h-1. h-2 learning objectives record the payroll for a pay period. 1 record employer payroll taxes. 2...
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H-1
H-2
Learning Objectives
Record the payroll for a pay period.1
Record employer payroll taxes.2
Discuss the objectives of internal control for payroll.
3
Appendix HPayroll Accounting
H-3
“Payroll” pertains to both:
Salaries - managerial, administrative, and sales personnel
(monthly or yearly rate).
Wages - store clerks, factory employees, and manual
laborers (rate per hour).
Involves computing three amounts: (1) gross earnings, (2)
payroll deductions, and (3) net pay.
Determining the Payroll
LO 1
LEARNINGOBJECTIVE Record the payroll for a pay period.1
H-4
Total compensation earned by an employee (wages or
salaries, plus any bonuses and commissions).
GROSS EARNINGS
Determining the Payroll
LO 1
Illustration H-1Computation of total wages
H-5
Mandatory:
FICA tax
Federal income tax
State income tax
PAYROLL DEDUCTIONS
Voluntary:
Charity
Insurance
Union dues
Pension plans
Determining the Payroll
LO 1
H-6
Mandatory:
FICA tax
Federal income tax
State income tax
Social Security and Medicare tax
Supplemental retirement,
employment disability, and medical
benefits.
Determining the Payroll
PAYROLL DEDUCTIONS
LO 1
Illustration H-3FICA tax rate and tax base
H-7
Employers are required to
withhold income taxes from
employees’ pay.
Withholding amounts are based
on gross wages and the number
of allowances claimed.
Determining the Payroll
Mandatory:
FICA tax
Federal income tax
State income tax
PAYROLL DEDUCTIONS
LO 1
H-8
Most states (and some cities)
require employers to withhold
income taxes from employees’
earnings.
Determining the Payroll
Mandatory:
FICA tax
Federal income tax
State income tax
PAYROLL DEDUCTIONS
LO 1
H-9
Gross earnings minus payroll deductions.
NET PAY
Determining the Payroll
LO 1
Illustration H-6Computation of net pay
H-10 LO 1Illustration H-7Employee earnings record
Recording the Payroll
H-11 LO 1
Illustration H-8Payroll register
Recording the Payroll
H-12
Illustration: Prepare the entry Academy Company would make to
record the payroll for the week ending January 14.
RECOGNIZING PAYROLL EXPENSES AND LIABILITIES
Salaries and Wages Expense 17,210.00
FICA Taxes Payable 1,316.57
Federal Income Taxes Payable 3,490.00
State Income Taxes Payable 344.20
United Fund Contributions Payable 421.50
Union Dues Payable 115.00
Salaries and Wages Payable 11,522.73
Recording the Payroll
LO 1
H-13
Illustration: Prepare the entry Academy Company would make to
record the payment of the payroll.
RECORDING PAYMENT OF THE PAYROLL
Recording the Payroll
LO 1
Salaries and Wages Payable 11,522.73
Cash 11,522.73
H-14
Illustration H-9Paycheck and statement ofearnings
RECORDING PAYMENT OF THE PAYROLL
LO 1
H-15
These taxes are:
FICA taxes
Federal
unemployment tax
State unemployment
tax
Same rate and maximum earnings
as the employee’s.
LO 2
Payroll tax expense results from three taxes that
governmental agencies levy on employers.
LEARNINGOBJECTIVE Record employer payroll taxes.2
H-16
FUTA tax rate is 6.2% of first
$7,000 of taxable wages.
Employers who pay the state
unemployment tax on a timely
basis will receive an offset credit
of up to 5.4%. Therefore, the net
federal tax rate is generally
0.8%.
Employer Payroll Taxes
These taxes are:
FICA tax
Federal
unemployment tax
State unemployment
tax
LO 2
Payroll tax expense results from three taxes that
governmental agencies levy on employers.
H-17
SUTA basic rate is usually 5.4% on
the first $7,000 of wages paid.
Employer Payroll Taxes
Payroll tax expense results from three taxes that
governmental agencies levy on employers.
These taxes are:
FICA tax
Federal
unemployment tax
State
unemployment tax
LO 2
H-18
Illustration: Academy records the payroll tax expense associated with the January 14 payroll with the following entry. Use the following rates: FICA 8%, state unemployment 5.4%, federal unemployment 0.8%.
Payroll Tax Expense 2,383.59
State Unemployment Tax Payable929.34
FICA Tax Payable1,316.57
*** $17,210.00 x 5.4% = $929.34
* $ 17,210.00 x 7.65% = $1,316.57
Federal Unemployment Tax Payable 137.68
*
** $17,210 x .8% = $137.68
**
***
Recording Employer Payroll Taxes
LO 2
H-19
Employer payroll taxes do not include:
a. Federal unemployment taxes.
b. State unemployment taxes.
c. Federal income taxes.
d. FICA taxes.
Question
LO 2
Recording Employer Payroll Taxes
H-20
Companies must report FICA taxes and federal income taxes
withheld no later than one month following the close of each
quarter.
Companies generally file and remit federal unemployment
taxes annually on or before January 31 of the subsequent
year. Companies usually file and pay state unemployment
taxes by the end of the month following each quarter.
Employers must provide each employee with a Wage and Tax
Statement (Form W-2) by January 31.
Filing and Remitting Payroll Taxes
LO 2
H-21
APPENDIXFiling and Remitting Payroll Taxes Illustration H-11
LO 2
H-22
As applied to payrolls, the objectives of internal control are
1. to safeguard company assets against unauthorized payments of payrolls, and
2. to ensure the accuracy and reliability of the accounting records pertaining to payrolls.
LO 3
LEARNINGOBJECTIVE
Discuss the objectives of internal control for payroll.
3
H-23
APPENDIXFiling and Remitting Payroll Taxes
LO 3
Illustration H-12Internal control for payroll
H-24
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