1. Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-1

2. Unit 11 Accounting for Payroll McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

3. 11-3 Accounting Records for Payroll Chart of accounts: –is a listing of all the general ledger accounts used by a business –serves as a guide for the recording of transactions. –represent assets, liabilities, and expense items. Assets: –are things of value owned by a business: –cash, bank accounts, office furniture, buildings, delivery vans, furniture, merchandise on hand. Liabilities are debts or loans, Expenses are the costs of operating the business Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

4. 11-4 Accounting Records for Payroll Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

5. 11-5 Accounting Records for Payroll Most accounting systems are built around two basic types of records: –Journals: is a (day-by-day) listing of transactions

6. Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-6 Accounting Records for Payroll Ledgers: ledger is a group of accounts each account shows everything-that happened over a period of time

7. Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-7 Assets Liabilities Expenses Amounts that are owed Things of value owned by a business Costs of operating the business Accounting Records for Payroll Double entry accounting system: at least two accounts are affected by each transaction. To ensure that the accounting records are kept up-to-date, the journal entries and posting to the ledger are made as soon as possible after the transactions occur.

8. Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-8 Understanding the Ledger Accounts Salaries Wages and Expenses: Payroll causes an increase in the operating expenses of a business. the salaries and wages expense account must be debited for the total gross earnings of the employees.

9. Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-9 Understanding the Ledger Accounts Salaries and Wages Payable: –are a liability of the company. is increased by the amount of net pay earned by the employees.

10. Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-10 Understanding the Ledger Accounts Deductions: difference between Salaries and Wages Expense account and Salaries and Wages Payable deductions will increase the liabilities Each payable account Credit each account for amount of tax withheld

11. Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-11 Understanding the Ledger Accounts Deductions: –Employee Federal Income Taxes Payable –State Disability Insurance Taxes Payable –Social Security Taxes Payable –Medicare Taxes Payable –Employee State Income Taxes Payable –IRA Contributions Payable –Savings Bonds Payable

12. Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-12 Payroll Journal Entry The journal entry to record payroll for week ending January 17, 2005 is:

13. Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-13 Payroll Payment Journal Entry Cash Account Credit for amount equal to net pay Wages & Salaries Payable Debit for amount of net pay Disbursement (payment) journal entry: –On Payday: liability account, (Salaries and Wages Payable) must be debited Cash account must be credited for the net pay amount

14. Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-14 Payroll Payment Journal Entry

15. Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-15 Payroll Taxes Expense Debit for total amount of employers payroll taxes. Each Liability Account Credit each account for the individual tax amounts. Recording the Employers Payroll Taxes Employers payroll taxes: –Employers Social Security Contribution –Employers Medicare Contribution, –Federal ( FUTA) and State (SUTA) unemployment taxes. These items cause: –an increase in operating expenses –and an increase in liabilities until the sums are remitted to the correct government agencies.

16. Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-16 Recording the Employers Payroll Taxes

17. Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-17 Cash Each Liability Account Credit for amount being paid. Debit for amount being deposited to government agencies. Payment/deposit of the payroll taxes: – each liability account must be debited – cash credited for the amount of tax being deposited to the correct government agency. Depositing the Taxes Withheld

18. Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-18 Depositing the Taxes Withheld

19. Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-19 Unit Summary

20. Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-20 Questions?