PowerPoint® Slides to accompany Basic Bookkeeping, Seventh Edition Prepared by JD Chazan CPA, CA National Taiwan University 10-1 Copyright © 2015 by Nelson Education Ltd.

10-2 Chapter 10 Payroll Copyright © 2015 by Nelson Education Ltd.

Chapter 10: Payroll Chapter Objectives After completing this chapter, you will be able to: calculate and record payroll for employees in hourly, piecework, salary, commission, and salary/commission payroll systems look up payroll deductions from government payroll deduction tables record remittances for government deductions and voluntary deductions Copyright © 2015 by Nelson Education Ltd. 10-3

Chapter 10: Payroll Calculating gross pay: 1. Hourly Payroll Employees are paid for the number of hours worked during the pay period (week, month, etc). Regular Hours Worked x Regular Rate = Gross Pay (Regular) Overtime Hours Worked x Overtime Rate = Gross Pay (Overtime) Copyright © 2015 by Nelson Education Ltd. 10-4

Chapter 10: Payroll 2. Piecework Payroll Employees are paid according to the number of pieces they produce during the pay period. For example: Copyright © 2015 by Nelson Education Ltd. 10-5

Chapter 10: Payroll 3. Salary Payroll Employees are paid a fixed amount for each payroll period. An example is an office worker who is paid $1,650 per month. Copyright © 2015 by Nelson Education Ltd. 10-6

Chapter 10: Payroll 4. Commission Payroll Employees are paid a commission based on the amount of sales they make. Commission may be paid at a flat rate, such as 6.5% on all sales. Commission may also be paid on an incentive basis, such as: » 7% on the first $5,000 of sales, plus » 9.5% on all sales over $5,000 Copyright © 2015 by Nelson Education Ltd. 10-7

Chapter 10: Payroll 5. Salary-Commission Payroll Employees are paid a basic monthly salary plus commission on sales, such as: » $600 basic salary per month, plus » 7.5% commission on all sales Copyright © 2015 by Nelson Education Ltd. 10-8

Chapter 10: Payroll Compulsory Payroll Deductions Income Tax Federal Income Tax Provincial Income Tax Each employee's Claim Code is based on the total of personal exemptions to which he/she is entitled The Claim Code is determined on form TD1.form TD1 Canada Pension Plan (CPP) / Quebec Pension Plan (QPP)‏ Contributions must be made by all employees 18 to 70 years of age who are in pensionable employment and not receiving CPP/QPP pension or disability payments. Copyright © 2015 by Nelson Education Ltd. 10-9

Chapter 10: Payroll Employment Insurance (EI)‏ Provides benefits for limited periods of unemployment and parental leave. Other Deductions Voluntary deductions – RRSPs – Canada Savings Bonds – Life, health, and dental plans Other compulsory deductions – Union dues Copyright © 2015 by Nelson Education Ltd

Chapter 10: Payroll Payroll Deductions Tables Tables are updated twice a year and are available as: Booklet of Payroll Deductions Tables Payroll Deductions Online Calculator on the CRA web siteCRA web site PDF tables downloaded from the CRA web site Copyright © 2015 by Nelson Education Ltd

Chapter 10: Payroll Looking up deductions in the tables Assume an employee has earned a gross pay of $645 this week. Also, assume he is entitled to Claim Code 5. Copyright © 2015 by Nelson Education Ltd

Chapter 10: Payroll Federal Income Tax Table (weekly) Look up the gross pay of $645 under Claim Code 5. Answer: $40.60 Copyright © 2015 by Nelson Education Ltd

Chapter 10: Payroll Provincial Income Tax Table (weekly) Look up the gross pay of $645 under Claim Code 5. Answer: $24.90 Copyright © 2015 by Nelson Education Ltd

Chapter 10: Payroll Canada Pension Plan (CPP) Look up a gross pay of $645. Answer: $28.60 Copyright © 2015 by Nelson Education Ltd

Chapter 10: Payroll Employment Insurance (EI) Look up a gross pay of $645. Answer: $11.16 Copyright © 2015 by Nelson Education Ltd

Chapter 10: Payroll Other Deductions: Rates or amounts for other deductions vary In our example, assume the employee pays $18 per week for a life/health/dental plan. Copyright © 2015 by Nelson Education Ltd

Chapter 10: Payroll Calculating net pay for this employee: Copyright © 2015 by Nelson Education Ltd

Chapter 10: Payroll Recording the Payroll Once all payroll has been calculated, it is recorded on: Employee Earnings Records Company Payroll Record Journal entries Copyright © 2015 by Nelson Education Ltd

Chapter 10: Payroll Employee Earnings Record A cumulative record of payroll information for an employee for the year. T4 slips are prepared from this information at year end. Copyright © 2015 by Nelson Education Ltd

Chapter 10: Payroll Company Payroll Record A record of payroll details for all employees for a given pay period. This record becomes the basis for the journal entries that follow. Copyright © 2015 by Nelson Education Ltd

Chapter 10: Payroll Journal Entries 1. The basic journal entry Copyright © 2015 by Nelson Education Ltd (Gross Pay)‏ (Net Pay)‏ Deductions withheld

Chapter 10: Payroll Journal Entries 2. The employer's contributions » CPP: equal to employees' contribution » EI: 1.4 times employees' contribution » Health plan: depends on the plan Copyright © 2015 by Nelson Education Ltd Additional payroll expenses Additional liabilities

Chapter 10: Payroll Journal Entries 3. Payments and remittances Copyright © 2015 by Nelson Education Ltd paycheques Remittance to the government for employees' and employer's contributions Remittance to the insurance company

Chapter 10: Payroll Workers' Compensation Compensation to workers for injuries or disabilities that result from accidents in the workplace. The provincial Workers’ Compensation legislation specifies what kinds of jobs are eligible for coverage, the cost to the employer, how the cost is determined, and when it must be paid. It is not a payroll deduction. The employer pays this cost. Copyright © 2015 by Nelson Education Ltd

Chapter 10: Payroll Vacation Pay and Holiday Pay Vacation Pay: Employees are entitled to a paid vacation period or payment of a percentage of earnings in lieu of vacation time. Holiday Pay: A premium paid to employees who work on public (statutory) holidays, such as Canada Day or New Year’s Day. Copyright © 2015 by Nelson Education Ltd

Chapter 10: Payroll End of Chapter Copyright © 2015 by Nelson Education Ltd.