bernard j. bieg and judith a. toland payroll accounting 2014

PAYROLL ACCOUNTING 2014

Bernard J. Bieg and Judith A. Toland

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license

distributed with a certain product or service or otherwise on a password-protected website for classroom use.

ANALYZING & JOURNALIZING

PAYROLL TRANSACTIONS

Chapter 6

© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or

service or otherwise on a password-protected website for classroom use.

Learning Objectives

1. Record payrolls in appropriate records

2. Understand various deductions taken

from employees’ gross pay

3. Journalize entries to record payroll and

payroll taxes

4. Post to general ledger

5. Explain recording of payroll tax deposits

6. Understand need for end-of-period

adjustments © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or


Accounting for Payroll

Transactions

Payroll requires entering data (in order)

in the following places

◦ Payroll Register

◦ Employee Earnings Records

◦ General Journal

Journalize gross wages and withholdings

Journalize payroll taxes and workers’ compensation

Journalize period-end accruals

◦ Post to General Ledger



LO-1

Recording Gross Payroll &

Withholdings

Enter information into accounting system

◦ Salary Expense is debited

◦ Each withholding tax is credited to a liability

◦ All other payroll deductions are liabilities as

well and are credited



LO-1

Methods of Paying Wages &

Salaries

Check

◦ Sometimes separate payroll account

maintained to make bank reconciliation

process easier

Electronic payment methods

◦ EFTS (electronic funds transfer system)

Electronic records created showing bank, account #

and net pay



LO-3


Salaries (cont.) ◦ Pay cards allow employer to deposit payroll

into prepaid card

Card utilized like debit or credit card

Many employees who do not have bank accounts

use these

◦ Electronic paystubs alleviate need for paper

paystubs



LO-3


Salaries (cont.)

Final pay

◦ Many states set time limit between

termination and final wage pay out (depends

upon whether worker left voluntarily)

◦ CA and MI require immediate payment if

employee is fired



LO-3

Journal Entries to Record Payroll

Journal Entry #1 - Record gross wages,

withholdings and net pay

Journal Entry #2 - Record employer’s

payroll tax expense

These two journal entries are always the

same in format. You must make both of

them every time you issue any paycheck

(even if cutting a check for one day’s

wages, for example).



LO-3

Journal Entry #1

Debit Wage Expense for gross payroll

Credit each withholding account - they

are all liabilities

Credit cash (or wages payable) for net

payroll



LO-3

Journal Entry #1



Gross OASDI HI FIT SIT Insurance Net

1,000.00 42.00 14.50 83.00 21.00 103.00 736.50

845.00 35.49 12.25 91.00 29.00 88.00 589.26

1,845.00$ 77.49$ 26.75$ 174.00$ 50.00$ 191.00$ 1,325.76$

Journal entry #1

Wage Expense 1,845.00

FICA Taxes Payable - OASDI 77.49

FICA Taxes Payable - HI 26.75

Employees FIT Payable 174.00

SIT Payable 50.00

Group Insurance Payments W/H 191.00

Cash 1,325.76 LO-3

Journal Entry #2

Debit Payroll Tax Expense for total of all

payroll taxes that employer pays

Credit each account - they are all

liabilities



LO-3

Journal Entry #2



EE Gross FUTA Wages SUTA Wages OASDI Wages HI Wages

A 1,000.00 - 800.00 1,000.00 1,000.00

B 845.00 615.00 845.00 845.00 845.00

Total 1,845.00$ 615.00$ 1,645.00$ 1,845.00$ 1,845.00$

Tax 3.69$ 46.06$ 114.39$ 26.75$

Calculate all employer taxes utilizing varying wage bases and percentages

Journal entry #2

Payroll Tax Expense 190.89

FUTA Taxes Payable 3.69

SUTA Taxes Payable 46.06

FICA Taxes Payable - OASDI 114.39

FICA Taxes Payable - HI 26.75

LO-3

Recording Deposit of Payroll

Taxes

Look in general ledger for amounts due

Deposit 941 taxes

Deposit SIT

Deposit SUTA



191.88

53.50

174.00

Cash 419.38

FICA Taxes Payable - HI

Employee FIT Payable

FICA Taxes Payable - OASDI

SUTA Taxes Payable

Cash

46.06

46.06

SIT Payable

Cash

50.00

50.00

LO-5

Workers’ Compensation

Insurance

Workers’ compensation is an expense for

the employer, who is required to purchase

insurance to protect employees against

work related injuries/disabilities

◦ Laws differ by state

◦ Premiums often calculated based on

employment classification – stated in terms of

$100 per payroll



LO-5

Workers’ Compensation

Insurance (cont.) ◦ Pay premiums in advance based on projected

wages

◦ Then, at year-end, report actual wages and pay

additional premium or may receive credit

towards next year



LO-5

bernard j. bieg and judith a. toland payroll accounting 2014

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