1. Copyright  2006 Pearson Education Canada Inc. 8-1

2. Copyright  2006 Pearson Education Canada Inc. 8-2 Outline  Payroll Accounting  Deductions From Pay and Voluntary Payroll Deductions  Recording Payroll  Employer’s Payroll Taxes  Adjusting Entry - Accrual for Employer’s Share of Taxes  Independent Contractors  Controlling Salaries and Wages Expense  The Tip Credit

3. Copyright  2006 Pearson Education Canada Inc. 8-3 Payroll Accounting  GROSS SALARIES - Salaries and wages earned by employees  DEDUCTIONS FROM PAY - Includes withheld taxes and voluntary deductions  NET PAY – The amount received by an employee after all deductions have been made  EMPLOYER’S PAYROLL TAXES – Payroll-related federal and provincial taxes and insurance payments which constitute an additional expense

4. Copyright  2006 Pearson Education Canada Inc. 8-4 Deductions from pay  Federal withholding taxes  Provincial and local withholding taxes (Quebec has some municipal income taxes)  Canada Pension Plan, employee’s share  Employment Insurance, employee’s share  Voluntary deductions

5. Copyright  2006 Pearson Education Canada Inc. 8-5 Voluntary Payroll Deductions  Supplemental medical insurance  Savings plans  Loan repayments  Charitable contributions

6. Copyright  2006 Pearson Education Canada Inc. 8-6 RECORDING PAYROLL

7. Copyright  2006 Pearson Education Canada Inc. 8-7 PAYROLL JOURNAL ENTRY

8. Copyright  2006 Pearson Education Canada Inc. 8-8 EMPLOYER’S PAYROLL EXPENSES JOURNAL ENTRY Employer must send each month’s money to Ottawa by the 15 th of the next month.

9. Copyright  2006 Pearson Education Canada Inc. 8-9 Payroll Taxes – Employer’s Share  Canada Pension Plan or Quebec Pension Plan  Workplace Insurance  Employment Insurance  Employer Health Tax

10. Copyright  2006 Pearson Education Canada Inc. 8-10 Adjusting Entry - Accrual for Employer’s Share of Taxes

11. Copyright  2006 Pearson Education Canada Inc. 8-11 Independent Contractors  Persons working for several business entities without becoming the exclusive employee of any of them  Employer is not responsible for deducting employee payroll taxes  Examples include musicians or entertainers, temporary helpers, cleaners, consultants

12. Copyright  2006 Pearson Education Canada Inc. 8-12 Controlling Salaries and Wages Expense Separation of responsibilities for the following payroll functions:  Control of personnel files  Preparation of payroll  Paying employees  Recording payroll information  Reconciling the payroll bank account

13. Copyright  2006 Pearson Education Canada Inc. 8-13 The Tip Credit  Great impact on the hospitality industry  Allows employers to consider tips as part of the employee’s minimum wage  Separate records of wages, tips deemed wages, and other tips must be maintained