1. Payroll Accounting $ $ $ $ Making Accounting Relevant Chapter 12
Businesses issue payroll checks to their employees to compensate them for work performed. $ $
If you have a part-time job, what items appear on your pay stub? Do you verify that your gross earnings were properly calculated? $

2. $ $ $ $ Why It’s Important Key Terms Chapter 12 payroll pay period
Section 1 Calculating Gross Earnings (con’t.)
Chapter 12 $
Why It’s Important
For many businesses payroll is the largest expense. It is essential that the payroll system accurately determine the gross pay for each employee for every pay period. $ $
Key Terms
payroll
pay period
payroll clerk
gross earnings
wage
time card
electronic badge readers
commission
overtime rate $

3. $ $ $ $ The Importance of Payroll Records Chapter 12
Section 1 Calculating Gross Earnings (con’t.)
Chapter 12 $
The Importance of Payroll Records $
The payroll is a list of the employees and the payments due to each employee for a specific pay period.
A pay period is the amount of time over which an employee is paid. $ $

4. $ $ $ $ The Importance of Payroll Records (con’t.) Chapter 12
Section 1 Calculating Gross Earnings (con’t.)
Chapter 12 $
The Importance of Payroll Records (con’t.) $ $ $

5. $ $ $ $ Calculating Gross Earnings Chapter 12
Section 1 Calculating Gross Earnings (con’t.)
Chapter 12 $
Calculating Gross Earnings
The total amount of money an employee earns in a pay period is the employee’s gross earnings. An employee’s pay can be based on: $ $
salary
hourly wage $
commission
salary plus commission or bonus
overtime pay

6. Section 1 Calculating Gross Earnings (con’t.)
Chapter 12 $
Salary
A salary is a fixed amount of money paid to an employee for each pay period.
An employee who is paid a salary earns the same amount regardless of the number of hours worked during the pay period. $ $ $

7. $ $ $ $ Hourly Wage Chapter 12
Section 1 Calculating Gross Earnings (con’t.)
Chapter 12 $
Hourly Wage
A wage is an amount of money paid to an employee at a specified rate per hour worked.
The number of hours worked multiplied by the hourly wage equals the gross earnings for the pay period. $ $ $

8. $ $ $ $ Commission Chapter 12
Section 1 Calculating Gross Earnings (con’t.)
Chapter 12 $
Commission
A commission is an amount paid to an employee based on a percentage of the employee’s sales.
Some salespeople earn a base salary plus a commission or a bonus on the amount of their sales. $ $ $

9. $ $ $ $ Overtime Pay Chapter 12
Section 1 Calculating Gross Earnings (con’t.)
Chapter 12 $
Overtime Pay
Employers are required to pay overtime when employees covered by these laws work more than 40 hours per week.
The overtime rate, set by the Fair Labor Standards Act of 1938, is 1½ (1.5) times the employee’s regular hourly pay rate. $ $ $

10. $ $ $ $ Why It’s Important Key Terms Chapter 12 deduction allowance
Section 2 Payroll Deductions (con’t.)
Chapter 12 $
Why It’s Important
To prepare the payroll accurately and to comply with the law, both mandatory and voluntary deductions must be calculated correctly. $ $
Key Terms
deduction
allowance
401(k) plan $

11. $ $ $ $ Determining Deductions from Gross Earnings Chapter 12
Section 2 Payroll Deductions (con’t.)
Chapter 12 $
Determining Deductions from Gross Earnings $
An amount that is subtracted from gross earnings is called a deduction.
Deductions include those required by law and those an employee wishes to have withheld from earnings. $ $

12. $ $ $ $ Deductions Required by Law Chapter 12 Federal Income Tax
Section 2 Payroll Deductions (con’t.)
Chapter 12 $
Deductions Required by Law $
Federal Income Tax
Social Security Tax
State and Local Tax $ $

13. $ $ $ $ Federal Income Tax Chapter 12
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Federal Income Tax
The amount withheld for federal income taxes depends on three factors: $
the employee’s marital status
the number of allowances claimed by the employee
the employee’s gross earnings $ $

14. $ $ $ $ Social Security Tax Chapter 12
Section 2 Payroll Deductions (con’t.)
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Social Security Tax
There are two FICA taxes: social security and Medicare. The tax rates are as follows:
Social security tax 6.20%
Medicare tax 1.45%
Total FICA taxes 7.65%
(Deducted from each employee’s earnings until the maximum taxable earnings amount for the year is reached. This amount increases each year.) $ $ $

15. $ $ $ $ State and Local Income Taxes Chapter 12
Section 2 Payroll Deductions (con’t.)
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State and Local Income Taxes
In some states and cities, the tax rates are set as a percentage of gross earnings.
In others, the amounts to be deducted are indicated on tables similar to the ones used for federal income tax. $ $ $

16. $ $ $ $ Voluntary Deductions Chapter 12
Section 2 Payroll Deductions (con’t.)
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Voluntary Deductions
Common voluntary deductions include: $
union dues
health insurance payments
life insurance payments
pension and other retirement contributions
credit union deposits and payments
U.S. savings bonds
charitable contributions $ $

17. $ $ $ $ Why It’s Important Key Terms Chapter 12 payroll register
Section 3 Payroll Records (con’t.)
Chapter 12 $
Why It’s Important
To comply with federal and state laws, payroll records must be kept accurately. $
Key Terms
payroll register
net pay
direct deposit
employee’s earnings record
accumulated earnings $ $

18. $ $ $ $ Completing the Payroll Register Chapter 12
Section 3 Payroll Records (con’t.)
Chapter 12 $
Completing the Payroll Register
The payroll register is a form that summarizes information about employees’ earnings for each pay period. $ $ $

19. $ $ $ $ Preparing Payroll Checks Chapter 12
Section 3 Payroll Records (con’t.)
Chapter 12 $
Preparing Payroll Checks
The payroll register is the source of information for preparing the payroll checks. $ $ $

20. $ $ $ $ The Employee’s Earnings Record Chapter 12
Section 3 Payroll Records (con’t.)
Chapter 12 $
The Employee’s Earnings Record
An employer must keep an employee’s earnings record. This record contains all of the payroll information related to an employee. $ $ $

21. $ $ $ $ The Employee’s Earnings Record (con’t.) Chapter 12
Section 3 Payroll Records (con’t.)
Chapter 12 $
The Employee’s Earnings Record (con’t.)
This amount was carried forward from the previous quarter’s record. $ $ $
This amount will be carried forward
to the next quarter’s record.