Chapter 14: Employees, Payroll, and Account Reconciliation McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Employees, Payroll, and Account Reconciliation 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 14 to show you how to use Peachtree to enter payroll default information, add employees, make journal entries for payroll, print payroll reports, and complete account reconciliation. 14-2

Software Objectives, p. 555 Complete the Payroll Setup Wizard. Copy the TAXABLE.DAT file. Enter employee and employer default information. Journalize and post Payroll Journal entries. Print paychecks. Reconcile First State Bank Account and the Payroll Checking Account. Compare the vendor ledgers, customer ledgers, and inventory valuation report to the associated general ledger accounts. Print the financial statements. Make four backups: two for Joann’s Service Merchandise; two for the end-of-chapter exercises. 14-3

Web Objectives, p. 555 Use your Internet browser to go to the book’s website at www.mhhe.com/yacht2009. Go to the Internet Activity link on the book’s website. Then, select WEB EXERCISES PART 3. Complete the fourth web exercise in Part 3–Salary Calculator. Use a word processing program to write a summary of the websites that you visited. 14-4

Peachtree Tips The exercises in Part 3 are cumulative. Exercises 11-1 through 13-2 must be completed before starting Exercise 14-1. The Payroll Entry window is the Payroll Journal. In order for payroll taxes to be computed automatically, students need to copy the TAXABLE.DAT file (pages 560-562), check that the user-maintained payroll tables are included for Georgia (pages 562-564); establish the payroll account (page 564); set up defaults using the Payroll Setup Wizard (pages 565-569); enter employee and employer default information (pages 570-571); and then complete payroll setup (pages 572-576). If you do not want to copy the TAXABLE.DAT file, payroll taxes can be entered manually on the Payroll Entry window. Refer to textbook pages 583 and 586 for completed payroll taxes. The Taxes – Benefits – Liabilities table lists the amount for both employee and employer withholdings. 14-5

Backing Up Chapter 14 This information is also shown on page 402. Backup Name KB Page Nos. Chapter 14 Begin 1,611 KB 579-580 Chapter 14 1,647 KB 604 Exercise 14-1 1549 KB 611 Exercise 14-2 1,586 KB 615 . 14-6

Chapter 14 Topics Software & web objectives, p. 555 Getting started, pp. 559-560 Copying the TAXABLE.DAT file, pages 560-562 a. User-maintained payroll tables, pages 562-564 b. Establishing the payroll account, p. 564 Payroll setup wizard, pp. 565-569 Entering employee and employer default information, pp. 570-572 Completing payroll setup, pp. 572-576 6. Entering employee maintenance information, pages 577-579 6. Backing up your data, pp. 579-580 7. Payroll entry, pp. 580-587 Printing the payroll journal, pp. 588-590 Account reconciliation, p. 591 a. First State Bank Statement, p. 592 b. Payroll Checking Account bank statement, p. 593 c. Print reports: account reconciliation, accounts receivable, accounts payable, and inventory, pp. 593-599 14-7

Chapter 14 Topics (concluded) Printing the general ledger trial balance, p. 600 Printing the financial statements, pp. 601-603 Backing up Chapter 14 data, p. 604 Internet activity, p. 604 Summary and review, p. 605 a. Going to the net, pp. 605-606 b. Multiple-choice questions, pp. 606-608 c. Exercise 14-1, pp. 609-611 d. Exercise 14-2, pp. 611-615 e. Analysis question, page 615 e. Chapter 14 index, p. 616 14-8

Getting started, p. 559 Complete steps 1 – 2e. on page 559. Remember, you must complete Chapters 11, 12, and 13 before starting Chapter 14. 14-9

Copying the TAXTABLE.DAT file, pp. 560-561 Read the information on pages 560-561. Complete steps 1 and 2 on page 561. Write down the Directory field shown on the Maintain Company Information window. 14-10

Copying the TAXTABLE.DAT file, p. 562-564 (concluded) Complete steps 3 and 4 on page 562. Read the information on pages 562. Complete steps 1-6. To check that you have copied the TAXTABLE.DAT file, refer to steps 1-4, pages 562-564. 14-11

Establishing the payroll account, p. 564 In order to establish the payroll checking account, transfer funds from First State Bank (Account No. 10200) to the Payroll Checking Account (Account No. 10300). Read the transaction information on p. 564. 14-12

Payroll Setup Wizard, pp. 565-569 From the Employees & Payroll page, click . Then, select Payroll Setup Wizard. Read the information on the Payroll Setup Wizard. Click <Next>. Read step 2, p. 566. Payroll Options is selected. Read the information. Accept the default for Do it Yourself In-House. Click <Next>. 14-13

Payroll Setup Wizard, pp. 566-569 The Payroll Options – Do it Yourself In-House window appears. Select Do it Yourself. Click <Next> Read the Other Payroll Options, Direct Deposit, and E-Filing areas. Click <Next>. Company Information is selected. The Federal Employer ID, State Employer ID, State (GA), Unemployment ID, and State Unemployment Rate fields are automatically completed. These fields agree with the company information entered on page 405 in Chapter 11. The Georgia Administration Assessment Tax rate is shown and No is selected for Do you want to record employee means and tips. Click <Next> Pay Types is selected. In the Overtime field, select Account No. 77600, Overtime Expense. Check this window carefully. Click <Next>. The Benefits window appears. Do not make any selections. Click <Next>. The Payroll window appears. Observe that the Tax liability acct no. (23400) and Tax Expense acct no. (72000) is selected. To accept these defaults, click <Next>. The Setup Complete window appears, click Finish. Click Finish. 14-14

Entering employee and employer default information, pp. 570-571 Read the information on p. 570. From the Employees & Payroll page, click then select Set Up Employee Defaults. Observe that GA is shown in the State field. Complete steps 2-6 on page 570. The Employee Defaults/Employee Fields window is shown on page 571. 14-15

Entering employee and employer default information, pp. 571-573 Click on the Company Fields tab. The Employee Defaults/Company Fields window is shown on p. 572. Click <OK>. Complete steps 1, 2 and 3 on pages 572-574. 14-16

Assign Company-Paid Tax Fields, pp. 574-575 Click .. The Assign Company-Paid Tax Fields window appears. These selections appear. (If not, select them.) Federal Unemployment (FUTA): Fed_Unemp_C State Unemployment (SUTA): St_Unemp_C Other State Unemployment: St2_Unemp_C 14-17

Assign Employee-Paid State Tax Fields, p. 575 Click <OK>. You are returned to the Assign Tax Fields window. Click . Do not make any changes. Click on <OK>. You are returned to the Assign Tax Fields window. Click <Next>. The Field Order window appears. Do not make any changes. Click <Next>. 14-18

Payroll Settings, p. 576 The Setup Complete window appears. Read the information. Click <Finish> 14-19

Entering employee maintenance information, p. 577-580 From the Employees & Payroll page, click . Select New Employee. The Maintain Employees/Sales Reps window appears. Complete the employee information shown on step 2, p. 577. 14-20

Entering Employee Maintenance Information, p. 577-578 Click on the Withholding Info tab. Complete step 3 on page 577. This window is shown at the top of page 578. Complete steps 4 – 6 on pp. 578. 14-21

Maintain Employees/Sales Reps window, pp. 578-579 After completing step 6 on page 578, this window shows Pay Info. Complete steps 7 – 12 on p. 579. 14-22

Complete steps 1 – 6 on p. 580 to back up your data. Backing up your data, p. 579-580 Complete steps 1 – 6 on p. 580 to back up your data. Use Chapter 14 Begin as the back up name. 14-23

Payroll Entry, pp. 580-583 Read the information on pages 580-582. Complete steps 1 – 8 on pages 581-582 to issue a payroll check. The Payroll Entry window is shown on p. 583. Click <Print>. 14-24

Print Forms: Payroll Checks, pp. 583-584 Complete step 11 on p. 583. Select OCR Multi-Purpose PR Laser. Read the comm584ent on page 583. The Print Forms: Payroll Checks window appears (see page 584). Click <OK>. Complete steps 12 and 13 on page 584. 14-25

First Check Number, pp. 585 Type 101 as the First Check Number. The Print Forms: Payroll Checks window is shown on p. 585 after step 14. Click <Print>. Compare your check with the one shown on page 585. Complete steps 16 and 17, p. 586. Then, issue the checks shown in step 18, p. 587. When through, close the Payroll Entry window. 14-26

Printing the payroll journal, pp. 588-590 Complete the steps on p. 588. Compare your payroll journal to the one shown on pp. 588-590. 14-27

Account Reconciliation, pp. 591-599 Read page 591. Peachtree’s general ledger is integrated with other parts of the program. The First State Bank Statement is on p. 592. Payroll Checking Account Bank Statement is on p. 593. Printing Reports: Account Reconciliation, General Ledgers, Customer Ledgers, Vendor Ledgers, and Inventory reports are on pp. 594-599. General Ledger (Cash account) First State Bank Account No. 10200 (Current Liability) Accounts Payable Account No. 20000 Joseph James Hardware (Vendor Ledger) JJH06 14-28

Printing the general ledger trial balance, p. 600 Complete the step on p. 600. Compare your general ledger trial balance to the one shown on p. 600. 14-29

Printing the financial statements, pp. 601-603 Complete the steps on page 601-603. Compare your financial statements with the ones shown on pages 601, 602, and 603. 14-30

Backing Up Chapter 14 Data, p. 604 Complete steps 1-6 on page 604. The back up name is Chapter 14. 14-31

Glossary of Terms Chapter 14 14-32

Exemptions, p. 556 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. 14-33

Withholding allowances, p. 556 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. 14-34

FICA taxes, p. 556 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. 14-35

Medicare, p. 556 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. 14-36

W-2 forms, p. 556 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. 14-37

Internet Activity, p. 604 1 Go to the book’s website at www.mhhe.com/yacht2009. 2 Link to Student Edition. 3 In the Course-wide Content list, link to Part 3 Internet Activities for Chapters 11-14. Open or Save. (You can also choose Chapter 14, then link to Internet Activities. If you Choose a Chapter, observe that other chapter-specific links are available; for example, Quizzes, PowerPoints, and Going to the Net Exercises.) 4 Complete the SALARY WIZARD-Chapter 14 exercise. Read steps 1-5. 5 Follow the steps shown on the book’s website to complete this Internet activity. 6 Using a word processing program, write a brief summary of what you find. Include all appropriate website addresses. 14-38

Going to the Net, pp. 605-606 Access the Employer Reporting and Instructions website at http://www.ssa.gov/employer/. Link to General W-2 Filing Information, then answer these questions. What are dates that employers must send W-2 information to the Social Security Administration? (Include the dates for both electronic and paper filing.) When must employers give employees their W-2? What two forms do employers send to the Social Security Administration? 14-39