1. Chapter 12 Payroll Accounting
Section 12-2
Payroll Deductions
Section 12-3
Payroll Records

2. The collection and processing of information needed to begin to prepare and issue payroll checks.
Gross earnings is the total amount an employee earns in a pay period.
A deduction is an amount that is subtracted from an employee’s gross earnings.
Net pay is the total amount that the employee actually receives (gross earnings less deductions).
Section skills

3. Problem 12-5 (page 333) practice 39 39 7.35 286.65 40 3 43 7.60 338.20
185.00
37.05
222.05
250.00
22.80
272.80
Ann Ryan
practice

4. Mandatory deductions – deductions required by law
Voluntary deduction – deductions that are optional
deductions

5. Deductions Required by Law
Social
Security
Tax
City and State Income Tax
Federal Income Tax
Mandatory deductions

6. mandatory deductions The amount of income tax withheld depends on:
The employee’s marital status (found on Form W-4)
The amount of income tax withheld depends on:
Number of allowances claimed (found on Form W-4)
The employee’s gross earnings
mandatory deductions

7. withholding allowance - An allowance an individual claims on a Form W-4; it is used to calculate the amount of income tax withheld from an employee’s paycheck.
Mandatory deductions
See page 319

8. Look at the Tax Tables shown on page 320
Separate tables for Single and Married
Different tables for pay periods
Reading the tables
mandatory deductions

9. Refund Amount Due Mandatory deductions
Too much money withheld
from the IRS
Employer withholds federal income tax
Too little money withheld
Amount Due
to the IRS
State/Local Income tax is similar – employer is required to withhold and forward to the government
Mandatory deductions

10. The Federal Insurance Contributions Act (FICA) established social security taxes in Two components of FICA are:
Social Security–provided as old age and disability insurance and survivors’ benefits
Medicare–provides health insurance for people who are elderly or disabled
Currently 6.2%
Currently 1.45%
Social Security has an annual maximum; currently the maximum taxable earnings amount is $106,800.
mandatory deductions

11. Examples of Voluntary Deductions
Union Dues
Health Insurance Premiums
Life Insurance Premiums
Retirement Contributions (401k, etc.)
Credit Union Deposits and Payments
U.S. Savings Bonds
Charitable Contributions
voluntary deductions

12. Problem 12-2 (page 322) practice
9.65
2.26
16.00
3.11
31.02
124.58
11.41
2.67
12.00
3.68
29.77
154.33
12.69
2.97
23.00
4.09
42.75
161.90
13.42
3.14
6.00
4.33
26.88
189.52
12.20
2.85
3.94
18.99
177.82
957.56
59.37
13.88
57.00
19.55
149.40
808.16
6.2%
1.45%
Page 320 2%
Double-check by taking the gross total minus total deductions to make sure it equals the net total.
practice

13. Paying Employees Two most common methods: Paper Check Direct Deposit
Payroll records

14. payroll register - A form that summarizes information about employees’ earnings for each pay period.
Total Hours Column
Rate Column
Earnings Section
Deductions Section
Net Pay Column
Check Number Column
Column Totals
See page 323
Payroll records

15. accumulated earnings - the employee’s year-to-date gross earnings
An employer must also keep an employee’s earning record, which includes accumulated earnings information.
employee’s earning record – a record prepared for each employee that contains all payroll information related to the employee; it is kept on a quarterly basis
accumulated earnings - the employee’s year-to-date gross earnings
Payroll records

16. Problem 12-6 (pages 333-334) Problem 12-7 (page 334) Excel – template
Compare with group
Problem 12-7 (page 334)
Handout
assignment