2. 8
Payroll Accounting: Employee Earnings and Deductions

3. 1
Distinguish between employees and independent contractors.

4. Payroll Record Keeping
Payroll costs are major expenditures for most businesses
Records provide data for analyzing and controlling these expenditures
Laws require records to be kept
For the business as a whole
For each employee

5. Employers or Independent Contractors?

6. Employees Work under the control and direction of an employer
Examples:
Secretaries
Sales Clerks
Plant Supervisors
Maintenance Workers

7. Independent Contractors
Perform services for a fee and do not work under the control and direction of the company paying for the services
Examples:
Lawyers
Public Accountants
Real Estate Agents

8. Employees vs. Independent Contractors
Employees involve:
More laws and regulations
Taxes that must be deducted
Payroll records to maintain
Numerous reports to file
Only one form must be filed for independent contractors
Form 1099

9. 2
Calculate employee earnings and deductions.

10. Salaries and Wages Salaries Wages
Compensation for managerial or administrative services
Expressed in biweekly, monthly, or annual terms
Wages
Compensation for skilled and unskilled labor
Expressed in terms of hours, weeks, or units produced

11. Overtime Fair Labor Standards Act (FLSA)
Requires employers to pay overtime (1½ times the regular rate) to any hourly employee who works over 40 hours in a week
Some salaried employees are exempt from the FLSA rules

12. Computing Total Earnings
When compensation is based on time, a record must be kept of the time worked by each employee
Examples:
Time cards, plastic cards or badges with special magnetic strip barcodes
The hours worked are multiplied by the rate of pay to determine total earnings

13. Computing Total Earnings (cont.)
EXAMPLE: Helen Kuzmik worked 55 hours this week. Kuzmik’s regular rate of pay is $12 per hour. She is paid 1½ times the regular rate for hours in excess of 8 on Monday through Friday and any hours worked on Saturday, and twice the regular rate for hours on Sunday. Helen worked 4 hours on Sunday.

14. Computing Total Earnings (cont.)
40 hours × $12 per hour =
$480
$12 × 1½ = $18 overtime rate
11 hours × $18 per hour =
$198

15. Computing Total Earnings (cont.)
EXAMPLE: Helen Kuzmik worked 55 hours this week. Kuzmik’s regular rate of pay is $12 per hour. She is paid 1½ times the regular rate for hours in excess of 8 on Monday through Friday and any hours worked on Saturday, and twice the regular rate for hours on Sunday. Helen worked 4 hours on Sunday.

16. Computing Total Earnings (cont.)
40 hours × $12 per hour =
$480
11 hours × $18 per hour =
198
4 hours × $24 per hour = 96
4 Sunday hours, twice the regular rate
($12 × 2 = $24 Sunday rate)

17. Computing Total Earnings (cont.)
EXAMPLE: Helen Kuzmik worked 55 hours this week. Kuzmik’s regular rate of pay is $12 per hour. She is paid 1½ times the regular rate for hours in excess of 8 on Monday through Friday and any hours worked on Saturday, and twice the regular rate for hours on Sunday. Helen worked 4 hours on Sunday.

18. Computing Total Earnings (cont.)
40 hours × $12 per hour =
$480
11 hours × $18 per hour =
198
4 hours × $24 per hour = 96
Total earnings for the week
$774
Also called “gross pay.”

19. Computing Total Earnings (cont.)
EXAMPLE: Linda Swaney has a salary of $2,288 a month plus 1½ times the regular hourly rate for hours in excess of 40 per week.
In order to compute her overtime
rate, we must determine her regular
hourly rate.

20. Computing Total Earnings (cont.)
EXAMPLE: Linda Swaney has a salary of $2,288 a month plus 1½ times the regular hourly rate for hours in excess of 40 per week.
Step #1—Determine her annual salary.
$2,288 per month × 12 months
= $27,456 annual pay

21. Computing Total Earnings (cont.)
EXAMPLE: Linda Swaney has a salary of $2,288 a month plus 1½ times the regular hourly rate for hours in excess of 40 per week.
Step #2—Determine her weekly salary.
$27,456 annual salary ÷ 52 weeks
= $ pay per week

22. Computing Total Earnings (cont.)
EXAMPLE: Linda Swaney has a salary of $2,288 a month plus 1½ times the regular hourly rate for hours in excess of 40 per week.
Step #3—Compute regular hourly pay.
$528 per week ÷ 40 hours per week
= $13.20 pay per regular hour

23. Computing Total Earnings (cont.)
EXAMPLE: Linda Swaney has a salary of $2,288 a month plus 1½ times the regular hourly rate for hours in excess of 40 per week.
Step #4—Compute overtime rate.
$13.20 per hour × 1½
= $19.80 overtime pay per hour

24. Deductions from Total Earnings
Three categories:
Federal (and possibly state and city) income tax withholding
Employee FICA tax withholding
Voluntary deductions
Gross pay – Deductions = Net pay
Also called take-home pay

25. Income Tax Withholding
Required by federal law
Applied toward the payment of the employee’s federal income tax
Amount withheld determined by:
Total earnings
Marital status
Number of withholding allowances claimed
Length of the pay period

26. Withholding Allowances
Exempt a specific dollar amount of an employee’s gross pay from federal income tax withholding
Computed on Form W-4 Employee’s Withholding Allowance Certificate
Based on the marital status and the number of allowances claimed
In general, each employee is permitted one personal withholding allowance, one for a spouse who does not also claim an allowance, and one for each dependent

27. Wage-Bracket Method
EXAMPLE: Ken Istone, who is married and claims 4 allowances, has gross earnings of $545 for the week ending December 19, Determine the amount of federal income tax to be withheld using the wage-bracket method.

28. MARRIED Persons—WEEKLY Payroll Period
If the wages are—
And the # of withholding allowances claimed is—
But less than 1 2 3 4 5 6 7 8 9 10
At least
The amount of income tax to be withheld is—
$ 390
$ 400 24 18 11 5
400
410 25 19 12 6
540
550 44 35 26 20 14 7 1
550
560 46 36 27 21 15 8 2
560
570 47 38 28 22 16 9 3
570
580 49 39 30 23 17 10 4
580
590 50 41 31 24 18 11 5
Step #1
Find the row for
wages of “at least $540,
but less than $550.”
630
640 58 48 39 29 23 16 10 4
640
650 59 50 40 31 24 17 11 5

29. MARRIED Persons—WEEKLY Payroll Period
If the wages are—
And the # of withholding allowances claimed is—
But less than 1 2 3 4 5 6 7 8 9 10
At least
The amount of income tax to be withheld is—
$ 390
$ 400 24 18 11 5
400
410 25 19 12 6
540
550 44 35 26 20 14 7 1
Step #2
Find the column headed “4
withholding allowances.”
550
560 46 36 27 21 15 8 2
560
570 47 38 28 22 16 9 3
570
580 49 39 30 23 17 10 4
580
590 50 41 31 24 18 11 5
630
640 58 48 39 29 23 16 10 4
640
650 59 50 40 31 24 17 11 5

30. MARRIED Persons—WEEKLY Payroll Period
If the wages are—
And the # of withholding allowances claimed is—
But less than 1 2 3 4 5 6 7 8 9 10
At least
The amount of income tax to be withheld is—
$ 390
$ 400 24 18 11 5
400
410 25 19 12 6
540
550 44 35 26 20 14 7 1
550
560 46 36 27 21 15 8 2
560
570 47 38 28 22 16 9 3
570
580 49 39 30 23 17 10 4
580
590 50 41 31 24 18 11 5
Step #3
Find the amount where they
cross. This is the amount
to be withheld.
630
640 58 48 39 29 23 16 10 4
640
650 59 50 40 31 24 17 11 5

31. Employee FICA Tax Withholding
Includes amounts for:
Social Security
Provides pension and disability benefits
Medicare
Provides health insurance
Required by the Federal Insurance Contributions Act (FICA)

32. Employee FICA Tax Withholding (cont.)
Tax rates are set by Congress
Social Security
6.2% on maximum earnings of $110,100
Medicare
1.45% on ALL earnings; there is no maximum
Rates can be changed annually by Congress

33. Employee FICA Tax Withholding (cont.)
EXAMPLE: Sarah Cadrain had earnings of $2,000 for the December 6–12 pay period, bringing her earnings year-to-date to $109,240.
Sarah’s earnings have not yet reached
the maximum of $110,100.
ALL of her earnings for this week are
subject to Social Security and Medicare tax.

34. Employee FICA Tax Withholding (cont.)
EXAMPLE: Sarah Cadrain had earnings of $2,000 for the December 6–12 pay period, bringing her earnings year-to-date to $111,100.
$2,000
Gross Pay ×
Tax Rate
Tax
Social Security 6.2%
Medicare % $ 29
$153 =

35. Employee FICA Tax Withholding (cont.)
EXAMPLE: The following week Cadrain earns $1,860, bringing her earnings year-to-date to $111,100 (over the Social Security maximum).
$111,100.00
Year-to-date earnings
110,100.00
Social Security maximum
Amount not subject to S.S. tax
1,000.00

36. Employee FICA Tax Withholding (cont.)
EXAMPLE: The following week Cadrain earns $1,860, bringing her earnings year-to-date to $111,100 (over the Social Security maximum).
$1,860.00
Gross pay
1,000.00
Amount not subject to S.S. tax
Amount subject to S.S. tax $
Tax rate
6.2%
Social Security tax $

37. Employee FICA Tax Withholding (cont.)
EXAMPLE: The following week Cadrain earns $1,860, bringing her earnings year-to-date to $111,100 (over the Social Security maximum).
Gross pay
$1,860.00
Since Medicare has no maximum
earnings, all of Cadrain’s gross
pay is subject to the Medicare tax.

38. Employee FICA Tax Withholding (cont.)
EXAMPLE: The following week Cadrain earns $1,860, bringing her earnings year-to-date to $111,100 (over the Social Security maximum).
$1,860.00
Gross pay
Tax rate
1.45%
Medicare tax $
Sarah’s total FICA tax is $80.29
($53.32 S.S. + $26.97 Med.)

39. Voluntary Deductions
Deductions that are optional and depend on specific agreements between the employee and employer
Examples:
U.S. savings bond purchases
Health insurance premiums
Credit union deposits
Pension plan payments
Charitable contributions

40. Computing Net Pay
EXAMPLE: Compute the net pay of Ken Istone for the week ended December 19. His health insurance premiums are $10 per week.
Gross pay
Deductions:
Federal income tax withholding $
$545.00
From the wage bracket
withholding tables

41. Computing Net Pay (cont.)
EXAMPLE: Compute the net pay of Ken Istone for the week ended December 19. His health insurance premiums are $10 per week.
33.79
Social Security tax withholding
Gross pay
Deductions:
Federal income tax withholding
$545.00 $
All his pay is subject to S.S. tax
($545 × 6.2%)

42. Computing Net Pay (cont.)
EXAMPLE: Compute the net pay of Ken Istone for the week ended December 19. His health insurance premiums are $10 per week.
Gross pay
Deductions:
Federal income tax withholding $
Social Security tax withholding
33.79
Medicare tax withholding
7.90
$545.00
$545 × 1.45%

43. Computing Net Pay (cont.)
EXAMPLE: Compute the net pay of Ken Istone for the week ended December 19. His health insurance premiums are $10 per week.

44. COMPUTING NET PAY
Gross pay
Deductions:
Federal income tax withholding $
Social Security tax withholding
33.79
Medicare tax withholding
7.90
Health insurance premiums
10.00
Total deductions
61.69
Net pay
$545.00
$483.31

45. 3
Describe and prepare payroll records.

46. Payroll Records
Should provide the following information on each employee
Name, address, occupation, social security number, marital status, and number of withholding allowances
Gross amount of earnings, date of payment, period covered by each payroll
Gross amount of earnings accumulated for the year
Amounts of taxes and other items withheld

47. Payroll Records (cont.)
Three types:
PAYROLL
REGISTER
PAYROLL CHECK
with earnings statement
EMPLOYEE
EARNINGS
RECORD

48. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
NAME #
MARITAL STATUS
REGULAR
OVER-TIME
TOTAL
ALLOW.
A payroll register is a form used
to assemble the data required
at the end of each payroll period.

49. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
NAME #
MARITAL STATUS
REGULAR
OVER-TIME
TOTAL
ALLOW.
Cadrain, Sarah 4 M
Since marital status and
number of allowances are
used to compute withholding
taxes, they are recorded
on the payroll register.

50. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
NAME #
MARITAL STATUS
REGULAR
OVER-TIME
TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,800.00
60.00
1,860.00
Earnings for this period
are shown, categorized by
regular and overtime
earnings.

51. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
TAXABLE EARNINGS
TOTAL
CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,860.00
111,100.00
860.00
This pay period has taken Cadrain’s earnings
above the Social Security maximum.
As computed earlier, only $1,260 of this
period’s earnings is subject to the
Social Security tax.

52. PAYROLL REGISTER (RIGHT SIDE)
FEDERAL INCOME TAX
SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
200.00
53.32
26.97
All deductions from
total earnings
are listed.

53. PAYROLL REGISTER (RIGHT SIDE)
DEDUCTIONS
HEALTH INSURANCE
UNITED WAY
TOTAL
NET PAY
CHECK NO.
280.29
1,579.71
409
Deductions are totaled
and subtracted from
total earnings to arrive
at net pay.

54. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
NAME #
MARITAL STATUS
REGULAR
OVER-TIME
TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,800.00
60.00
1,860.00
Guder, James 1 S
760.00
140.00
900.00
The payroll information for
the other employees
is recorded in the same manner.

55. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
TAXABLE EARNINGS
TOTAL
CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,860.00
111,100.00
860.00
900.00
43,400.00
900.00

56. PAYROLL REGISTER (RIGHT SIDE)
FEDERAL INCOME TAX
SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
200.00
53.32
26.97
121.00
55.80
13.05
20.00

57. PAYROLL REGISTER (RIGHT SIDE)
DEDUCTIONS
HEALTH INSURANCE
UNITED WAY
TOTAL
NET PAY
CHECK NO.
286.19
1,373.81
409
20.00
209.85
690.15
410

58. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
NAME #
MARITAL STATUS
REGULAR
OVER-TIME
TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,600.00
60.00
1,660.00
Guder, James 1 S
760.00
140.00
900.00
Istone, Ken 4 M
545.00
545.00

59. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
TAXABLE EARNINGS
TOTAL
CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,660.00
107,200.00
1,260.00
900.00
43,400.00
900.00
545.00
27,025.00
545.00

60. PAYROLL REGISTER (RIGHT SIDE)
FEDERAL INCOME TAX
SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
200.00
53.32
26.97
121.00
55.80
13.05
20.00
10.00
33.79
7.90
10.00

61. PAYROLL REGISTER (RIGHT SIDE)
DEDUCTIONS
HEALTH INSURANCE
UNITED WAY
TOTAL
NET PAY
CHECK NO.
280.29
1,579.71
409
20.00
209.85
690.15
410
10.00
61.69
483.31
411

62. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
NAME #
MARITAL STATUS
REGULAR
OVER-TIME
TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,800.00
60.00
1,860.00
Guder, James 1 S
760.00
140.00
900.00
Istone, Ken 4 M
545.00
545.00
Kuzmik, Helen 2 M
480.00
294.00
774.00

63. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
TAXABLE EARNINGS
TOTAL
CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,860.00
111,100.00
860.00
900.00
43,400.00
900.00
545.00
27,025.00
545.00
774.00
31,000.00
774.00

64. PAYROLL REGISTER (RIGHT SIDE)
FEDERAL INCOME TAX
SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
200.00
53.32
26.97
121.00
55.80
13.05
20.00
10.00
33.79
7.90
10.00
54.00
47.99
11.22
13.00
20.00

65. PAYROLL REGISTER (RIGHT SIDE)
DEDUCTIONS
HEALTH INSURANCE
UNITED WAY
TOTAL
NET PAY
CHECK NO.
286.19
1,373.81
409
20.00
222.85
677.15
410
10.00
61.69
483.31
411
13.00
20.00
146.21
627.79
412

66. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
NAME #
MARITAL STATUS
REGULAR
OVER-TIME
TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,600.00
60.00
1,660.00
Guder, James 1 S
760.00
140.00
900.00
Istone, Ken 6 M
545.00
545.00
Kuzmik, Helen 2 M
480.00
294.00
774.00
Lee, Hoseoup 3 M
440.00
440.00

67. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
TAXABLE EARNINGS
TOTAL
CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,660.00
107,200.00
1,260.00
900.00
43,400.00
900.00
545.00
27,025.00
545.00
774.00
31,000.00
774.00
440.00
22,340.00
440.00

68. PAYROLL REGISTER (RIGHT SIDE)
FEDERAL INCOME TAX
SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
200.00
53.32
26.97
121.00
55.80
13.05
20.00
10.00
33.79
7.90
10.00
54.00
47.99
11.22
13.00
20.00
7.00
27.28
6.38
13.00

69. PAYROLL REGISTER (RIGHT SIDE)
DEDUCTIONS
HEALTH INSURANCE
UNITED WAY
TOTAL
NET PAY
CHECK NO.
280.29
1,579.71
409
20.00
209.85
690.15
410
10.00
61.69
483.31
411
13.00
20.00
146.21
627.79
412
13.00
53.66
386.34
413

70. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
NAME #
MARITAL STATUS
REGULAR
OVER-TIME
TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,800.00
60.00
1,860.00
Guder, James 1 S
760.00
140.00
900.00
Istone, Ken 6 M
545.00
545.00
Kuzmik, Helen 2 M
480.00
294.00
774.00
Lee, Hoseoup 3 M
440.00
440.00
Swaney, Linda 2 S
528.00
198.00
726.00

71. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
TAXABLE EARNINGS
TOTAL
CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,860.00
111,100.00
860.00
900.00
43,400.00
900.00
545.00
27,025.00
545.00
774.00
31,000.00
774.00
440.00
22,340.00
440.00
726.00
27,500.00
726.00

72. PAYROLL REGISTER (RIGHT SIDE)
FEDERAL INCOME TAX
SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
200.00
53.32
26.97
121.00
55.80
13.05
20.00
10.00
33.79
7.90
10.00
54.00
47.99
11.22
13.00
20.00
7.00
27.28
6.38
13.00
72.00
45.01
10.53

73. PAYROLL REGISTER (RIGHT SIDE)
DEDUCTIONS
HEALTH INSURANCE
UNITED WAY
TOTAL
NET PAY
CHECK NO.
280.29
1,579.71
409
20.00
209.85
690.15
410
10.00
61.69
483.31
411
13.00
20.00
146.21
627.79
412
13.00
53.66
386.34
413
127.54
598.46
414

74. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
NAME #
MARITAL STATUS
REGULAR
OVER-TIME
TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,800.00
60.00
1,860.00
Guder, James 1 S
760.00
140.00
900.00
Istone, Ken 4 M
545.00
545.00
Kuzmik, Helen 2 M
480.00
294.00
774.00
Lee, Hoseoup 3 M
440.00
440.00
Swaney, Linda 2 S
528.00
198.00
726.00
Tucci, Paul 3 M
490.00
490.00

75. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
TAXABLE EARNINGS
TOTAL
CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,860.00
111,100.00
860.00
900.00
43,400.00
900.00
545.00
27,025.00
545.00
774.00
31,000.00
774.00
440.00
22,340.00
440.00
726.00
27,500.00
726.00
490.00
25,050.00
490.00

76. PAYROLL REGISTER (RIGHT SIDE)
FEDERAL INCOME TAX
SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
200.00
53.32
26.97
121.00
55.80
13.05
20.00
10.00
33.79
7.90
10.00
54.00
47.99
11.22
13.00
20.00
7.00
27.28
6.38
13.00
72.00
45.01
10.53
12.00
30.38
7.11
10.00

77. PAYROLL REGISTER (RIGHT SIDE)
DEDUCTIONS
HEALTH INSURANCE
UNITED WAY
TOTAL
NET PAY
CHECK NO.
280.29
1,579.71
409
20.00
209.85
690.15
410
10.00
61.69
483.31
411
13.00
20.00
146.21
627.79
412
13.00
53.66
386.34
413
127.54
598.46
414
10.00
59.49
430.51
415

78. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
NAME #
MARITAL STATUS
REGULAR
OVER-TIME
TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,800.00
60.00
1,860.00
Guder, James 1 S
760.00
140.00
900.00
Istone, Ken 6 M
545.00
545.00
Kuzmik, Helen 2 M
480.00
294.00
774.00
Lee, Hoseoup 3 M
440.00
440.00
Swaney, Linda 2 S
528.00
198.00
726.00
Tucci, Paul 5 M
490.00
490.00
Wiles, Harry 1 S
300.00
300.00

79. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
TAXABLE EARNINGS
TOTAL
CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,860.00
111,100.00
860.00
900.00
43,400.00
900.00
545.00
27,025.00
545.00
774.00
31,000.00
774.00
440.00
22,340.00
440.00
726.00
27,500.00
726.00
490.00
25,050.00
490.00
300.00
6,300.00
300.00
300.00

80. PAYROLL REGISTER (RIGHT SIDE)
FEDERAL INCOME TAX
SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
200.00
53.32
26.97
121.00
55.80
13.05
20.00
10.00
33.79
7.90
10.00
54.00
47.99
11.22
13.00
20.00
7.00
27.28
6.38
13.00
72.00
45.01
10.53
12.00
30.38
7.11
10.00
20.00
18.60
4.35

81. PAYROLL REGISTER (RIGHT SIDE)
DEDUCTIONS
HEALTH INSURANCE
UNITED WAY
TOTAL
NET PAY
CHECK NO.
280.29
1,579.71
409
20.00
209.85
690.15
410
10.00
61.69
483.31
411
13.00
20.00
146.21
627.79
412
13.00
53.66
386.34
413
127.54
598.46
414
10.00
59.49
430.51
415
42.95
257.05
416

82. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
NAME #
MARITAL STATUS
REGULAR
OVER-TIME
TOTAL
ALLOW.
Cadrain, Sarah 4 M
1,600.00
60.00
1,660.00
Guder, James 1 S
760.00
140.00
900.00
Istone, Ken 6 M
545.00
545.00
Kuzmik, Helen 2 M
480.00
294.00
774.00
Lee, Hoseoup 3 M
440.00
440.00
Swaney, Linda 2 S
528.00
198.00
726.00
Tucci, Paul 5 M
490.00
490.00
Wiles, Harry 1 S
300.00
300.00
5,143.00
692.00
5,835.00

83. PAYROLL REGISTER (LEFT SIDE)
EARNINGS
TAXABLE EARNINGS
TOTAL
CUMULATIVE TOTAL
UNEMPLOYMENT COMP.
SOCIAL SECURITY
1,860.00
111,100.00
860.00
900.00
43,400.00
900.00
545.00
27,025.00
545.00
774.00
31,000.00
774.00
440.00
22,340.00
440.00
726.00
27,500.00
726.00
490.00
25,050.00
490.00
300.00
6,300.00
300.00
300.00
6,035.00
293,715.00
300.00
5,035.00

84. PAYROLL REGISTER (RIGHT SIDE)
FEDERAL INCOME TAX
SOC. SEC. TAX
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
200.00
53.32
26.97
121.00
55.80
13.05
20.00
10.00
33.79
7.90
10.00
54.00
47.99
11.22
13.00
20.00
7.00
27.28
6.38
13.00
72.00
45.01
10.53
12.00
30.38
7.11
10.00
20.00
18.60
4.35
496.00
312.17
87.51
46.00
40.00

85. PAYROLL REGISTER (RIGHT SIDE)
DEDUCTIONS
HEALTH INSURANCE
UNITED WAY
TOTAL
NET PAY
CHECK NO.
280.29
1,579.71
409
20.00
209.85
690.15
410
10.00
61.69
483.31
411
13.00
20.00
146.21
627.79
412
13.00
53.66
386.34
413
127.54
598.46
414
10.00
59.49
430.51
415
42.95
257.05
416
46.00
40.00
981.68
5,053.32

86. Paying Employees Employees may be paid in cash or by check
The employer furnishes an earnings statement to each employee along with his or her paycheck
In many cases, payment is made by direct deposit or electronic funds transfer (EFT) by the employer to the employee’s bank
Payment by check or direct deposit provides better internal accounting control than payment by cash

87. EMPLOYEE EARNINGS RECORD
PERIOD ENDED
REGULAR
OVERTIME
TOTAL
CUMULATIVE TOTAL
11/28
545.00
75.00
620.00
25,240.00
A separate earnings record
is maintained for each employee.
12/5
545.00
75.00
620.00
25,860.00
12/12
545.00
75.00
620.00
26,480.00
GENDER
DEPARTMENT
OCCUPATION
SOCIAL SECURITY # M F 
Maintenance
Service

88. EMPLOYEE EARNINGS RECORD
PERIOD ENDED
REGULAR
OVERTIME
TOTAL
CUMULATIVE TOTAL
Let’s record the last entry
of the year for Ken Istone.
11/28
545.00
75.00
620.00
25,240.00
12/5
545.00
75.00
620.00
25,860.00
12/12
545.00
75.00
620.00
26,480.00
GENDER
DEPARTMENT
OCCUPATION
SOCIAL SECURITY # M F 
Maintenance
Service

89. EMPLOYEE EARNINGS RECORD
PERIOD ENDED
REGULAR
OVERTIME
TOTAL
CUMULATIVE TOTAL
11/28
545.00
75.00
620.00
25,240.00
12/5
545.00
75.00
620.00
25,860.00
12/12
545.00
75.00
620.00
26,480.00
12/19
545.00
545.00
27,025.00
GENDER
DEPARTMENT
OCCUPATION
SOCIAL SECURITY # M F
Earnings for this period
are recorded and the cumulative
earnings are updated. 
Maintenance
Service

90. EMPLOYEE EARNINGS RECORD
TAXABLE EARNINGS
DEDUCTIONS
UNEMPLOYMENT COMPENSATION
SOCIAL SECURITY
FEDERAL INCOME TAX
SOCIAL SECURITY TAX
620.00
9.00
38.44
620.00
9.00
38.44
620.00
9.00
38.44
545.00
1.00
33.79
MARITAL STATUS
ALLOWANCES
PAY RATE
Deductions are noted. M
$545/week

91. EMPLOYEE EARNINGS RECORD
DEDUCTIONS
MEDICARE TAX
HEALTH INSURANCE
UNITED WAY
OTHER
8.99
10.00
8.99
10.00
8.99
10.00
7.90
10.00
DATE OF BIRTH
DATE HIRED
NAME/ADDRESS
Ken M. Istone
8/17/64
1/3/87
1546 Swallow Drive
St. Louis, MO

92. EMPLOYEE EARNINGS RECORD
DEDUCTIONS
OTHER
TOTAL
CHECK #
AMOUNT
66.43
387
547.57
66.43
395
547.57
66.43
403
547.57
52.69
411
492.31
NAME/ADDRESS
EMPLOYEE NUMBER
Ken M. Istone
Deductions are totaled and
net pay is recorded, along
with the paycheck’s number. 3
1546 Swallow Drive
St. Louis, MO

93. 4
Account for employee earnings and deductions.

94. JOURNALIZING PAYROLL TRANSACTIONS
DEBIT
DATE
DESCRIPTION PR
CREDIT 1 2 3 4
Journal entries are now made to record
the payroll expenses and liabilities. 5 6 7 8 9 10

95. JOURNALIZING PAYROLL TRANSACTIONS
DEBIT
DATE
DESCRIPTION PR
CREDIT 1 2 3
The payroll register is the
source for the journal entry. 4 5 6 7 8 9 10

96. JOURNALIZING PAYROLL TRANSACTIONS
DEBIT
DATE
DESCRIPTION PR
CREDIT 1
Dec. 19
Wages and Salaries Expense
5,835.00
GROSS PAY 2 3 4 5 6 7 8 9 10

97. JOURNALIZING PAYROLL TRANSACTIONS
DEBIT
DATE
DESCRIPTION PR
CREDIT 1
Dec. 19
Wages and Salaries Expense
5,835.00 2
Employee Income Tax Pay.
488.00 3
Social Security Tax Payable
336.97 4
Medicare Tax Payable
84.61 5
Health Ins. Prem. Payable
46.00 6
United Way Contrib. Pay.
40.00 7
Each deduction is recorded
in a separate liability account. 8 9 10

98. JOURNALIZING PAYROLL TRANSACTIONS
DEBIT
DATE
DESCRIPTION PR
CREDIT 1
Dec. 19
Wages and Salaries Expense
6,035.00 2
Employee Income Tax Pay.
496.00 3
Social Security Tax Payable
312.17 4
Medicare Tax Payable
87.51 5
Health Ins. Prem. Payable
46.00 6
United Way Contrib. Pay.
40.00
NET PAY 7
Cash
5,053.32 8 9 10

99. Wages and Salaries Expense
DEBIT
CREDIT
Debit gross pay of
employees for each
pay period.

100. Employee Income Tax Payable
DEBIT
CREDIT
Credited when federal
income tax is withheld
from employees.

101. Employee Income Tax Payable (cont.)
DEBIT
CREDIT
Debited when withheld
taxes are paid to
the IRS.

102. Social Security Tax Payable
DEBIT
CREDIT
Both the employer and employee
pay Social Security taxes.

103. Social Security Tax Payable (cont.)
DEBIT
CREDIT
Credited when taxes
are withheld from
employees’ earnings.

104. Social Security Tax Payable (cont.)
DEBIT
CREDIT
Also credited for taxes
imposed on the
employer.

105. Social Security Tax Payable (cont.)
DEBIT
CREDIT
Debited when taxes
are paid.

106. Medicare Tax Payable MEDICARE TAX PAYABLE WORKS EXACTLY THE SAME AS
DEBIT
CREDIT
WORKS EXACTLY THE SAME AS
SOCIAL SECURITY TAX PAYABLE

107. 5
Describe various payroll record-keeping methods.

108. Payroll Record-Keeping Methods
Manual system:
The same information is recorded several times
Can be very inefficient
Payroll processing center:
A business that sells payroll record-keeping services
Electronic system:
A computer system that performs all payroll record keeping and prepares payroll checks

109. ELECTRONIC PAYROLL SYSTEM
INPUT
PROCESSING
OUTPUT
EMPLOYEE:
Only the employee’s
social security number
and hours worked
are input each
pay period.
SOCIAL SECURITY #
HOURS WORKED

110. ELECTRONIC PAYROLL SYSTEM
INPUT
PROCESSING
OUTPUT
Payroll Register
EMPLOYEE:
SOCIAL SECRUITY NO.
Paychecks
COMPUTER
HOURS WORKED
Employee Earnings Record