; one entry per cheque written.
Each net pay to be paid by EFT batch is credited to the Electronic Clearing Account.
When payment is in cash, one cheque is issued to cover all net pays being paid in cash.
Payroll Accounting

11. Note and Coinage Analysis
This ensures that there will be the exact change available to fill the pay envelopes. Because the smallest coin is 5 cents, each employee’s net pay is rounded up or down to the nearest 5 cents.
Payroll Accounting