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GLENCOE / McGraw-Hill

GLENCOE / McGraw-Hill. Payroll Computations, Records, and Payment. Recording Payroll Information. Section Objectives. Journalize payroll transactions in the general journal. Maintain an earnings record for each employee. Page. 367. Recording Payroll. Page. 367. Objective 7.

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GLENCOE / McGraw-Hill

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  1. GLENCOE / McGraw-Hill

  2. Payroll Computations, Records, and Payment

  3. RecordingPayroll Information Section Objectives • Journalize payroll transactions in the general journal. • Maintain an earnings record for each employee.

  4. Page 367 Recording Payroll

  5. Page 367 Objective 7 Journalize payroll transactions in the general journal.

  6. Page 367 Recording Payroll Recording payroll information involves two separate entries: Record the payroll expense Pay the employees

  7. Page 367 The general journal entry to record the payroll expense is based on the payroll register.

  8. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. Page 368 AND ENDING January 6, 20-- PAID January 8, 20-- DEDUCTIONS DISTRIBUTION NAME SOCIAL MEDICARE INCOME HEALTHNET CHECK OFFICE SHIPPING SECURITY TAX INSURANCE AMOUNT NO. SALARIES WAGES Taylor, Cindy 22.32 5.22 28.00 304.46 1725 360.00 Gallegos, Edward23.56 5.51 42.00 308.93 1726 380.00 Turner, Bill 18.60 4.35 14.00 20.00 243.05 1727 300.00 Lin, Cecilia 32.24 7.54 44.00 20.00 416.22 1728 520.00 Anderson, Selena 24.80 5.80 45.00 324.40 1729 400.00 121.52 28.42 173.00 40.00 1,597.06 400.00 1,560.00 M N O P Q R S T The gross pay for each category is debited to the proper general ledger account. 20-- Jan. 8 Office Salaries Expense 400.00 Shipping Wages Expense 1,560.00 Social Security Tax Payable 121.52 Medicare Tax Payable 28.42 Employee Income Tax Payable 173.00 Health Insurance Premiums Payable 40.00 Salaries and Wages Payable 1,597.06 Payroll for week ending Jan. 6

  9. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. Page 368 AND ENDING January 6, 20-- PAID January 8, 20-- DEDUCTIONS DISTRIBUTION NAME SOCIAL MEDICARE INCOME HEALTHNET CHECK OFFICE SHIPPING SECURITY TAX INSURANCE AMOUNT NO. SALARIES WAGES Taylor, Cindy 22.32 5.22 28.00 304.46 1725 360.00 Gallegos, Edward23.56 5.51 42.00 308.93 1726 380.00 Turner, Bill 18.60 4.35 14.00 20.00 243.05 1727 300.00 Lin, Cecilia 32.24 7.54 44.00 20.00 416.22 1728 520.00 Anderson, Selena 24.80 5.80 45.00 324.40 1729 400.00 121.52 28.42 173.00 40.00 1,597.06 400.00 1,560.00 M N O P Q R S T Each type of deduction is credited to a separate liability account. 20-- Jan. 8 Office Salaries Expense 400.00 Shipping Wages Expense 1,560.00 Social Security Tax Payable 121.52 Medicare Tax Payable 28.42 Employee Income Tax Payable 173.00 Health Insurance Premiums Payable 40.00 Salaries and Wages Payable 1,597.06 Payroll for week ending Jan. 6

  10. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. Page 368 AND ENDING January 6, 20-- PAID January 8, 20-- DEDUCTIONS DISTRIBUTION NAME SOCIAL MEDICARE INCOME HEALTHNET CHECK OFFICE SHIPPING SECURITY TAX INSURANCE AMOUNT NO. SALARIES WAGES Taylor, Cindy 22.32 5.22 28.00 304.46 1725 360.00 Gallegos, Edward23.56 5.51 42.00 308.93 1726 380.00 Turner, Bill 18.60 4.35 14.00 20.00 243.05 1727 300.00 Lin, Cecilia 32.24 7.54 44.00 20.00 416.22 1728 520.00 Anderson, Selena 24.80 5.80 45.00 324.40 1729 400.00 121.52 28.42 173.00 40.00 1,597.06 400.00 1,560.00 M N O P Q R S T Net pay is credited to the liability account, Salaries and Wages Payable. 20-- Jan. 8 Office Salaries Expense 400.00 Shipping Wages Expense 1,560.00 Social Security Tax Payable 121.52 Medicare Tax Payable 28.42 Employee Income Tax Payable 173.00 Health Insurance Premiums Payable 40.00 Salaries and Wages Payable 1,597.06 Payroll for week ending Jan. 6

  11. Page 368 Paying Employees

  12. Page 368 Paying Employees Most businesses pay their employees by check or by direct deposit. By using these methods, the business avoids the inconvenience and risk involved in dealing with currency.

  13. Page 368 Paying by Check

  14. Page 368 Paying by Check Paychecks may be written on • the firm’s regular checking account, or • a payroll bank account.

  15. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. Jan. 8 Salaries and Wages Payable 1,597.06 Cash 1,597.06 To record payment of salaries and wages for week ended Jan. 6 Page 369 Checks Written on Regular Checking Account On January 8 On Line Furnishings wrote five checks for payroll, Check numbers 1725-1729. General Journal Format

  16. Page 369 Checks Written on Regular Checking Account On January 8 On Line Furnishings wrote five checks for payroll, Check numbers 1725-1729. CASH PAYMENTS JOURNAL PAGE 1 ACCOUNTS SALARIES PURCHASES DATE CK. DESCRIPTION POST. PAYABLE AND WAGES DISCOUNT CASH NO. REF. DEBIT PAYABLE DEBIT CREDIT CREDIT 8 1725 Cindy Taylor 304.46 304.46 8 1726 Edward Gallegos 308.93 308.93 8 1727 Bill Turner 243.05 243.05 8 1728 Cecilia Lin 416.22 416.22 8 1729 Selena Anderson 324.40 324.40 31 Totals xxxx.xx 6,388.24 xxxx.xx xxxx.xx Special Journal Format

  17. Page 369 Notice that there is a separate Salaries and Wages Payable Debit Column. CASH PAYMENTS JOURNAL PAGE 1 ACCOUNTS SALARIES PURCHASES DATE CK. DESCRIPTION POST. PAYABLE AND WAGES DISCOUNT CASH NO. REF. DEBIT PAYABLE DEBIT CREDIT CREDIT 8 1725 Cindy Taylor 304.46 304.46 8 1726 Edward Gallegos 308.93 308.93 8 1727 Bill Turner 243.05 243.05 8 1728 Cecilia Lin 416.22 416.22 8 1729 Selena Anderson 324.40 324.40 31 Totals xxxx.xx 6,388.24 xxxx.xx xxxx.xx

  18. QUESTION: Why didn’t expense increase when the payroll checks were issued? ANSWER: The expense was already recorded when the first payroll journal entry was made. Page 369 Paying Employees

  19. Record Payroll Issue Paychecks Income Statement Income Statement Expenses $1,960 Net Income $1,960 Balance Sheet Balance Sheet Liabilities $1,960 Assets $1,597.06 Equity $1,960 Liabilities $1,597.06 Page 369 Effects on the Financial Statements No effect on net income

  20. Page 369 Checks Written on a Separate Payroll Account Many businesses write payroll checks from a separatepayroll bank account. This is a two-step process. • A check is drawn on the regular bank account for the total amount of net pay and deposited in the payroll bank account. • Individual payroll checks are issued from the payroll bank account.

  21. Page 370 Paying by Direct Deposit

  22. Page 370 Paying by Direct Deposit • A popular method of paying employees is the direct deposit method. • The bank electronically transfers net pay from the employer’s account to the personal account of the employee. • On payday the employee receives a statement showing gross earnings, deductions, and net pay.

  23. Page 370 Individual Earnings Records

  24. Page 370 Objective 8 Maintain an earnings record for each employee.

  25. QUESTION: What is an individual earnings record? ANSWER: An individual earnings record is a record that contains information needed to compute earnings and complete tax reports. Page 370

  26. Page 371 The earnings record shows: The payroll period EARNINGS RECORD FOR 20-- NAME Cindy Taylor RATE $9 per hour SOC. SEC. NO. 123-xx-xxxx ADDRESS6480 Oak Tree Drive, Denton, TX 76209-6789DATE OF BIRTH Nov. 25, 1979 WITHHOLDING ALLOWANCES1 MARITAL STATUSM

  27. Page 371 The earnings record shows: The date paid EARNINGS RECORD FOR 20-- NAME Cindy Taylor RATE $9 per hour SOC. SEC. NO. 123-xx-xxxx ADDRESS6480 Oak Tree Drive, Denton, TX 76209-6789DATE OF BIRTH Nov. 25, 1979 WITHHOLDING ALLOWANCES1 MARITAL STATUSM

  28. Page 371 The earnings record shows: The regular and overtime hours EARNINGS RECORD FOR 20-- NAME Cindy Taylor RATE $9 per hour SOC. SEC. NO. 123-xx-xxxx ADDRESS6480 Oak Tree Drive, Denton, TX 76209-6789DATE OF BIRTH Nov. 25, 1979 WITHHOLDING ALLOWANCES1 MARITAL STATUSM

  29. Page 371 The earnings record shows: The regular and overtime earnings EARNINGS RECORD FOR 20-- NAME Cindy Taylor RATE $9 per hour SOC. SEC. NO. 123-xx-xxxx ADDRESS6480 Oak Tree Drive, Denton, TX 76209-6789DATE OF BIRTH Nov. 25, 1979 WITHHOLDING ALLOWANCES1 MARITAL STATUSM

  30. Page 371 The earnings record shows: The deductions EARNINGS RECORD FOR 20-- NAME Cindy Taylor RATE $9 per hour SOC. SEC. NO. 123-xx-xxxx ADDRESS6480 Oak Tree Drive, Denton, TX 76209-6789DATE OF BIRTH Nov. 25, 1979 WITHHOLDING ALLOWANCES1 MARITAL STATUSM

  31. Page 371 The earnings record shows: The net pay EARNINGS RECORD FOR 20-- NAME Cindy Taylor RATE $9 per hour SOC. SEC. NO. 123-xx-xxxx ADDRESS6480 Oak Tree Drive, Denton, TX 76209-6789DATE OF BIRTH Nov. 25, 1979 WITHHOLDING ALLOWANCES1 MARITAL STATUSM

  32. Page 371 The earnings records are totaled monthly and at the end of each calendar quarter. This provides information needed to make tax payments and file tax returns. EARNINGS RECORD FOR 20-- NAME Cindy Taylor RATE $9 per hour SOC. SEC. NO. 123-xx-xxxx ADDRESS6480 Oak Tree Drive, Denton, TX 76209-6789DATE OF BIRTH Nov. 25, 1979 WITHHOLDING ALLOWANCES1 MARITAL STATUSM Totaled monthly earnings

  33. Page 371 Completing January Payrolls

  34. Page 371 In order to complete the January payroll for On Line Furnishings, assume that all employees worked the same number of hours each week of the month as they did the first week. Thus they had the same earnings, deductions, and net pay each week.

  35. Page 373 Entry to Record Payroll

  36. One general journal entry is made to record the weekly payroll expense for all employees of On Line Furnishings. This general journal entry records the payroll expense and liability, but not the payments to employees. Page 373 Entry to Record Payroll

  37. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. Page 373 AND ENDING January 6, 20-- PAID January 8, 20-- DEDUCTIONS DISTRIBUTION NAME SOCIAL MEDICARE INCOME HEALTHNET CHECK OFFICE SHIPPING SECURITY TAX INSURANCE AMOUNT NO. SALARIES WAGES Taylor, Cindy 22.32 5.22 28.00 304.46 1725 360.00 Gallegos, Edward23.56 5.51 42.00 308.93 1726 380.00 Turner, Bill 18.60 4.35 14.00 20.00 243.05 1727 300.00 Lin, Cecilia 32.24 7.54 44.00 20.00 416.22 1728 520.00 Anderson, Selena 24.80 5.80 45.00 324.40 1729 400.00 121.52 28.42 173.00 40.00 1,597.06 400.00 1,560.00 M N O P Q R S T Since we are assuming an identical payroll for each week of the month, each of the four weekly payrolls require general journal entries identical to the one shown here. 20-- Jan. 8 Office Salaries Expense 400.00 Shipping Wages Expense 1,560.00 Social Security Tax Payable 121.52 Medicare Tax Payable 28.42 Employee Income Tax Payable 173.00 Health Insurance Premiums Payable 40.00 Salaries and Wages Payable 1,597.06 Payroll for week ending Jan. 6

  38. Page 373 Entry to Record Payment of Payroll

  39. CASH PAYMENTS JOURNAL PAGE 1 ACCOUNTS SALARIES PURCHASES DATE CK. DESCRIPTION POST. PAYABLE AND WAGES DISCOUNT CASH NO. REF. DEBIT PAYABLE DEBIT CREDIT CREDIT Jan. 2 1711 Discount Furniture 1,200.00 24.00 1,176.00 Company 8 1725 Cindy Taylor 304.46 304.46 8 1726 Edward Gallegos 308.93 308.93 8 1727 Bill Turner 243.05 243.05 8 1728 Cecilia Lin 416.22 416.22 8 1729 Selena Anderson 324.40 324.40 31 Totals xxxx.xx 6,388.24 xxxx.xx xxxx.xx Page 373 At the end of January, the columns in the cash payments journal are totaled, including the Salaries and Wages Payable Debit column.

  40. Page 373 Postings to Ledger Accounts

  41. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. 2004 Jan. 8 Office Salaries Expense 400.00 Shipping Wages Expense 1,560.00 Social Security Tax Payable 121.52 Medicare Tax Payable 28.42 Employee Income Tax Payable 173.00 Health Insurance Premiums Payable 40.00 Salaries and Wages Payable 1,597.06 Payroll for week ending Jan. 6 Page 373 The entries to record the weekly payroll expense and liability amounts are posted from the general journal to the accounts in the general ledger. Salaries and Wages Payable 1/31 6,388.24 1/8 1,597.06 1/15 1,597.06 1/22 1,597.06 1/29 1,597.06 Office Salaries Expense 1/8 400.00 1/15 400.00 1/22 400.00 1/29 400.00

  42. Page 373 Salaries and Wages Payable 1/31 6,388.24 1/8 1,597.06 1/15 1,597.06 1/22 1,597.06 1/29 1,597.06 The total of the Salaries and Wages Payable Debit column in the cash payments journal is posted to the Salaries and Wages Payable general ledger account. CASH PAYMENTS JOURNAL PAGE 1 ACCOUNTS SALARIES PURCHASES DATE CK. DESCRIPTION POST. PAYABLE AND WAGES DISCOUNT CASH NO. REF. DEBIT PAYABLE DEBIT CREDIT CREDIT Jan. 2 1711 Discount Furniture 1,200.00 24.00 1,176.00 Company 8 1725 Cindy Taylor 304.46 304.46 8 1726 Edward Gallegos 308.93 308.93 8 1727 Bill Turner 243.05 243.05 8 1728 Cecilia Lin 416.22 416.22 8 1729 Selena Anderson 324.40 324.40 31 Totals xxxx.xx 6,388.24 xxxx.xx xxxx.xx

  43. R E V I E W Complete the following sentences: The information for the general journal entry to record the payroll expense comes from the _____________. payroll register When payroll expense is recorded, net pay is _______ to the liability account,Salaries and Wages Payable. credited regular Paychecks can be written on the _______ checking account or on a separate ______ account. payroll

  44. R E V I E W Complete the following sentences: direct deposit method In the ___________________ of paying employees, the bank electronically transfers net pay from the employer’s account to the personal account of the employee. individual earnings record The _______________________ contains information needed to compute earnings for each employee. The Salaries and Wages Payable account is _______ when paychecks are written. debited

  45. Thank You for using College Accounting, Tenth Edition Price • Haddock • Brock

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