1. Chapter 13: Payroll

2. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-2Payroll Employees and employers are required to pay local, state, and federal payroll taxes. Employers must withhold taxes from each employee’s paycheck. The amount withheld for federal taxes is determined from tax tables published by the IRS. The amount withheld depends on the employee’s earnings and the number of exemptions or withholding allowances claimed by the employee. FICA taxes and Medicare taxes are also deducted from employee’s paychecks. It is the purpose of Chapter 13 to show you how to use Peachtree to enter payroll default information, add employees, make the correct journal entries for payroll, and to print the various payroll reports.

3. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-3 Software Objectives, p. 491 Explore the Payroll Setup Wizard. Enter initial payroll fields. Enter employee and employer default information. Journalize and post payroll journal entries. Print paychecks. Make four backups: 2 for Joel's Sales & Service; 2 for the end-of-chapter exercises.

4. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-4 Web Objectives, p. 491 Use your Internet browser to go to the book’s website at www.mhhe.com/business/accounting/yacht2002 www.mhhe.com/business/accounting/yacht2002 Go to the Internet Activity link on the book’s website. Then, select WEB EXERCISES PART 3. Complete the third web exercise in Part 3, “The Salary Calculator.” Use a word processing program to write summaries of the websites that you visited

5. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-5 Peachtree Tips The exercises in Part 3 are cumulative. Chapters 11 and 12 must be completed before starting Chapter 13. The “Payroll Entry” window is the Payroll Journal. The educational version of the software packaged with the textbook includes generic tax tables. This means that payroll tax amounts will not be deducted automatically from paychecks. In Chapter 13, you will enter these deduction amounts manually on the “Payroll Entry” window (which is also the payroll journal).

6. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-6 Peachtree Tips (continued) Follow these steps to check the global tax table version. 1. Start Windows, then Peachtree. Open any company. 2. From the menu bar, click on Help, About Peachtree Accounting.

7. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-7 Peachtree Tips (concluded) If your “Global Tax Table Version” is “19000101,” a generic tax table is installed on your computer. This tax table is supplied with all new installations of Peachtree. During payroll entry, payroll tax amounts will be calculated as zero. In this chapter, you will manually enter payroll tax amounts for each employee. In order for the software to calculate payroll tax amounts automatically, you need to subscribe to Peachtree’s tax service. The first four digits of the “Global Tax Table Version” represent the current payroll tax year; for example, 20010101 would mean you have tax tables for 2001. Visit Peachtree’s website at http://www.peachtree.com/html/tax_pca.cfm to display information about the payroll tax service. http://www.peachtree.com/html/tax_pca.cfm

8. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-8 Backing Up Chapter 13 DiskBackup NameKBPage Nos. 17 of 18A:\Chapter 13 Begin132 KB508 A:\Chapter 13139 KB517 A:\Exercise 13-1140 KB525 A:\Exercise 13-2148 KB527 TOTAL KB559 KB.

9. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-9 Chapter 13 Topics 1. Software & web objectives, p. 491 2. Getting started, pp. 494-495 a. Checking your global tax table version, pp. 495-496 b.Establishing the payroll account, p. 496 3. Initial payroll fields, pp. 497-502 4. Entering Employee and Employer Default Information, pp. 502-506 5. Entering employee maintenance information, pp. 507-510 6.Backing up your data, p. 510 7.Payroll entry, pp. 511-516 8. Printing the payroll journal, p. 517 9. Printing the general ledger trial balance, p. 518

10. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-10 Chapter 13 Topics (concluded) 10. Backing up Chapter 13 data, p. 519 11. Internet activity, p. 519 12. Summary and review, p. 520 a. Going to the net, p. 520 b. Multiple-choice questions, pp. 521-523 c. Exercise 13-1, pp. 523-526 d. Exercise 13-2, p. 526-527 e. Chapter 13 index, p. 528

11. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-11 Getting started, pp. 494-495 Complete steps 1 – 2i on pages 494-495. Remember, you must complete Chapters 11 and 12 before starting Chapter 13.

12. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-12 Checking Your Global Tax Table Version, p. 495 From the menu bar, click on Help, then About Peachtree Accounting. The “Peachtree Complete Accounting” screen appears. Read the information on pages 495-496. Click on to close this window.

13. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-13 Establishing the payroll account, p. 496 In order to establish the payroll checking account, transfer funds from La Jolla Bank (Account No. 10200) to the Payroll Checking Account (Account No. 10300). Read the transaction information on p. 496.

14. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-14 Payroll Setup Wizard, p. 497 Click on Maintain, Default Information, then Payroll Setup Wizard. Click on.

15. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-15 Payroll Setup Wizard, continued, p. 498 In the “State” box, select “CA.” Type 3.4 in the “Unemployment Percent” box. Go to step 4 on page 499. Click on the “Sales Defaults” folder tab.

16. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-16 Payroll Setup Wizard, continued, p. 499 Click on. The “Default Payroll G/L Accounts” screen appears. You will make changes to these defaults on page 505 and 506. Click on.

17. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-17 Payroll Setup Wizard, continued, p. 500 Read the information on the “Payroll Tax Table Information” screen. Click on. Then, click on at the next three screens (see steps 7 - 9 on p. 500).

18. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-18 Payroll Setup Wizard, continued, p. 501 Read the information on the “Payroll Field Preview” screen. Click on the “EmployER Fields” folder tab.

19. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-19 Payroll Setup Wizard, concluded, p. 501 Make sure you have selected the “EmployER Fields” folder tab. Click on. Read the information on the “Payroll Setup Complete” screen, then click on.

20. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-20 Entering employee and employer default information, pp. 502-503 Click on Maintain, Default Information, then Employees. Complete steps 1 and 2 on p. 502. Click on.

21. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-21 Assign Payroll Fields for EmployEE Paid Taxes, p. 503 Click on the arrow next to “EmployEE Paid Taxes.” Click on.

22. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-22 Assign Payroll Fields for EmployER Paid Taxes, p. 503 Click on the arrow next to “EmployER Paid Taxes.”

23. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-23 Assign Payroll Fields for EmployER Paid Taxes, p. 504 Click on the arrow in the “State Disability (SDI)” field. Select “SDI.” Click on to return to the “Employee Defaults” window. Then, select the “Pay Levels” folder tab.

24. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-24 Employee Defaults, p. 504 Make sure you have selected the “Pay Levels” folder tab on the “Employee Defaults” window. Then for “Overtime,” select Account No. 77600, Overtime Expense.

25. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-25 Employee Defaults, continued, p. 504-505 Complete steps 11 – 18 on pp. 504-505.

26. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-26 “Employer Fields” folder tab, p. 506 Complete step 19 on page 506. Click on to save your changes and return to the menu bar.

27. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-27 Entering employee maintenance information, pp. 507-508 Click on Maintain, then Employees/Sales Reps. Type in the employee information shown in step 2 on pp. 507-508.

28. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-28 Maintain Employees/Sales Reps, pp. 508-509 Complete steps 3 – 6 on p. 508. This screen illustration is on p. 509. Complete steps 7 – 13 on pp. 509-510.

29. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-29 Backing up your data, p. 510 Complete steps 1 – 9 on page 510 to back up your data. Use “Chapter 13 Begin” as the back up name.

30. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-30 Payroll Entry, pp. 511-514 Read the information on pages 511-513. Complete steps 1 – 11 on pages 512 - 514 to issue a payroll check. Click on the “Print” icon.

31. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-31 Print Forms: Payroll Checks, pp. 514 and 515 Highlight “OCR - PR Preprint 1 Stub.” Read the “comment” on page 514. Complete steps 14 – 16 on p. 515.

32. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-32 About to Print Checks, p. 515 Type 101 as the “First check number.” Click on. Compare your check with the one shown on page 515. Complete steps 18 and 19 on p. 516. Compare your check with the one shown on p. 516.

33. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-33 Printing the payroll journal, p. 517 Complete steps 1 and 2 on p. 517. Compare your printout of the payroll journal to the one shown on p. 517.

34. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-34 Printing the general ledger trial balance, p. 518 Complete steps 1 and 2 on p. 518. Compare your printout of the general ledger trial balance to the one shown on p. 518.

35. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-35 Backing Up Chapter 13 Data, p. 519 Complete steps 1 - 9 on page 519. The back up name is “Chapter 13.” Click on. Compare your check to the one shown on p. 381. Record the additional payments shown on p. 382.

36. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-36 Glossary of Terms Chapter 13

37. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-37 Exemptions, p. 491 These are withholding allowances claimed by the employee. The number of exemptions or withholding allowances usually includes one for the employee, one for the employee’s spouse, and one for each dependent.

38. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-38 Withholding allowances, p. 491 Exemptions claimed by the employee. The number of exemptions or withholding allowances usually includes one for the employee, one for the employee’s spouse, and one for each dependent.

39. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-39 FICA taxes, p. 492 This deduction from wages is also called the social security tax and provides qualified workers who retire at age 62 or older with monthly payments from the federal government. A portion of this tax is for Medicare.

40. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-40 Medicare, p. 492 A portion of FICA taxes (also called social security taxes) deducted from wages of qualified workers. Medical benefits called Medicare are received by retirees after reaching age 65.

41. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-41 W-2 forms, p. 492 An annual report of an employee’s wages subject to FICA and federal income tax that shows the amounts of these taxes that were withheld.

42. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-42 Internet Activity, p. 519 1Go to the book’s website at www.mhhe.com/business/accounting/yacht2002 www.mhhe.com/business/accounting/yacht2002 2In the “Student Center” list, link to Internet Activities. 3Link to WEB EXERCISES PART 3. 4Complete the “SALARY CALCULATOR” exercise. Read steps 1-3. 5Follow the steps shown on the book’s website to complete this Internet activity. 6Using a word processing program, write a brief summary of what you find. Include all appropriate website addresses.

43. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 13-43 Going to the Net, p. 520 Access the National Payroll Week website at www.ssa.gov/employer/ Link to General W-2 Filing Information, then answer these questions.” www.ssa.gov/employer/ 1. What are dates that employers must send W-2 information to the Social Security Administration? (Include the dates for both electronic and paper filing.) 2. When must employers give employees their W-W? 3. What two forms do employers send to the Social Security Administration?