1. PAYROLL ACCOUNTING: EMPLOYEE EARNINGS AND DEDUCTIONS
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 Secretaries
Work under the control and direction of an employer
Secretaries
Examples:
Salesclerks
Maintenance Workers
Plant Supervisors

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:
Public Accountants
Real Estate Agents
Lawyers

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: Wages:
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
$480
11 hours x $18
$12 x 1 1/2 = $18 overtime rate

12. 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
$480
11 hours x $18
198
4 hours x $24 96
4 Sunday hours, paid at double the regular rate
$12 x 2 = $24 Sunday rate

13. 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
$480
11 hours x $18
198
4 hours x $24 96
Total earnings for the week
$774
Also called “Gross Pay”

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
$ 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
$ 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, Determine the amount of federal income tax to be withheld using the wage-bracket method.

23. Step #1 Find the row for wages of “at least $540, but less than $550.”
MARRIED Persons - WEEKLY Payroll Period
If the wages are--
And the # of withholding allowances claimed is--
But less than 1 2 3 4 5 6 7 8 9 10
At least
The amount of income tax to be withheld is--
$ 390
$ 400 41 33 24 16 8
400
410 42 34 26 18 10 2
540
550 63 55 47 39 31 23 15 7
550
560 65 57 48 40 32 24 16 8
560
570 66 58 50 42 34 26 18 10 2
570
580 68 60 51 43 35 27 19 11 3
580
590 69 61 53 45 37 29 21 13 5
Step #1 Find the row for
wages of “at least $540,
but less than $550.”
590
600 71 63 54 46 38 30 22 14 6
600
610 72 64 56 48 40 32 24 16 8
610
620 74 66 57 49 41 33 25 17 9 1
620
630 75 67 59 51 43 36 27 19 11 2
630
640 77 69 60 52 44 38 28 20 12 4
640
650 78 70 62 54 46 38 30 22 14 5

24. “6 withholding allowances.”
MARRIED Persons - WEEKLY Payroll Period
If the wages are--
And the # of withholding allowances claimed is--
But less than 1 2 3 4 5 6 7 8 9 10
At least
The amount of income tax to be withheld is--
$ 390
$ 400 41 33 24 16 8
400
410 42 34 26 18 10 2
540
550 63 55 47 39 31 23 15 7
Step #2 Find the column
headed
“6 withholding allowances.”
550
560 65 57 48 40 32 24 16 8
560
570 66 58 50 42 34 26 18 10 2
570
580 68 60 51 43 35 27 19 11 3
580
590 69 61 53 45 37 29 21 13 5
590
600 71 63 54 46 38 30 22 14 6
600
610 72 64 56 48 40 32 24 16 8
610
620 74 66 57 49 41 33 25 17 9 1
620
630 75 67 59 51 43 36 27 19 11 2
630
640 77 69 60 52 44 38 28 20 12 4
640
650 78 70 62 54 46 38 30 22 14 5

25. 15 Step #3 Find the amount where they cross. This is the amount
MARRIED Persons - WEEKLY Payroll Period
If the wages are--
And the # of withholding allowances claimed is--
But less than 1 2 3 4 5 6 7 8 9 10
At least
The amount of income tax to be withheld is--
$ 390
$ 400 41 33 24 16 8
400
410 42 34 26 18 10 2 15
540
550 63 55 47 39 31 23 7
550
560 65 57 48 40 32 24 16 8
560
570 66 58 50 42 34 26 18 10 2
570
580 68 60 51 43 35 27 19 11 3
580
Step #3 Find the amount
where they cross.
This is the amount
to be withheld.
590 69 61 53 45 37 29 21 13 5
590
600 71 63 54 46 38 30 22 14 6
600
610 72 64 56 48 40 32 24 16 8
610
620 74 66 57 49 41 33 25 17 9 1
620
630 75 67 59 51 43 36 27 19 11 2
630
640 77 69 60 52 44 38 28 20 12 4
640
650 78 70 62 54 46 38 30 22 14 5

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 $76,200
Medicare
1.45% on ALL earnings
Rates are changed frequently

28. FICA TAX WITHHOLDING
EXAMPLE: Sarah Cadrain had earnings of $1,500 for the pay period, December Bringing her earnings year-to-date to $75,540
Sarah’s earnings have not yet reached
the maximum of $76,200.
ALL of her earnings for this week are
subject to Social Security and Medicare tax.

29. FICA TAX WITHHOLDING $114.75 Gross Pay X Tax Rate Tax $1,500 $93.00
EXAMPLE: Sarah Cadrain had earnings of $1,500 for the pay period, December Bringing her earnings year-to-date to $75,540
Gross Pay X
Tax Rate
Tax
$1,500
Social Security 6.2%
$93.00
Medicare %
21.75
$114.75

30. FICA TAX WITHHOLDING
EXAMPLE: The following week Sarah earns $1,260, bringing her earnings year-to-date to $76,800 (over the Social Security maximum).
Year-to-date earnings
$76,800
Social Security maximum
76,200
Amount not subject to S.S. tax
600

31. FICA TAX WITHHOLDING Social Security Tax $ 40.92 $1,260 600 660 6.2%
EXAMPLE: The following week Sarah earns $1,260, bringing her earnings year-to-date to $76,800 (over the Social Security maximum).
Gross Pay
$1,260
Amount not subject to S.S. tax
600
Amount subject to S.S. tax
660
6.2%
Tax Rate
Social Security Tax
$ 40.92

32. FICA TAX WITHHOLDING
EXAMPLE: The following week Sarah earns $1,260, bringing her earnings year-to-date to $76,800 (over the Social Security maximum).
Gross Pay
$1,260
Medicare has no maximum earnings.
Therefore, all Sarah’s gross pay
is subject to the Medicare tax.

33. Sarah’s total FICA tax is $59.19
FICA TAX WITHHOLDING
EXAMPLE: The following week Sarah earns $1,260, bringing her earnings year-to-date to $76,800 (over the Social Security maximum).
Gross Pay
$1,260
Tax Rate
1.45%
Medicare Tax
$ 18.27
Sarah’s total FICA tax is $59.19
($40.92 SS + $18.27 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. From Wage Bracket Tables
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
$15.00
From Wage Bracket Tables

36. All his pay is subject to S.S. tax:
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
$15.00
33.79
Social Security Tax
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
$15.00
$545 x 1.45%
33.79
Social Security Tax
Medicare Tax
7.90

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
$545.00
Deductions:
Federal Income Tax
$15.00
33.79
Social Security Tax
Medicare Tax
7.90
Health Insurance Premiums
10.00
Total Deductions
66.69
Net Pay
$478.31

39. PAYROLL RECORDS
Should provide the following information on each employee:
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

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

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

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

43. Earnings for this period are shown, categorized by
PAYROLL REGISTER
EARNINGS
NAME #
MARITAL STATUS
REGULAR
OVER-TIME
TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,200.00
60.00
1,260.00
Earnings for this period
are shown, categorized by
Regular and Overtime
earnings.

44. PAYROLL REGISTER This pay period has taken Sarah’s earnings
TAXABLE EARNINGS
TOTAL
CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,260.00
76,800.00
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 All deductions from total earnings are listed.
FEDERAL INCOME TAX
SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
154.00
40.92
18.27
All deductions from
total earnings
are listed.

46. Deductions are totaled Total Earnings to arrive
PAYROLL REGISTER
DEDUCTIONS
HEALTH INSURANCE
UNITED WAY
TOTAL
NET PAY
CHECK NO.
213.19
1,046.81
409
Deductions are totaled
and subtracted from
Total Earnings to arrive
at Net Pay.

47. The payroll information for is recorded in the same manner.
PAYROLL REGISTER
EARNINGS
NAME #
MARITAL STATUS
REGULAR
OVER-TIME
TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,200.00
60.00
1,260.00
Guder, James 1 S
760.00
140.00
900.00
The payroll information for
the other employees
is recorded in the same manner.

48. PAYROLL REGISTER EARNINGS TAXABLE EARNINGS TOTAL CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,260.00
76,800.00
660.00
900.00
43,400.00
900.00

49. PAYROLL REGISTER DEDUCTIONS FEDERAL INCOME TAX SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
154.00
40.92
18.27
161.00
55.80
13.05
20.00

50. PAYROLL REGISTER DEDUCTIONS HEALTH INSURANCE UNITED WAY TOTAL NET PAY
CHECK NO.
213.19
1,046.81
409
20.00
249.85
650.15
410

51. PAYROLL REGISTER EARNINGS NAME # MARITAL STATUS REGULAR OVERTIME TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,200.00
60.00
1,260.00
Guder, James 1 S
760.00
140.00
900.00
Istone, Ken 6 M
545.00
545.00

52. PAYROLL REGISTER EARNINGS TAXABLE EARNINGS TOTAL CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,260.00
76,800.00
660.00
900.00
43,400.00
900.00
545.00
27,025.00
545.00

53. PAYROLL REGISTER DEDUCTIONS FEDERAL INCOME TAX SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
154.00
40.92
18.27
161.00
55.80
13.05
20.00
15.00
33.79
7.90
10.00

54. PAYROLL REGISTER DEDUCTIONS HEALTH INSURANCE UNITED WAY TOTAL NET PAY
CHECK NO.
213.19
1,046.81
409
20.00
249.85
650.15
410
10.00
66.69
478.31
411

55. PAYROLL REGISTER EARNINGS NAME # MARITAL STATUS REGULAR OVER-TIME
TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,200.00
60.00
1,260.00
Guder, James 1 S
760.00
140.00
900.00
Istone, Ken 6 M
545.00
545.00
Kuzmik, Helen 2 M
480.00
294.00
774.00

56. PAYROLL REGISTER EARNINGS TAXABLE EARNINGS TOTAL CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,260.00
76,800.00
660.00
900.00
43,400.00
900.00
545.00
27,025.00
545.00
774.00
31,000.00
774.00

57. PAYROLL REGISTER DEDUCTIONS FEDERAL INCOME TAX SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
154.00
40.92
18.27
161.00
55.80
13.05
20.00
15.00
33.79
7.90
10.00
81.00
47.99
11.22
13.00
20.00

58. PAYROLL REGISTER DEDUCTIONS HEALTH INSURANCE UNITED WAY TOTAL NET PAY
CHECK NO.
213.19
1,046.81
409
20.00
249.85
650.15
410
10.00
66.69
478.31
411
13.00
20.00
173.21
600.79
412

59. PAYROLL REGISTER EARNINGS NAME # MARITAL STATUS REGULAR OVER-TIME
TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,200.00
60.00
1,260.00
Guder, James 1 S
760.00
140.00
900.00
Istone, Ken 6 M
545.00
545.00
Kuzmik, Helen 2 M
480.00
294.00
774.00
Lee, Hoseoup 3 M
440.00
440.00

60. PAYROLL REGISTER EARNINGS TAXABLE EARNINGS TOTAL CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,260.00
76,800.00
660.00
900.00
43,400.00
900.00
545.00
27,025.00
545.00
774.00
31,000.00
774.00
440.00
22,340.00
440.00

61. PAYROLL REGISTER DEDUCTIONS FEDERAL INCOME TAX SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
154.00
40.92
18.27
161.00
55.80
13.05
20.00
15.00
33.79
7.90
10.00
81.00
47.99
11.22
13.00
20.00
24.00
27.28
6.38
13.00

62. PAYROLL REGISTER DEDUCTIONS HEALTH INSURANCE UNITED WAY TOTAL NET PAY
CHECK NO.
213.19
1,046.81
409
20.00
249.85
650.15
410
10.00
66.69
478.31
411
13.00
20.00
173.21
600.79
412
13.00
70.66
369.34
413

63. PAYROLL REGISTER EARNINGS NAME # MARITAL STATUS REGULAR OVERTIME TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,200.00
60.00
1,260.00
Guder, James 1 S
760.00
140.00
900.00
Istone, Ken 6 M
545.00
545.00
Kuzmik, Helen 2 M
480.00
294.00
774.00
Lee, Hoseoup 3 M
440.00
440.00
Swaney, Linda 2 S
528.00
198.00
726.00

64. PAYROLL REGISTER EARNINGS TAXABLE EARNINGS TOTAL CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,260.00
76,800.00
660.00
900.00
43,400.00
900.00
545.00
27,025.00
545.00
774.00
31,000.00
774.00
440.00
22,340.00
440.00
726.00
27,500.00
726.00

65. PAYROLL REGISTER DEDUCTIONS FEDERAL INCOME TAX SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
154.00
40.92
18.27
161.00
55.80
13.05
20.00
15.00
33.79
7.90
10.00
81.00
47.99
11.22
13.00
20.00
24.00
27.28
6.38
13.00
96.00
45.01
10.53

66. PAYROLL REGISTER DEDUCTIONS HEALTH INSURANCE UNITED WAY TOTAL NET PAY
CHECK NO.
213.19
1,046.81
409
20.00
249.85
650.15
410
10.00
66.69
478.31
411
13.00
20.00
173.21
600.79
412
13.00
70.66
369.34
413
151.54
574.46
414

67. PAYROLL REGISTER EARNINGS NAME # MARITAL STATUS REGULAR OVERTIME TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,200.00
60.00
1,260.00
Guder, James 1 S
760.00
140.00
900.00
Istone, Ken 6 M
545.00
545.00
Kuzmik, Helen 2 M
480.00
294.00
774.00
Lee, Hoseoup 3 M
440.00
440.00
Swaney, Linda 2 S
528.00
198.00
726.00
Tucci, Paul 5 M
490.00
490.00

68. PAYROLL REGISTER EARNINGS TAXABLE EARNINGS TOTAL CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,260.00
76,800.00
660.00
900.00
43,400.00
900.00
545.00
27,025.00
545.00
774.00
31,000.00
774.00
440.00
22,340.00
440.00
726.00
27,500.00
726.00
490.00
25,050.00
490.00

69. PAYROLL REGISTER DEDUCTIONS FEDERAL INCOME TAX SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
154.00
40.92
18.27
161.00
55.80
13.05
20.00
15.00
33.79
7.90
10.00
81.00
47.99
11.22
13.00
20.00
24.00
27.28
6.38
13.00
96.00
45.01
10.53
15.00
30.38
7.11
10.00

70. PAYROLL REGISTER DEDUCTIONS HEALTH INSURANCE UNITED WAY TOTAL NET PAY
CHECK NO.
213.19
1,046.81
409
20.00
249.85
650.15
410
10.00
66.69
478.31
411
13.00
20.00
173.21
600.79
412
13.00
70.66
369.34
413
151.54
574.46
414
10.00
62.49
427.52
415

71. PAYROLL REGISTER EARNINGS NAME # MARITAL STATUS REGULAR OVERTIME TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,200.00
60.00
1,260.00
Guder, James 1 S
760.00
140.00
900.00
Istone, Ken 6 M
545.00
545.00
Kuzmik, Helen 2 M
480.00
294.00
774.00
Lee, Hoseoup 3 M
440.00
440.00
Swaney, Linda 2 S
528.00
198.00
726.00
Tucci, Paul 5 M
490.00
490.00
Wiles, Harry 1 S
300.00
300.00

72. PAYROLL REGISTER EARNINGS TAXABLE EARNINGS TOTAL CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,260.00
76,800.00
660.00
900.00
43,400.00
900.00
545.00
27,025.00
545.00
774.00
31,000.00
774.00
440.00
22,340.00
440.00
726.00
27,500.00
726.00
490.00
25,050.00
490.00
300.00
6,300.00
300.00
300.00

73. PAYROLL REGISTER DEDUCTIONS FEDERAL INCOME TAX SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
154.00
40.92
18.27
161.00
55.80
13.05
20.00
15.00
33.79
7.90
10.00
81.00
47.99
11.22
13.00
20.00
24.00
27.28
6.38
13.00
96.00
45.01
10.53
15.00
30.38
7.11
10.00
30.00
18.60
4.35

74. PAYROLL REGISTER DEDUCTIONS HEALTH INSURANCE UNITED WAY TOTAL NET PAY
CHECK NO.
213.19
1,046.81
409
20.00
249.85
650.15
410
10.00
66.69
478.31
411
13.00
20.00
173.21
600.79
412
13.00
70.66
369.34
413
151.54
574.46
414
10.00
62.49
427.52
415
52.95
247.05
416

75. PAYROLL REGISTER EARNINGS NAME # MARITAL STATUS REGULAR OVERTIME TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,200.00
60.00
1,260.00
Guder, James 1 S
760.00
140.00
900.00
Istone, Ken 6 M
545.00
545.00
Kuzmik, Helen 2 M
480.00
294.00
774.00
Lee, Hoseoup 3 M
440.00
440.00
Swaney, Linda 2 S
528.00
198.00
726.00
Tucci, Paul 5 M
490.00
490.00
Wiles, Harry 1 S
300.00
300.00
4,743.00
692.00
5,435.00

76. PAYROLL REGISTER EARNINGS TAXABLE EARNINGS TOTAL CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,260.00
76,800.00
660.00
900.00
43,400.00
900.00
545.00
27,025.00
545.00
774.00
31,000.00
774.00
440.00
22,340.00
440.00
726.00
27,500.00
726.00
490.00
25,050.00
490.00
300.00
6,300.00
300.00
300.00
5,435.00
259,415.00
300.00
4,835.00

77. PAYROLL REGISTER DEDUCTIONS FEDERAL INCOME TAX SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
154.00
40.92
18.27
161.00
55.80
13.05
20.00
15.00
33.79
7.90
10.00
81.00
47.99
11.22
13.00
20.00
24.00
27.28
6.38
13.00
96.00
45.01
10.53
15.00
30.38
7.11
10.00
30.00
18.60
4.35
576.00
299.77
78.81
46.00
40.00

78. PAYROLL REGISTER DEDUCTIONS HEALTH INSURANCE UNITED WAY TOTAL NET PAY
CHECK NO.
213.19
1,046.81
409
20.00
249.85
650.15
410
10.00
66.69
478.31
411
13.00
20.00
173.21
600.79
412
13.00
70.66
369.34
413
151.54
574.46
414
10.00
62.49
427.52
415
52.95
247.05
416
46.00
40.00
1,040.58
4,394.42

79. METHODS OF PAYMENT Cash Check: Electronic Funds Transfer (EFT):
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
PERIOD ENDED
REGULAR
OVERTIME
TOTAL
CUMULATIVE TOTAL
11/28
545.00
A separate earnings record
is maintained for each employee.
75.00
620.00
25,240.00
12/05
545.00
75.00
620.00
25,860.00
12/12
545.00
75.00
620.00
26,480.00
GENDER
DEPARTMENT
OCCUPATION
SOCIAL SECURITY # M F 
Maintenance
Service

81. EMPLOYEE EARNINGS RECORD
PERIOD ENDED
REGULAR
OVERTIME
TOTAL
CUMULATIVE TOTAL
11/28
545.00
75.00
620.00
25,240.00
Let’s record the last entry
of the year for Ken Istone.
12/05
545.00
75.00
620.00
25,860.00
12/12
545.00
75.00
620.00
26,480.00
GENDER
DEPARTMENT
OCCUPATION
SOCIAL SECURITY # M F 
Maintenance
Service

82. EMPLOYEE EARNINGS RECORD
PERIOD ENDED
REGULAR
OVERTIME
TOTAL
CUMULATIVE TOTAL
11/28
545.00
75.00
620.00
25,240.00
12/05
545.00
75.00
620.00
25,860.00
12/12
545.00
75.00
620.00
26,480.00
12/19
545.00
545.00
27,025.00
GENDER
DEPARTMENT
OCCUPATION
SOCIAL SECURITY # M F
Earnings for this period
are recorded and the cumulative
earnings are updated. 
Maintenance
Service

83. EMPLOYEE EARNINGS RECORD
TAXABLE EARNINGS
DEDUCTIONS
UNEMPLOYMENT COMPENSATION
SOCIAL SECURITY
FEDERAL INCOME TAX
SOCIAL SECURITY TAX
620.00
27.00
38.44
620.00
27.00
38.44
620.00
27.00
38.44
545.00
15.00
33.79
MARITAL STATUS
ALLOWANCES
PAY RATE
Deductions are noted. M
$545/week

84. EMPLOYEE EARNINGS RECORD
DEDUCTIONS
MEDICARE
HEALTH INSURANCE
UNITED WAY
OTHER
8.99
10.00
8.99
10.00
8.99
10.00
7.90
10.00
DATE OF BIRTH
DATE HIRED
NAME/ADDRESS
Ken M. Istone
8/17/64
1/3/87
1546 Swallow Drive
St. Louis, MO

85. EMPLOYEE EARNINGS RECORD
DEDUCTIONS
OTHER
TOTAL
CHECK #
AMOUNT
84.43
387
535.57
84.43
395
535.57
84.43
403
535.57
66.69
411
478.31
NAME/ADDRESS
EMPLOYEE NUMBER
Ken M. Istone
Deductions are totaled,
net pay is recorded, along
with the paycheck’s #. 3
1546 Swallow Drive
St. Louis, MO

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

87. Payroll Register is the source
GENERAL JOURNAL
DATE
DESCRIPTION
DEBIT PR
CREDIT 1 2 3
Payroll Register is the source
for the journal entry. 4 5 6 7 8 9 10 11

88. GENERAL JOURNAL GROSS PAY DATE DESCRIPTION DEBIT PR CREDIT 1 Dec. 19
Wages and Salaries Expense
5,435.00
GROSS PAY 2 3 4 5 6 7 8 9 10 11

89. Each deduction is recorded in a separate liability account.
GENERAL JOURNAL
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Dec. 19
Wages and Salaries Expense
5,435.00 2
Employee Income Tax Pay.
576.00 3
Social Security Tax Payable
299.77 4
Medicare Tax Payable
78.81 5
Health Ins. Prem. Payable
46.00 6
United Way Contrib. Pay.
40.00 7
Each deduction is recorded
in a separate liability account. 8 9 10 11

90. GENERAL JOURNAL NET PAY DATE DESCRIPTION DEBIT PR CREDIT 1 Dec. 19
Wages and Salaries Expense
5,435.00 2
Employee Income Tax Pay.
576.00 3
Social Security Tax Payable
299.77 4
Medicare Tax Payable
78.81 5
Health Ins. Prem. Payable
46.00 6
United Way Contrib. Pay.
40.00 7
NET PAY
Cash
4,394.42 8 9 10 11

91. GENERAL JOURNAL If the payroll is paid from a separate
DATE
DESCRIPTION
DEBIT PR
CREDIT 1
Dec. 19
Wages and Salaries Expense
5,435.00 2
If the payroll is paid from a separate
payroll checking account,
an additional entry is made.
Employee Income Tax Pay.
576.00 3
Social Security Tax Payable
299.77 4
Medicare Tax Payable
78.81 5
Health Ins. Prem. Payable
46.00 6
United Way Contrib. Pay.
40.00 7
Cash
4,394.42 8 9 19
Payroll Cash
4,394.42 10
Cash
4,394.42 11

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

93. EMPLOYEE INCOME TAX PAYABLE Debited when withheld taxes
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. SOCIAL SECURITY TAX PAYABLE
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. SOCIAL SECURITY TAX PAYABLE
PAYROLL LIABILITIES
SOCIAL SECURITY TAX PAYABLE
DEBIT
CREDIT
Debited when taxes
are paid.

98. SOCIAL SECURITY TAX PAYABLE
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
PROCESSING
OUTPUT
EMPLOYEE:
Only employee’s Social
Security # and hours
worked are input each
pay period.
SOCIAL SECURITY #
HOURS WORKED

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