1. First Canadian Edition Price • Haddock • Brock • Hahn • Reed
College
Accounting
First Canadian Edition
Price • Haddock • Brock • Hahn • Reed
Throughout this presentation I will be referring to the Price text entitled College Accounting, First Canadian edition
McGraw-Hill Ryerson 1

2. PAYROLL COMPUTATIONS, RECORDS,
CHAPTER 12
PAYROLL COMPUTATIONS, RECORDS,
AND PAYMENT 2

3. WHO IS AN EMPLOYEE? One who is hired by the employer
Under the control and direction of the employer
Usually provided the tools or equipment by the employer
Generally controlled by the employer as to the number of hours worked and approach to the job 3

4. Federal and Provincial Laws have a crucial impact on relationships
between employers and employees.
EARNINGS
TAXES
WORKING CONDITIONS
EMPLOYEE BENEFITS 4

5. Explain the major federal and provincial laws relating
OBJECTIVE 1
Explain the major federal
and provincial laws relating
to employee earnings and
withholding. 5

6. THE LABOUR STANDARDS ACT
Sets a minimum hourly rate of pay and also sets a maximum number of hours of work per week to be performed at the regular rate of pay.
Hours worked over 44 in any week to be paid at “time and a half” rate.
In Ontario: $6.85 an hour for 44 hours. 6

7. CANADA PENSION PLAN (CPP)
Levies a tax that is shared equally by employer and employee.
Provides three major categories of benefits:
1. Retirement benefit, or pension, when a worker
reaches age 62.
2. Benefits for the dependents of a retired worker.
3. Benefits for the worker and the worker’s dependents when the worker is disabled.
Presently 4.3% on the first $38,300 7

8. INCOME TAX
Employers are required to withhold an estimated amount of income tax from the employee’s earnings. 8

9. EMPLOYER’S PAYROLL TAXES AND INSURANCE COSTS
Employers must also pay taxes on their employees’ earnings.
1. Canada or Quebec pension plans
2. Employment insurance benefits
3. Workers’ Compensation Insurance 9

10. CANADA OR QUEBEC PENSION PLAN
Employer required to pay amount equal to CPP tax withheld from employee’s base earnings.
Employer’s share of tax sent to federal government along with amounts withheld from employee’s paycheque.
Currently 4.3% on the first $38,300 10

11. EMPLOYMENT INSURANCE TAX
Employers are required to pay a tax based on earnings to a maximum of $39,000. 11

12. CPP Contributions for 2001 EI Premiums for 2001 Employer EI Premiums
Maximum pensionable earnings $38,300.00
Annual basic exemption 3,500.00
Maximum contributory earnings 34,800.00
Contribution rate (4.3%)
Maximum employee contribution 1,496.40
Maximum employer contribution 1,496.40
Deduction for CPP stops when the employee reaches the maximum contribution for the year.
EI Premiums for 2001
Maximum annual insurance earnings $39,000.00
Premium rate (2.25%)
Maximum annual employee premium
Employer EI Premiums
Employer EI premium is 1.4 times employee’s premium for the pay period 12

13. INSURANCE PREMIUM
Rate for employment insurance premium is 2.25 percent of employee’s gross wage.
Employer must pay 1.4 times amount the employee contributes. 13

14. WORKERS’ COMPENSATION INSURANCE
Some provinces have laws requiring employers to pay for insurance that will:
Reimburse employees for losses suffered from job-related injuries
Compensate their families if death occurs in the course of their employment 14

15. REQUIRED PAYROLL RECORDS
THE MOST IMPORTANT RECORDS REQUIRED ARE:
The name, address, social insurance number, and date of birth of each employee.
Hours worked each day and week, wages paid at the regular rate, and overtime premium wages.
Cumulative amount of taxable wages paid throughout the year.
Amount of income tax, Canada or Quebec pension plan contributions, and employment insurance premiums withheld from each employee’s earnings for each pay period. 15

16. Compute gross earnings
OBJECTIVE 2
Compute gross earnings
of employees. 16

17. GROSS WAGE/SALARY EARNED BY EACH EMPLOYEE
Hourly-Rate Basis
Hours Worked X Rate Per Hour
Salary Basis
Agreed Amount For Each Week, Month
Or Other Period
Commission Basis
Percentage Of Net Sales
Piece-Rate Basis
Wages Based On Number Of Units Produced 17

18. Computing Gross Pay Example 1 Example 2
Cass Collins worked 44 $8.00 per hr.
44 hrs. X $8.00 = $ Gross Pay
Example 2
Enos Echols worked 48 hrs regular hourly rate of $7.00 and 8 overtime rate of $10.50
$7.00  2 = $ $7.00 = $10.50
Regular time earnings: 40 $7.00 = $280.00
Overtime earnings: 8 hrs. X $ =
Gross Pay = $364.00 18

19. OBJECTIVE 3 Determine employee deductions for CPP contributions.19

20. DETERMINING CPP CONTRIBUTIONS
Both employee and employer pay an equal amount.
Multiply 4.3% (rate) times the first $38,300 (base) of gross wages for each employee, after $3,500 basic personal exemption has been subtracted. 20

21. OBJECTIVE 4 Determine employee deductions for employment insurance
premiums. 21

22. DETERMINING DEDUCTIONS FOR EMPLOYMENT INSURANCE
Both employee and employer pay.
A rate of 2.25% is levied to a maximum of $39,000. 22

23. OBJECTIVE 5 Determine employee deductions for income taxes.23

24. INCOME TAX
The amount of income tax to be withheld from an employee’s earnings generally depends on the following:
Income earned during the pay period
Length of pay period
Number of exemption allowances 24

25. 25

26. 26

27. 27

28. 28

29. OTHER DEDUCTIONS REQUIRED BY LAW
Provinces require that provincial income tax be withheld from earnings of employees. 29

30. WITHHOLDINGS NOT REQUIRED BY LAW
Many kinds of deductions that are not required by law are made by agreement between the employee and the employer.
Examples are:
Life insurance
Group medical insurance covering the employee’s family
Employee’s share of company retirement plans
Union dues that will be deposited in a bank or a company credit union
Canada savings bonds, shares of stock, or other investment 30

31. SALARIED EMPLOYEES
Salaried employees earn a specific sum of money for each payroll period, whether it is weekly, biweekly, semimonthly, or monthly.
Salaried workers who do not hold supervisory jobs are generally covered by the provisions of the Labour Standards Act that deal with maximum hours and overtime premium pay. 31

32. in the payroll register.
OBJECTIVE 6
Enter gross earnings,
deductions, and net pay
in the payroll register. 32

33. 33 PAYROLL REGISTER WEEK BEGINNING January 1, 2001
FED NO EARNINGS
NAME CLAIM CUMULATIVE OF RATE REG O/T GROSS CUMUL.
CODE EARNINGS HRS PREM AMT. EARNS.
Collins, Cass
Echols, Enos
Johansen, Carol
Sanchez, Rita
Yamoah, Mill
1, , ,616.00
(A) (B) (C) (D) (E) (F) (G) (H) (I)
AND ENDING January 6, 20X PAID January 8, 20X5
TAXABLE WAGES DEDUCTIONS DISTRIBUTION
CPP EI INC. HLTH NET CHQ. OFFICE SHPG.
TAX INS AMT NO SALS. WAGES
1, , , ,316.00
(J) (K) (M) (N) (O) (P) (Q) (R) (S) (T) 33

34. OBJECTIVE 7 Journalize payroll transactions in the general journal.34

35. JOURNALIZE DATA FROM THE PAYROLL REGISTER IN THE
GENERAL JOURNAL
20x5
Jan Office Salaries Expense
Shipping Wages Expense ,316.00
CPP Pay
EI Pay
Employee Inc. Tax Pay
Health Ins. Premiums Pay
Salaries and Wages Pay ,276.90
Payroll for week ending
January 6
350 35

36. CASH PAYMENTS JOURNAL Page 1
ACCOUNTS SALARIES AND PURCHASES
DATE CQ. EXPLANATION POST. PAYABLE WAGES PAYABLE DISCOUNT CASH
NO REF DEBIT DEBIT CREDIT CREDIT
20X5
Jan Town Supply
Company
Cass Collins
Enos Echols
Carol Johansen
Rita Sanchez
Mill Yamoah
Totals xxxxxx , xxxxxx xxxxxxx 36

37. 20x5
Jan Salaries and Wages Payable ,276.90
Cash ,276.90
Record cheque to payroll
bank account. 37

38. The major benefit of using a separate payroll account, if there are many employees, is it simplifies the bank reconciliation at the end of the month.
A special payroll account makes it easier to quickly determine each month if there are outstanding payroll cheques. 38

39. Direct Deposit Method 39 CASS COLLINS
PAYROLL PERIOD : January 1 - January 6, 20X5
Gross:
Deductions:
CPP EI
Income Tax
Net Pay
Direct deposit will be available
1-8-X5
Direct Deposit Method 39

40. OBJECTIVE 8 Maintain an earnings record for each individual employee.40

41. Individual Employee’s
EARNINGS RECORD FOR
NAME Cass Collins RATE $8 per hour SOC. INS. NO
ADDRESS 24 Oak Street, North Bay, ON P0A 1X DATE OF BIRTH Jan. 23, 1970
WITHHOLDING ALLOWANCES MARITAL STATUS M
DATE HOURS EARNINGS
WK PAID RG OT REGULAR OVERTIME TOTAL CUMU-
END LATIVE
TOTAL
/ /
/ /
/ /
/ / ,280.00
January , ,280.00
PAYROLL NO.
Individual Employee’s
Earnings Record 41

42. Deduction Section of the Individual Earnings Record
EARNINGS RECORD FOR 20X5
NAME Cass Collins RATE $8 per hour SOC. SEC. NO
ADDRESS 24 Oak Street, Krum, TX DATE OF BIRTH Jan. 23, 1970
WITHHOLDING ALLOWANCES MARITAL STATUS M
1 1/06 1/
2 1/13 1/
3 1/20 1/
4 1/27 1/
January ,
DATE HOURS EARNINGS DEDUCTIONS
NET
WK. PAID RG OT REGULAR CPP EI INCOME OTHER PAY
END TAX
PAYROLL NO.
Deduction Section of the
Individual Earnings Record 42

43. 43 AND ENDING January 6, 20X5 PAID January 8, 20X5 (K) (P) (R) (S) (T)
DISTRIBUTION
EMPLOY HEALTH NET CHEQUE OFFICE SHIPPING
INS INS. AMOUNT NO SALARIES WAGES
1, ,316.00
(K) (P) (R) (S) (T)
GENERAL JOURNAL
20X5
Jan Office Salaries Expense
Shipping Wages Expense ,316.00
CPP Pay
EI Pay
Employee Income Tax Pay
Health Ins. Premiums Pay
Salaries and Wages Pay ,276.90
Payroll for week ending
January 6 43

44. Salaries and Wages Payable Office Salaries Expense EI Payable
GENERAL JOURNAL
20X5
Jan Office Salaries Expense
Shipping Wages Expense ,316.00
CPP Pay
EI Pay
Employee Income Tax Pay
Health Ins. Premiums Pay
Salaries and Wages Pay ,276.90
Payroll for week ending
January 6
Salaries and Wages Payable
5, / ,276.90
1/15 1,276.90
1/22 1,276.90
1/29 1,276.90
Office Salaries Expense 1/ 1/ 1/ 1/
EI Payable 1/ 1/ 1/ 1/
356
CASH PAYMENTS JOURNAL Page
ACCOUNTS SALARIES AND PURCHASES
DATE CK. EXPLANATION POST. PAYABLE WAGES PAYABLE DISCOUNT CASH
NO REF DEBIT DEBIT CREDIT CREDIT
Jan Town Supply
Company
Totals xxxxxx , xxxxxx xxxxxxx
Shipping Wages Payable
1/ ,316.00
1/15 1,316.00
1/22 1,316.00
1/29 1,316.00 44

45. Employee Income Tax Pay. Health Insurance Premiums Pay.
GENERAL JOURNAL
20X5
Jan Office Salaries Expense
Shipping Wages Expense ,316.00
CPP Pay
EI Pay
Employee Income Tax Pay
Health Ins. Premiums Pay
Salaries and Wages Pay ,276.90
Payroll for week ending
January 6
Employee Income Tax Pay. 1/ 1/ 1/ 1/
Health Insurance Premiums Pay. 1/ 1/ 1/ 1/
Shipping Wages Expense
1/ ,316.00
1/15 1,316.00
1/22 1,316.00
1/29 1,316.00
356
CASH PAYMENTS JOURNAL Page
ACCOUNTS SALARIES AND PURCHASES
DATE CK. EXPLANATION POST. PAYABLE WAGES PAYABLE DISCOUNT CASH
NO REF DEBIT DEBIT CREDIT CREDIT
Jan Town Supply
Company
Totals xxxxxx , xxxxxx xxxxxxx
CPP Pay. 1/ 1/ 1/ 1/ 45