1. GLENCOE / McGraw-Hill

2. Payroll Computations, Records, and Payment

3. 7.Journalize payroll transactions in the general journal. 8.Maintain an earnings record for each employee. Recording Payroll Information Section Objectives

4. Page 367 Recording Payroll

5. Objective 7 Journalize payroll transactions in the general journal. Page 367

6. Recording Payroll 1. Record the payroll expense 2. Pay the employees Page 367 Recording payroll information involves two separate entries:

7. The general journal entry to record the payroll expense is based on the payroll register. Page 367

8. AND ENDING January 6, 20-- PAID January 8, 20-- DEDUCTIONS DISTRIBUTION NAME SOCIAL MEDICARE INCOME HEALTH NET CHECK OFFICE SHIPPING SECURITY TAX INSURANCEAMOUNT NO. SALARIES WAGES Taylor, Cindy 22.325.22 28.00 304.461725360.00 Gallegos, Edward23.565.51 42.00 308.931726380.00 Turner, Bill18.604.35 14.0020.00 243.051727300.00 Lin, Cecilia 32.247.54 44.0020.00 416.221728520.00 Anderson, Selena 24.805.80 45.00 324.401729 400.00 121.52 28.42 173.0040.00 1,597.06 400.00 1,560.00 M N O P Q R S T GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. 20-- Jan. 8 Shipping Wages Expense 1,560.00 Social Security Tax Payable 121.52 Medicare Tax Payable 28.42 Payroll for week ending Jan. 6 Office Salaries Expense 400.00 Employee Income Tax Payable 173.00 Health Insurance Premiums Payable 40.00 Salaries and Wages Payable 1,597.06 The gross pay for each category is debited to the proper general ledger account. Page 368

9. AND ENDING January 6, 20-- PAID January 8, 20-- DEDUCTIONS DISTRIBUTION NAME SOCIAL MEDICARE INCOME HEALTH NET CHECK OFFICE SHIPPING SECURITY TAX INSURANCEAMOUNT NO. SALARIES WAGES Taylor, Cindy 22.325.22 28.00 304.461725360.00 Gallegos, Edward23.565.51 42.00 308.931726380.00 Turner, Bill18.604.35 14.0020.00 243.051727300.00 Lin, Cecilia 32.247.54 44.0020.00 416.221728520.00 Anderson, Selena 24.805.80 45.00 324.401729 400.00 121.52 28.42 173.0040.00 1,597.06 400.00 1,560.00 M N O P Q R S T GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. 20-- Jan. 8 Shipping Wages Expense 1,560.00 Social Security Tax Payable 121.52 Medicare Tax Payable 28.42 Payroll for week ending Jan. 6 Office Salaries Expense 400.00 Employee Income Tax Payable 173.00 Each type of deduction is credited to a separate liability account. Page 368 Health Insurance Premiums Payable 40.00 Salaries and Wages Payable 1,597.06

10. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. 20-- Jan. 8 Shipping Wages Expense 1,560.00 Social Security Tax Payable 121.52 Medicare Tax Payable 28.42 Payroll for week ending Jan. 6 Office Salaries Expense 400.00 Employee Income Tax Payable 173.00 AND ENDING January 6, 20-- PAID January 8, 20-- DEDUCTIONS DISTRIBUTION NAME SOCIAL MEDICARE INCOME HEALTH NET CHECK OFFICE SHIPPING SECURITY TAX INSURANCEAMOUNT NO. SALARIES WAGES Taylor, Cindy 22.325.22 28.00 304.461725360.00 Gallegos, Edward23.565.51 42.00 308.931726380.00 Turner, Bill18.604.35 14.0020.00 243.051727300.00 Lin, Cecilia 32.247.54 44.0020.00 416.221728520.00 Anderson, Selena 24.805.80 45.00 324.401729 400.00 121.52 28.42 173.0040.00 1,597.06 400.00 1,560.00 M N O P Q R S T Page 368 Net pay is credited to the liability account, Salaries and Wages Payable. Health Insurance Premiums Payable 40.00 Salaries and Wages Payable 1,597.06

11. Paying Employees Page 368

12. Paying Employees Most businesses pay their employees by check or by direct deposit. By using these methods, the business avoids the inconvenience and risk involved in dealing with currency. Page 368

13. Paying by Check Page 368

14. Paying by Check Paychecks may be written on the firm’s regular checking account, or a payroll bank account. Page 368

15. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. Jan. 8 Salaries and Wages Payable 1,597.06 Cash 1,597.06 To record payment of salaries and wages for week ended Jan. 6 On January 8 On Line Furnishings wrote five checks for payroll, Check numbers 1725-1729. Checks Written on Regular Checking Account Page 369 General Journal Format

16. Special Journal Format CASH PAYMENTS JOURNAL PAGE 1 ACCOUNTS SALARIES PURCHASES DATE CK. DESCRIPTION POST. PAYABLE AND WAGES DISCOUNT CASH NO. REF. DEBIT PAYABLE DEBIT CREDIT CREDIT 8 1725 Cindy Taylor 304.46 304.46 8 1726 Edward Gallegos 308.93 308.93 8 1727 Bill Turner 243.05 243.05 8 1728 Cecilia Lin 416.22 416.22 8 1729 Selena Anderson 324.40 324.40 31 Totals xxxx.xx 6,388.24 xxxx.xx xxxx.xx Page 369 On January 8 On Line Furnishings wrote five checks for payroll, Check numbers 1725-1729. Checks Written on Regular Checking Account

17. CASH PAYMENTS JOURNAL PAGE 1 ACCOUNTS SALARIES PURCHASES DATE CK. DESCRIPTION POST. PAYABLE AND WAGES DISCOUNT CASH NO. REF. DEBIT PAYABLE DEBIT CREDIT CREDIT 8 1725 Cindy Taylor 304.46 304.46 8 1726 Edward Gallegos 308.93 308.93 8 1727 Bill Turner 243.05 243.05 8 1728 Cecilia Lin 416.22 416.22 8 1729 Selena Anderson 324.40 324.40 31 Totals xxxx.xx 6,388.24 xxxx.xx xxxx.xx Notice that there is a separate Salaries and Wages Payable Debit Column. Page 369

18. Paying Employees Why didn’t expense increase when the payroll checks were issued? QUESTION: The expense was already recorded when the first payroll journal entry was made. ANSWER: Page 369

19. Balance Sheet Issue Paychecks Income Statement No effect on net income Assets $1,597.06 Liabilities $1,597.06 Record Payroll Balance Sheet Income Statement Page 369 Effects on the Financial Statements Expenses $1,960 Net Income $1,960 Liabilities $1,960 Equity $1,960

20. Checks Written on a Separate Payroll Account Many businesses write payroll checks from a separate payroll bank account. This is a two-step process. Page 369 1.A check is drawn on the regular bank account for the total amount of net pay and deposited in the payroll bank account. 2.Individual payroll checks are issued from the payroll bank account.

21. Paying by Direct Deposit Page 370

22. A popular method of paying employees is the direct deposit method. Page 370 The bank electronically transfers net pay from the employer’s account to the personal account of the employee. On payday the employee receives a statement showing gross earnings, deductions, and net pay. Paying by Direct Deposit

23. Individual Earnings Records Page 370

24. Objective 8 Maintain an earnings record for each employee. Page 370

25. An individual earnings record is a record that contains information needed to compute earnings and complete tax reports. ANSWER: QUESTION: What is an individual earnings record? Page 370

26. The earnings record shows: Page 371 The payroll period EARNINGS RECORD FOR 20-- NAME Cindy Taylor RATE $9 per hour SOC. SEC. NO. 123-xx-xxxx ADDRESS 6480 Oak Tree Drive, Denton, TX 76209-6789 DATE OF BIRTH Nov. 25, 1979 WITHHOLDING ALLOWANCES 1 MARITAL STATUS M

27. EARNINGS RECORD FOR 20-- NAME Cindy Taylor RATE $9 per hour SOC. SEC. NO. 123-xx-xxxx ADDRESS 6480 Oak Tree Drive, Denton, TX 76209-6789 DATE OF BIRTH Nov. 25, 1979 WITHHOLDING ALLOWANCES 1 MARITAL STATUS M Page 371 The earnings record shows: The date paid

28. EARNINGS RECORD FOR 20-- NAME Cindy Taylor RATE $9 per hour SOC. SEC. NO. 123-xx-xxxx ADDRESS 6480 Oak Tree Drive, Denton, TX 76209-6789 DATE OF BIRTH Nov. 25, 1979 WITHHOLDING ALLOWANCES 1 MARITAL STATUS M Page 371 The earnings record shows: The regular and overtime hours

29. EARNINGS RECORD FOR 20-- NAME Cindy Taylor RATE $9 per hour SOC. SEC. NO. 123-xx-xxxx ADDRESS 6480 Oak Tree Drive, Denton, TX 76209-6789 DATE OF BIRTH Nov. 25, 1979 WITHHOLDING ALLOWANCES 1 MARITAL STATUS M Page 371 The earnings record shows: The regular and overtime earnings

30. EARNINGS RECORD FOR 20-- NAME Cindy Taylor RATE $9 per hour SOC. SEC. NO. 123-xx-xxxx ADDRESS 6480 Oak Tree Drive, Denton, TX 76209-6789 DATE OF BIRTH Nov. 25, 1979 WITHHOLDING ALLOWANCES 1 MARITAL STATUS M Page 371 The earnings record shows: The deductions

31. EARNINGS RECORD FOR 20-- NAME Cindy Taylor RATE $9 per hour SOC. SEC. NO. 123-xx-xxxx ADDRESS 6480 Oak Tree Drive, Denton, TX 76209-6789 DATE OF BIRTH Nov. 25, 1979 WITHHOLDING ALLOWANCES 1 MARITAL STATUS M Page 371 The earnings record shows: The net pay

32. EARNINGS RECORD FOR 20-- NAME Cindy Taylor RATE $9 per hour SOC. SEC. NO. 123-xx-xxxx ADDRESS 6480 Oak Tree Drive, Denton, TX 76209-6789 DATE OF BIRTH Nov. 25, 1979 WITHHOLDING ALLOWANCES 1 MARITAL STATUS M The earnings records are totaled monthly and at the end of each calendar quarter. This provides information needed to make tax payments and file tax returns. Page 371 Totaled monthly earnings

33. Completing January Payrolls Page 371

34. In order to complete the January payroll for On Line Furnishings, assume that all employees worked the same number of hours each week of the month as they did the first week. Page 371 Thus they had the same earnings, deductions, and net pay each week.

35. Entry to Record Payroll Page 373

36. Entry to Record Payroll One general journal entry is made to record the weekly payroll expense for all employees of On Line Furnishings. This general journal entry records the payroll expense and liability, but not the payments to employees. Page 373

37. AND ENDING January 6, 20-- PAID January 8, 20-- DEDUCTIONS DISTRIBUTION NAME SOCIAL MEDICARE INCOME HEALTH NET CHECK OFFICE SHIPPING SECURITY TAX INSURANCEAMOUNT NO. SALARIES WAGES Taylor, Cindy 22.325.22 28.00 304.461725360.00 Gallegos, Edward23.565.51 42.00 308.931726380.00 Turner, Bill18.604.35 14.0020.00 243.051727300.00 Lin, Cecilia 32.247.54 44.0020.00 416.221728520.00 Anderson, Selena 24.805.80 45.00 324.401729 400.00 121.52 28.42 173.0040.00 1,597.06 400.00 1,560.00 M N O P Q R S T GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. 20-- Jan. 8 Shipping Wages Expense 1,560.00 Social Security Tax Payable 121.52 Medicare Tax Payable 28.42 Payroll for week ending Jan. 6 Office Salaries Expense 400.00 Employee Income Tax Payable 173.00 Health Insurance Premiums Payable 40.00 Salaries and Wages Payable 1,597.06 Since we are assuming an identical payroll for each week of the month, each of the four weekly payrolls require general journal entries identical to the one shown here. Page 373

38. Entry to Record Payment of Payroll Page 373

39. CASH PAYMENTS JOURNAL PAGE 1 ACCOUNTS SALARIES PURCHASES DATE CK. DESCRIPTION POST. PAYABLE AND WAGES DISCOUNT CASH NO. REF. DEBIT PAYABLE DEBIT CREDIT CREDIT Jan. 2 1711 Discount Furniture 1,200.00 24.00 1,176.00 Company 8 1725 Cindy Taylor 304.46 304.46 8 1726 Edward Gallegos 308.93 308.93 8 1727 Bill Turner 243.05 243.05 8 1728 Cecilia Lin 416.22 416.22 8 1729 Selena Anderson 324.40 324.40 31 Totals xxxx.xx 6,388.24 xxxx.xx xxxx.xx At the end of January, the columns in the cash payments journal are totaled, including the Salaries and Wages Payable Debit column. Page 373

40. Postings to Ledger Accounts Page 373

41. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. DEBIT CREDIT REF. 2004 Jan. 8 Shipping Wages Expense 1,560.00 Social Security Tax Payable 121.52 Medicare Tax Payable 28.42 Payroll for week ending Jan. 6 Employee Income Tax Payable 173.00 Health Insurance Premiums Payable 40.00 Salaries and Wages Payable 1,597.06 Office Salaries Expense 400.00 Salaries and Wages Payable 1/31 6,388.24 1/8 1,597.06 1/15 1,597.06 1/22 1,597.06 1/29 1,597.06 Office Salaries Expense 1/8 400.00 1/15 400.00 1/22 400.00 1/29 400.00 Page 373 The entries to record the weekly payroll expense and liability amounts are posted from the general journal to the accounts in the general ledger.

42. CASH PAYMENTS JOURNAL PAGE 1 ACCOUNTS SALARIES PURCHASES DATE CK. DESCRIPTION POST. PAYABLE AND WAGES DISCOUNT CASH NO. REF. DEBIT PAYABLE DEBIT CREDIT CREDIT Jan. 2 1711 Discount Furniture 1,200.00 24.00 1,176.00 Company 8 1725 Cindy Taylor 304.46 304.46 8 1726 Edward Gallegos 308.93 308.93 8 1727 Bill Turner 243.05 243.05 8 1728 Cecilia Lin 416.22 416.22 8 1729 Selena Anderson 324.40 324.40 31 Totals xxxx.xx 6,388.24 xxxx.xx xxxx.xx Salaries and Wages Payable 1/31 6,388.24 1/8 1,597.06 1/15 1,597.06 1/22 1,597.06 1/29 1,597.06 The total of the Salaries and Wages Payable Debit column in the cash payments journal is posted to the Salaries and Wages Payable general ledger account. Page 373

43. REVIEWREVIEW The information for the general journal entry to record the payroll expense comes from the _____________. When payroll expense is recorded, net pay is _______ to the liability account, Salaries and Wages Payable. Paychecks can be written on the _______ checking account or on a separate ______ account. Complete the following sentences: credited regular payroll register payroll

44. REVIEWREVIEW In the ___________________ of paying employees, the bank electronically transfers net pay from the employer’s account to the personal account of the employee. The _______________________ contains information needed to compute earnings for each employee. The Salaries and Wages Payable account is _______ when paychecks are written. individual earnings record direct deposit method Complete the following sentences: debited

45. Thank You for using College Accounting, Tenth Edition Price Haddock Brock