Financial Management Lesson 2: Bank Statements and Payroll 16 Financial Management Lesson 2: Bank Statements and Payroll

Lesson Objectives Upon completion of this lesson, students should be able to … Define and spell the terms to learn for this chapter. List and discuss nine steps for reconciling a bank statement.

Bank Statement Provides confirmation of funds in an account Assists in uncovering errors made by the office or bank bookkeeping system Includes all debits and credits processed 3

Information Included on Bank Statements Account number Average collected balance Minimum balance Tax ID number Beginning balance Deposit history Interest/Credits Checks and debits Service charges Ending balance 4

Critical Thinking Question Does it really matter that much if a bank statement is reconciled or not? Explain your answer!

Instructions for Reconciling a Bank Statement Compare the beginning balance of the current statement with the ending balance of the previous statement Write the current ending balance in the appropriate space on the reverse side of the bank statement Compare deposits noted on the statement against your records or receipts by making a check mark next to each correct number

Instructions for Reconciling a Bank Statement List separately all outstanding deposits Add these together and place the total on the reverse side of the statement in the space provided Add the ending balance to the total of deposits not already included and write this amount on the “Total” line

Instructions for Reconciling a Bank Statement Compare the value of the checks listed on the statement with the value listed in the checkbook or check stubs and place a check mark next to each correct number Note all numbers missing from the sequential list of check numbers List all outstanding checks Add the total for outstanding checks and place that figure on the line indicated on the back of the statement

Instructions for Reconciling a Bank Statement Subtract the total figure for checks outstanding from the previous total on the back of the statement to determine the current balance The current balance should agree with the amount in your check book or stub balance

Documents Used to Verify Banking Procedures Receipts Vouchers Invoices Statements from suppliers Proof of payments 10

Petty Cash Designated amount of money available for small purchases Must be tracked and recorded in a daily financial log A check is used to replenish petty cash Typically handled by one individual in the office Kept under lock and key for security purposes 11

Petty Cash Fund For a video about How To Handle the Petty Cash Fund click here, go MyHealthProfessionsKit.com, or insert the DVD-Rom found in the back of your book and select the “The Petty Cash Fund” video. 12

Payroll Pay Periods Weekly – 52 pay periods a year Biweekly – 26 pay periods a year Semi-Monthly – 24 pay periods a year Monthly – 12 pay periods a year 13

Formula to Calculate Payroll (Hourly wage X Number of hours worked per week) X 52 Weeks in a year = Gross pay (or Hourly wage X 2080 Full-time hours in a year = Annual pay) 14

Payroll Information Employers Must Maintain Amount of Gross Social Security number of each employee Number of exemptions of each employee Deductions for Social Security, federal, state, and city taxes State disability insurance and unemployment tax, where applicable Any pre-tax deductions such as 401K contributions 15

Steps for Manually Generating Payroll Step 1: Using the employee time card, calculate the total number of regular hours worked and then the total number of overtime hours worked. Step 2: Enter the totals obtained on the payroll register. Step 3: In the employee payroll record, obtain the employee’s pay rate. Step 4: Calculate the pay rate times the total number of regular hours worked. Step 5: Calculate the overtime pay rate times the total number of overtime hours.

Steps for Manually Generating Payroll Step 6: Enter the totals for each on the payroll register. Step 7: Add the regular hours earned and overtime hours earned and place this amount on the payroll register under the heading “total gross.” Step 8: Gather the employee payroll record and tax tables. Step 9: Determine how much to withhold for federal income tax. Step 10: Calculate the total FICA tax to be withheld.

Steps for Manually Generating Payroll Step 11: Enter the amounts on the payroll register. Step 12: Determine how much to withhold for local and state taxes. Step 13: Enter the amounts on the payroll register. Step 14: Compute the employer’s contributions to the unemployment fund of the state of residence and the Federal Unemployment Tax Act (FUTA). Step 15: Document these calculations on the employer’s account.

Steps for Manually Generating Payroll Step 16: Determine if there are any other deductions. Step 17: To calculate the net earnings subtract the total amount of deductions from the gross earnings. Step 18: Complete the check stub and check with the required information.

Other Federal Government Payroll Requirements Social Security, Medicare, and income tax withholding Federal unemployment tax State unemployment tax State disability insurance 20

Information Included on the W-4 Form Employee’s name and current address Social Security number Marital status The number of exemptions the employee claims 21

W-4 Forms 22

Questions? 23