Slide F 1

Slide F 2 Appendix F Payroll Accounting Learning Objectives After studying this chapter, you should be able to: 1.Compute and record the payroll for a pay period. 2.Describe and record employer payroll taxes. 3.Discuss the objectives of internal control for payroll.

Slide F 3 “Payroll” pertains to both: Salaries - managerial, administrative, and sales personnel (monthly or yearly rate). Wages - store clerks, factory employees, and manual laborers (rate per hour). Involves computing three amounts: (1) gross earnings, (2) payroll deductions, and (3) net pay. Accounting for Payroll Determining the Payroll

Slide F 4 Total compensation earned by an employee (wages or salaries, plus any bonuses and commissions). Gross Earnings LO 1 Compute and record the payroll for a pay period. Illustration F-1 Determining the Payroll

Slide F 5 Mandatory:  FICA tax  Federal income tax  State and city income taxes Payroll Deductions LO 1 Compute and record the payroll for a pay period. Voluntary:  Charity  Insurance  Union dues  Pension plans Determining the Payroll

Slide F 6 Mandatory:  FICA tax  Federal income tax  State and city income taxes LO 1 Social Security taxes  Supplemental retirement, employment disability, and medical benefits.  The rate is 6.2% for Social Security on the first $106,800 of gross earnings for each employee plus 1.45% for Medicare on the gross earnings for each employee, no limit. Determining the Payroll Payroll Deductions

Slide F 7 LO 1 Compute and record the payroll for a pay period.  Employers are required to withhold income taxes from employees’ pay.  Withholding amounts are based on gross wages and the number of allowances claimed. Determining the Payroll Mandatory:  FICA tax  Federal income tax  State and city income taxes Payroll Deductions

Slide F 8 LO 1 Compute and record the payroll for a pay period.  Most states (and some cities) require employers to withhold income taxes from employees’ earnings. Determining the Payroll Mandatory:  FICA tax  Federal income tax  State income tax Payroll Deductions

Slide F 9 Gross earnings minus payroll deductions. Net Pay LO 1 Compute and record the payroll for a pay period. Illustration F-7 Determining the Payroll

Slide F 10 Maintaining Payroll Department Records Recording the Payroll Illustration F-8 LO 1

Slide F 11 Maintaining Payroll Department Records Recording the Payroll LO 1 Illustration F-9

Slide F 12 Illustration: Prepare the entry Academy Company would make to record the payroll for the week ending January 14. Recognizing Payroll Expenses and Liabilities LO 1 Compute and record the payroll for a pay period. Salaries and wages expense17, Federal income taxes payable3, FICA taxes payable1, State income taxes payable United fund contributions payable Union dues payable Salaries and wages payable11, Recording the Payroll

Slide F 13 Illustration: Prepare the entry Academy Company would make to record the payment of the payroll. Recording Payment of the Payroll LO 1 Compute and record the payroll for a pay period. Salaries and wages payable 11, Cash 11, Recording the Payroll

Slide F 14 LO 1 Compute and record the payroll for a pay period. Illustration F-10 Paycheck and statement of earnings Recording the Payroll

Slide F 15 Payroll tax expense results from three taxes that governmental agencies levy on employers. LO 2 Describe and record employer payroll taxes. These taxes are:  FICA tax  Federal unemployment tax  State unemployment tax  Same rate and maximum earnings as the employee’s.  The rate is 6.2% for Social Security on the first $106,800 of gross earnings for each employee plus 1.45% for Medicare on the gross earnings for each employee, no limit. Employer Payroll Taxes

Slide F 16 LO 2 Describe and record employer payroll taxes.  FUTA tax rate is 6.2% of first $7,000 of taxable wages.  Employers who pay the state unemployment tax on a timely basis will receive an offset credit of up to 5.4%. Therefore, the net federal tax rate is generally 0.8%. Employer Payroll Taxes Payroll tax expense results from three taxes that governmental agencies levy on employers. These taxes are:  FICA tax  Federal unemployment tax  State unemployment tax

Slide F 17 LO 2 Describe and record employer payroll taxes.  SUTA basic rate is usually 5.4% on the first $7,000 of wages paid. Employer Payroll Taxes Payroll tax expense results from three taxes that governmental agencies levy on employers. These taxes are:  FICA tax  Federal unemployment tax  State unemployment tax

Slide F 18 Illustration: Academy records the payroll tax expense associated with the January 14 payroll with the following entry. Use the following rates: FICA 8%, state unemployment 5.4%, federal unemployment 0.8%. Payroll tax expense2, State unemployment taxes payable FICA tax payable1, ** $17, x 5.4% = $ * $ 17, x 7.65% = $1, Federal unemployment taxes payable * *** $17,210 x.8% = $ ** *** LO 2 Describe and record employer payroll taxes. Employer Payroll Taxes

Slide F 19 Employer payroll taxes do not include: a.Federal unemployment taxes. b.State unemployment taxes. c.Federal income taxes. d.FICA taxes. Question LO 2 Describe and record employer payroll taxes. Employer Payroll Taxes

Slide F 20 Companies must report FICA taxes and federal income taxes withheld no later than one month following the close of each quarter. Companies generally file and remit federal unemployment taxes annually on or before January 31 of the subsequent year. Companies usually file and pay state unemployment taxes by the end of the month following each quarter. Employers must provide each employee with a Wage and Tax Statement (Form W-2) by January 31. LO 2 Describe and record employer payroll taxes. Filing and Remitting Payroll Taxes

Slide F 21 APPENDIX Filing and Remitting Payroll Taxes Illustration F-12

Slide F 22 As applied to payroll, the objectives of internal control are 1.to safeguard company assets against unauthorized payments of payrolls, and 2.to ensure the accuracy and reliability of the accounting records pertaining to payrolls. LO 3 Discuss the objectives of internal control for payroll. Internal Control for Payroll

Slide F 23 APPENDIX Filing and Remitting Payroll Taxes Illustration F-13

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