Current liabilities – Personnel Costs Payroll, payroll taxes, compensated absence, bonuses

Current liabilities Short-term debt to be met with one year or less (or operating cycle, if longer than a year) Often arises from accruals – Expense…………………………………………..XX Payable………………………………………………………..XX Examples – contractual amounts --accounts payable (AP), notes payable (NP), taxes payable, wages payable. Amounts determined from operating activities– accrued expenses, payroll taxes, compensated absences, bonuses, sales and use taxes, income taxes, unearned revenue Contingent amounts – warranties, premiums, guarantees, loss contingencies

Recording the Payroll Gross pay of employees -weekly, bimonthly, monthly Withholdings (liabilities)–taxes (FICA --tax rate and ceiling, medicare, federal, state, local income tax -- tax rate and no ceiling), retirement, insurance (health, life, etc), voluntary savings/contributions, etc. Net pay – the amount paid to employees, salaries payable Salaries expense………………….XX FICA tax payable……………………………XX Federal income tax payable……………XX state income tax payable……………… XX Heath,insurance,retirement pay…….XX Salaries payable or cash…………………XX

Recording Payroll Taxes Payroll tax expense – the total of taxes the employer pays because they have employees. This includes social security, unemployment, etc. Social Security Liabilities –Employer contributes to O.A.S.D.I. (old-age, survivor and disability insurance) and medicare “social security taxes” as the employee does, though the amount could be different depending on current tax rules. Unemployment Liabilities – Employer contributes to federal and state unemployment taxes (FUTA and SUTA). Unemployment does have a ceiling or cap based on employee gross pay per year. Payroll tax expense……………………………………XX Federal Unemployment Taxes Payable…………………….XX State Unemployment Taxes Payable…………………………XX OASDI taxes payable………………………………………………..XX Medicare taxes payable…………………………………………..XX

Recording Compensated Absences Compensated absences include -- vacation/holiday, sickness or personal days for which the company pays the employee when not working Required entries needed if the following conditions are met. Employee service already rendered so right to compensated absence is “earned” Rights vest (employees can’t lose right to be paid if not used, even if leave employment) and/or accumulate (carried over to another accounting period if not used). Payment is very likely at some point. The amount of the payment can be calculated fairly accurately Required accrual journal entry examples --vacation pay that vests and vacation pay that doesn’t vest, if carried forward to another accounting period, sick leave if vests (and will be paid eventually to employees even if they are not sick) Optional accrual journal entry examples– sick leave that does not vest but accumulates to another accounting period Salaries expense……………………………………………XX Liability for compensated absences………………………..XX

Recording bonuses Additional compensation incentives to some executives and managers Earnings-based so often only given if company profits meet or exceed a certain amount Percentage of total profits or in excess of minimum amount Paid shortly after end of year Tax deductible expense Bonus = income before taxes and bonus times bonus % Bonus= income before taxes but after bonus times bonus% Salaries expense…………………………………..XX Bonus payable………………………………………………..XX