Business Math Chapter 8

Federal Insurance Contributions Act (FICA) Social Security tax Managing Payroll and Inventory Chapter 8 payroll gross earnings salary hourly wage overtime rate commission deductions Federal Insurance Contributions Act (FICA) Social Security tax Medicare tax total gross earnings perpetual inventory system point-of-sale terminals periodic inventory system specific identification method first-in-first-out method (FIFO) last-in, first-out method (LIFO)

Managing Payroll and Inventory Chapter 8

The Importance of Payroll Records Managing Payroll and Inventory Chapter 8 The Importance of Payroll Records Calculate Gross Earnings 1 Calculate Payroll Deductions 2 Prepare Payroll Records 3 Common Steps in the Payroll System Prepare Paychecks 4 Record Payroll Information in the Accounting Records 5 Report Payroll Information to the Government 6

Calculating Payroll Deductions Managing Payroll and Inventory Chapter 8 Calculating Payroll Deductions Voluntary Deductions Health or Life Insurance Programs Union Dues Contributions to Charities Pensions and Other Retirement Plans Direct Deposits to a Credit Union or Bank

Preparing Payroll Records Managing Payroll and Inventory Chapter 8 Preparing Payroll Records Earnings Sections of the Payroll Register Pertaining to Money Overtime Pay Gross Earnings

The Benefits of Direct Deposit Managing Payroll and Inventory Chapter 8 Preparing Paychecks Section 1 The Benefits of Direct Deposit Employees do not have to go to the bank to deposit paychecks No risk of misplacing or losing a check Funds are usually available faster Employers save the expense of paper and labor

Employer’s Payroll Taxes Managing Payroll and Inventory Chapter 8 Employer’s Payroll Taxes Employer’s Share of FICA Taxes Federal law requires that the employer match the total amount deducted from employees’ paychecks for Social Security and Medicare. Federal and State Unemployment Taxes The employer pays both federal and state unemployment taxes. The federal unemployment tax is 6.2 percent on the first $7,000 of an employee’s annual wages. State unemployment tax rates and maximum taxable amounts vary among states.

Reporting Payroll Information to the Government Managing Payroll and Inventory Chapter 8 Reporting Payroll Information to the Government Issues Addressed by the Internal Revenue Code (IRC) Determining whether the federal tax coverage rules apply Computing an employee’s taxable wages Calculating the amount of employment taxes to be withheld Depositing the correct amount of taxes with the government Filing employment tax returns

Payroll Accounting in Financial Management Managing Payroll and Inventory Chapter 8 Payroll Accounting in Financial Management Accurate payroll records are essential for controlling business expenses. Payroll is often the biggest expense of running a business.

Establishing an Inventory System Managing Payroll and Inventory Chapter 8 Establishing an Inventory System The Stages of Merchandise 1 2 3 4 Ordering Merchandise Storing Merchandise Displaying Merchandise Selling Merchandise Tracking and controlling inventory is a major function of an accounting system.

Controlling Inventory Managing Payroll and Inventory Chapter 8 Controlling Inventory Inventory Too Large You may have purchased the wrong quantity Cash may not be available for operating expenses Merchandise may have to be sold at a loss Inventory Too Low Not enough choice for customers Less cash from sales as customers go elsewhere Disappointed customers may be lost forever

Analyzing Inventory Turnover Managing Payroll and Inventory Chapter 8 Analyzing Inventory Turnover Inventory Turnover Average Inventory Inventory Turnover Levels Days in Stock Basic Stock List Model Stock List Never-Out List Stock Lists

Perpetual Inventory System Periodic Inventory System Managing Payroll and Inventory Chapter 8 Inventory Systems Perpetual Inventory System Constant, up-to-date records of inventory Can use point of sale terminals Automated reordering possible Periodic Inventory System Inventory records updated after physical count Some businesses shut down for inventory