1. CHAPTER 12 ACCOUNTING FOR A PAYROLL SYSTEM

2. ACCOUNTING FOR A PAYROLL SYSTEM
CHAPTER OJECTIVES
Importance of accurate payroll records.
Calculate gross earnings using different methods.
How to calculate different types of deductions from gross earnings.
Prepare a payroll register.
Prepare an employee’s earnings record.
Knowledge of all accounting terms introduced in this chapter.

3. UNIT 1 CALCULATING GROSS EARNINGS
IMPORTANCE OF PAYROLL RECORDS
PAYROLL– is a list of the employees and the payments due to each employee or a specific time period.
PAY PERIOD—is the amount of time over which an employee is paid. Most businesses use weekly, bi-weekly (every 2-weeks) or semi-monthly (2 times monthly)

4. UNIT 1 CALCULATING GROSS EARNINGS
IMPORTANCE OF PAYROLL RECORDS
The Payroll– is a major expense for most companies. A well designed payroll system serves 2 roles.
The collection and processing of all data needed to prepare and issue payroll checks.
The generation of payroll records needed for accounting purpose and reporting required information to government agencies, management and other board members.

5. UNIT 1 CALCULATING GROSS EARNINGS
IMPORTANCE OF PAYROLL RECORDS
PAYROLL CLERK– is the person responsible for processing and preparing the payroll.
Their duties include:
1) Make sure all paid on time.
2) Ensure employee’s get the correct amount.
3) Completes all payroll records.
4) Submits all necessary payroll reports.
5) Pays payroll taxes.

6. UNIT 1 CALCULATING GROSS EARNINGS
Gross Earnings—this calculation depends on the basis on which an employee is paid. The employee’s pay is based on the following:
SALARY
HOURLY WAGE
COMMISSION
SALARY PLUS COMMISSION/BONUS
OVERTIME PAY

7. UNIT 1 CALCULATING GROSS EARNINGS
SALARY—is a fixed amount of money paid to an employee for each pay period. Someone who gets paid on a salary basis gets paid the same amount of money regardless of the number of hours they work.

8. UNIT 1 CALCULATING GROSS EARNINGS
HOURLY WAGE—is an amount of money paid to an employee at a specified rate per each hour worked. Example: John worked 35 hours last week at $7.25 per hour.
GROSS EARNINGS:
35 x 7.25==$253.75
Therefore John’s gross earnings were

9. UNIT 1 CALCULATING GROSS EARNINGS
TIME CARD—is a record of the times an employees reports to work each day. These times may be recorded manually or by an electronic clock.

10. UNIT 1 CALCULATING GROSS EARNINGS
COMMISSION—is an amount paid to an employee based on a certain percentage of the employee’s sales. These are used as incentive laden terms so that this encourages the employee to strive harder for sales because their earnings are directly related to their productivity.

11. UNIT 1 CALCULATING GROSS EARNINGS
SALARY & COMMISSION—is a way in which employee has a guaranteed “base” and additionally get a commission from their sales.
EXAMPLE::
Mary gets paid $ per week plus %5 sales
Mary had sales last week of $
$ ($2, x .05) = $375.00
Thus: Mary’s earnings for the week were $375.00

12. CALCULATING GROSS EARNINGS
OVERTIME PAY– is the amount of pay by law required to pay an employee who works hourly over a 40 work week. The overtime rate of 1 ½ times per hour over the 40 was set by the “Fair Labor & Standards Act” of 1938.
EXAMPLE– Jose is a machinist for Dillon’s Repair he works
at a rate of $7.75 hourly and he worked 47 hour last week.
HOURS RATE
Regular $7.75 = $310.00
Overtime $ = $81.55
$391.55

13. CALCULATING GROSS EARNINGS—Problem 12-1
EMPLOYEE
TOTAL
HOURS
PAY
RATE
REGULAR
EARNINGS OT
EARNS.
GROSS
David Clune
33 ½
6.95
232.83
232.85
Richard L 38
7.80
296.40
Jane L. 43
7.25
290.00
32.63
322.63
Betty Q.
44 ¼
8.30
332.00
52.91
384.91
John S.
39 ½
327.85
Kelly T. 40
7.5
300.00
Gene T.
42 ½
9.75
Heidi V.
34 ½
8.75
Kevin W. 46
9.25