Payroll Liabilities and Tax Records Chapter 13 $ Payroll Liabilities and Tax Records $ Making Accounting Relevant Federal, state, and local governments pass tax laws in order to generate revenue for government services. $ $ Can you name some uses for your tax dollars?

$ $ $ $ Section 1 Journalizing and Posting the Payroll Chapter 13 $ Section 1 Journalizing and Posting the Payroll $ What You’ll Learn How to compute the business payroll deductions. How to record the payroll entry in the general journal. $ $

$ $ $ $ Why It’s Important Key Term Chapter 13 Salaries Expense Section 1 Journalizing and Posting the Payroll (con’t.) Chapter 13 $ Why It’s Important Payroll deductions are liabilities of the business. It is essential that payroll deductions are journalized and posted in a timely manner. $ $ $ Key Term Salaries Expense

$ $ $ $ Analyzing the Payroll Transaction Chapter 13 Section 1 Journalizing and Posting the Payroll (con’t.) Chapter 13 $ Analyzing the Payroll Transaction Employee earnings are a normal operating expense of a business. Various deductions, such as income and FICA taxes, are withheld from gross earnings each pay period. Net pay is the amount actually paid out in cash by the employer to the employees. $ $ $

Section 1 Journalizing and Posting the Payroll (con’t.) Chapter 13 $ Analyzing the Payroll Transaction con’t. The employee retains the amounts withheld until it is time to pay the appropriate government agencies and businesses. The amount withheld but not yet paid are liabilities of the business. $ $ Type of Deduction Ledger Account Federal income tax Employees’ Federal Income Tax Payable Medicare tax Medicare Tax Payable Hospital insurance premiums Hospital Insurance Premiums Payable $

Amount actually paid out in cash by the employer to the employees. Section 1 Journalizing and Posting the Payroll (con’t.) Chapter 13 $ Journalizing the Payroll $ JOURNAL ENTRY $ $ Amount actually paid out in cash by the employer to the employees.

Demonstration Problem 13-1

18 200- May 16 Salaries Expense 4955.30 Employees’ Federal Income Tax Payable 793.-- Employees’ State Income Tax Payable 99.11 Social Security Tax Payable 307.23 Medicare Tax Payable 71.85 Hospital Insurance Premiums Payable 114.50 Union Dues Payable 140.-- Cash in Bank (Net Pay) 3429.61 Payroll Register 5/16 ck #345

Assignment $ $ $ $ Chapter 13 Section 1 Journalizing and Posting the Payroll Chapter 13 $ $ Assignment $ $

$ $ $ $ Thinking Critically 1&2 Computing in the Business World Section 1 Journalizing and Posting the Payroll (con’t.) Chapter 13 $ Check Your Understanding p321 $ Thinking Critically 1&2 Computing in the Business World Problem 13-1 $ $