1. Weygandt, Kieso, Kimmel, Trenholm, Kinnear Accounting Principles, Third Canadian Edition © 2009 John Wiley & Sons Canada, Ltd. Prepared by: Debbie Musil Kwantlen University College Chapter 10 Current Liabilities

2. Weygandt, Kieso, Kimmel, Trenholm, Kinnear Accounting Principles, Third Canadian Edition © 2009 John Wiley & Sons Canada, Ltd. Payroll Liabilities Three types of payroll liabilities: Three types of payroll liabilities: Net pay owed to employees Net pay owed to employees Gross pay owed to employees less employee payroll deductionsGross pay owed to employees less employee payroll deductions Employee payroll deductions Employee payroll deductions Both voluntary and required by lawBoth voluntary and required by law Employer payroll deductions Employer payroll deductions Employer’s share of CPP, EI, plus paid vacations and other employer-paid benefitsEmployer’s share of CPP, EI, plus paid vacations and other employer-paid benefits

3. Weygandt, Kieso, Kimmel, Trenholm, Kinnear Accounting Principles, Third Canadian Edition © 2009 John Wiley & Sons Canada, Ltd. Payroll Accounting More than paying employee salaries and wages More than paying employee salaries and wages Companies are required by law: Companies are required by law: To have payroll records for each employeeTo have payroll records for each employee To report and remit payroll deductionsTo report and remit payroll deductions To respect federal and provincial lawsTo respect federal and provincial laws Two types of payroll costs: Two types of payroll costs: Employee costs: amounts paid to employees (net pay) and amounts paid by employees (payroll deductions)Employee costs: amounts paid to employees (net pay) and amounts paid by employees (payroll deductions) Employer costs: amounts paid by employer on behalf of the employee (employee benefits)Employer costs: amounts paid by employer on behalf of the employee (employee benefits)

4. Weygandt, Kieso, Kimmel, Trenholm, Kinnear Accounting Principles, Third Canadian Edition © 2009 John Wiley & Sons Canada, Ltd. Gross Pay The total compensation earned by an employee The total compensation earned by an employee Consists of: Consists of: Wages = hours worked x hourly rate of pay, orWages = hours worked x hourly rate of pay, or Salaries: based on a weekly, biweekly, monthly or annual rateSalaries: based on a weekly, biweekly, monthly or annual rate BonusesBonuses CommissionsCommissions

5. Weygandt, Kieso, Kimmel, Trenholm, Kinnear Accounting Principles, Third Canadian Edition © 2009 John Wiley & Sons Canada, Ltd. Payroll Deductions The difference between gross pay and the amount actually received (net pay) The difference between gross pay and the amount actually received (net pay) Mandatory payroll deductions: Mandatory payroll deductions: Personal income tax, Canada Pension Plan (CPP) and Employment Insurance (EI)Personal income tax, Canada Pension Plan (CPP) and Employment Insurance (EI) Determined from payroll deduction tablesDetermined from payroll deduction tables Voluntary payroll deductions: Voluntary payroll deductions: For charitable causes, retirement, and other purposesFor charitable causes, retirement, and other purposes Should be authorized in writing by the employeeShould be authorized in writing by the employee Do not result in a payroll expense to the employerDo not result in a payroll expense to the employer

6. Weygandt, Kieso, Kimmel, Trenholm, Kinnear Accounting Principles, Third Canadian Edition © 2009 John Wiley & Sons Canada, Ltd. Employer Payroll Costs Amounts an employer is required to pay Amounts an employer is required to pay Required by governments:Required by governments: CPP (matching the employee contribution)CPP (matching the employee contribution) EI (1.4 x the employee contribution)EI (1.4 x the employee contribution) Workplace safety and healthWorkplace safety and health Additional employee benefits:Additional employee benefits: Paid absences: sick days, vacation, holidaysPaid absences: sick days, vacation, holidays Post-employment benefits: to retired employeesPost-employment benefits: to retired employees These benefits give rise to liabilities that must be accrued These benefits give rise to liabilities that must be accrued

7. Weygandt, Kieso, Kimmel, Trenholm, Kinnear Accounting Principles, Third Canadian Edition © 2009 John Wiley & Sons Canada, Ltd. Recording Payroll Expenses and Liabilities Employee payroll costs: Employee payroll costs: Entry for the employee portion of a payrollEntry for the employee portion of a payroll Not an expense to the companyNot an expense to the company Become current liabilities of the company until remittedBecome current liabilities of the company until remitted

8. Weygandt, Kieso, Kimmel, Trenholm, Kinnear Accounting Principles, Third Canadian Edition © 2009 John Wiley & Sons Canada, Ltd. Recording Payroll Expenses and Liabilities 2 Employer payroll costs: Employer payroll costs: Recorded when the payroll is journalizedRecorded when the payroll is journalized Become current liabilities of the company until remittedBecome current liabilities of the company until remitted

9. Weygandt, Kieso, Kimmel, Trenholm, Kinnear Accounting Principles, Third Canadian Edition © 2009 John Wiley & Sons Canada, Ltd. Recording Payment of the Payroll Payment of payroll is either by cheque or electronic funds transfer (EFT) Payment of payroll is either by cheque or electronic funds transfer (EFT) Entry to record payment of payroll deductions: Entry to record payment of payroll deductions:

10. Weygandt, Kieso, Kimmel, Trenholm, Kinnear Accounting Principles, Third Canadian Edition © 2009 John Wiley & Sons Canada, Ltd. COPYRIGHT Copyright © 2009 John Wiley & Sons Canada, Ltd. All rights reserved. Reproduction or translation of this work beyond that permitted by Access Copyright (The Canadian Copyright Licensing Agency) is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein.