CHAPTER EIGHT

PAYROLL ACCOUNTING: EMPLOYEE EARNINGS

AND DEDUCTIONS

PAYROLL RECORD KEEPING

PAYROLLRECORD KEEPING

Payroll is a major expenditure for most businesses.• Records provide data for analyzing and

controlling these expenditures.

Laws require records to be kept• For business as a whole• For each employee

EMPLOYEESOR

INDEPENDENTCONTRACTORS?

EMPLOYEES

Work under the control and direction of an employer

Examples:

INDEPENDENT CONTRACTORS

Perform services for a fee and do not work under the control and direction of the company paying for the services

Examples:

EMPLOYEES vs. INDEPENDENT CONTRACTORS

Employees involve:• More laws and regulations• Taxes that must be deducted • Payroll records to maintain• Numerous reports to file

Only one form must be filed for independent contractors• Form 1099

SALARIES & WAGES

Salaries:• Compensation for managerial administrative

services• Expressed in biweekly, monthly, or annual

terms

Wages:• Compensation for skilled and unskilled labor• Expressed in terms of hours, weeks, or units

produced

OVERTIME

Fair Labor Standards Act (FLSA): • Requires employers to pay overtime (1 1/2

times the regular rate) to any hourly employee who works over 40 hours in a week

• Some salaried employees are exempt from FLSA.

CALCULATING TOTAL EARNINGS

When compensation is based on time: Records must be kept of the time

worked by each employee.• Examples: time cards, plastic cards

with bar codes

The hours worked are multiplied by rate of pay to determine total earnings.

CALCULATING TOTAL EARNINGS

Example: Helen Kuzmik worked 55 hours this week. She is paid overtime (1 1/2 times her regular rate) for any hours over 8 in one day or 40 hours in a week (11 hours) and double time for any hours worked on Sundays (4 hours). Her regular rate of pay is $12 per hour.

40 hours x $12 per hour11 hours x $18

$480

$12 x 1 1/2 = $18 overtime rate

CALCULATING TOTAL EARNINGS

40 hours x $12 per hour11 hours x $18

4 Sunday hours, paid at double the regular rate$12 x 2 = $24 Sunday rate

4 hours x $24

$48019896

Example: Helen Kuzmik worked 55 hours this week. She is paid overtime (1 1/2 times her regular rate) for any hours over 8 in one day or 40 hours in a week (11 hours) and double time for any hours worked on Sundays (4 hours). Her regular rate of pay is $12 per hour.

CALCULATING TOTAL EARNINGS

40 hours x $12 per hour11 hours x $18 4 hours x $24

$48019896

$774Total earnings for the week

Also called “Gross Pay”

Example: Helen Kuzmik worked 55 hours this week. She is paid overtime (1 1/2 times her regular rate) for any hours over 8 in one day or 40 hours in a week (11 hours) and double time for any hours worked on Sundays (4 hours). Her regular rate of pay is $12 per hour.

CALCULATING TOTAL EARNINGS

EXAMPLE: Linda Swaney has a salary of $2,288 per month. If she works over 40 hours in a week, she is to be paid the overtime rate of 1 1/2 times her hourly rate.

In order to compute her overtime rate,we must determine her regular

hourly rate

CALCULATING TOTAL EARNINGS

EXAMPLE: Linda Swaney has a salary of $2,288 per month. If she works over 40 hours in a week, she is to be paid the overtime rate of 1 1/2 times her hourly rate.

Step #1 Determine her annual salary

$2,288 per month x 12 months

$27,456

CALCULATING TOTAL EARNINGS

EXAMPLE: Linda Swaney has a salary of $2,288 per month. If she works over 40 hours in a week, she is to be paid the overtime rate of 1 1/2 times her hourly rate.

Step #2 Determine her weekly salary

$27,456 annual salary ÷ 52 weeks

$528.00 per week

CALCULATING TOTAL EARNINGS

EXAMPLE: Linda Swaney has a salary of $2,288 per month. If she works over 40 hours in a week, she is to be paid the overtime rate of 1 1/2 times her hourly rate.

Step #3 Compute regular hourly rate

$528.00 per week ÷ 40 hours per week

$13.20 per hour

CALCULATING TOTAL EARNINGS

EXAMPLE: Linda Swaney has a salary of $2,288 per month. If she works over 40 hours in a week, she is to be paid the overtime rate of 1 1/2 times her hourly rate.

Step #4 Compute overtime rate

$13.20 per hour x 1 1/2

$19.80 per hour of overtime

DEDUCTIONS FROM GROSS PAY

Three categories:• Federal (and possibly state and city) income tax

withholding• Employee FICA tax withholding• Voluntary deductions

Gross Pay - Deductions = Net Pay• Also called “take-home pay”

INCOME TAX WITHHOLDING

Required by federal law:• Applied toward payment of employee’s federal

income tax

Amount withheld determined by:• Total Earnings• Marital Status• Number of withholding allowance claimed• Length of the pay period

WITHHOLDING ALLOWANCES

Exempt a specific dollar amount of gross pay from income tax withholding.

Computed on Form W-4 “Employee’s Withholding Allowance Certificate”

Based on marital status and number of allowances claimed

•One allowance for employee, spouse who does not claim an allowance, and each dependent child

WAGE-BRACKET METHOD

EXAMPLE: Ken Istone, who is married and claims 6 allowances, has gross earnings of $545 for the week ending December 19, 20--. Determine the amount of federal income tax to be withheld using the wage-bracket method.

MARRIED Persons - WEEKLY Payroll PeriodIf the wages are--

At leastBut less

than

And the # of withholding allowances claimed is--

The amount of income tax to be withheld is--$ 390 $ 400

400 410

540 550 550 560 560 570 570 580 580 590

600 590 610 600

610 620 620 630 630 640 640 650

0

29 31

52 53 55 56 58 596162646567

1 2 3 4 5 6 7 8 9 10

2122

43 44 46 47 49 5052 53 55 56 58

16

34 36 37 39 40 4243 45 46 4849

10 11

2527283031333436373940

4 0 0 0 0 0 00 0 0 0 0

000

0 5

19 13 7 120212223242527283031

14151617181920212223

8 2 0 0 09 3 0 00

10 4 0 11 5 0

0 00 0

12 6 0 0 0

15

13 7 1 0 014 8 2 0 015 9 3 0 016 10 4 0 017 11 5 0 0

Step #1 Find the row for wages of “at least $540,

but less than $550.”

MARRIED Persons - WEEKLY Payroll PeriodIf the wages are--

At leastBut less

than

And the # of withholding allowances claimed is--

The amount of income tax to be withheld is--$ 390 $ 400

400 410

540 550 550 560 560 570 570 580 580 590

600 590 610 600

610 620 620 630 630 640 640 650

0

29 31

52 53 55 56 58 596162646567

1 2 3 4 5 6 7 8 9 10

2122

43 44 46 47 49 5052 53 55 56 58

16

34 36 37 39 40 4243 45 46 4849

10 11

2527283031333436373940

4 0 0 0 0 0 00 0 0 0 0

000

0 5

19 13 7 120212223242527283031

14151617181920212223

8 2 0 0 09 3 0 00

10 4 0 11 5 0

0 00 0

12 6 0 0 0

15

13 7 1 0 014 8 2 0 015 9 3 0 016 10 4 0 017 11 5 0 0

Step #2 Find the columnheaded

“6 withholding allowances.”

MARRIED Persons - WEEKLY Payroll PeriodIf the wages are--

At leastBut less

than

And the # of withholding allowances claimed is--

The amount of income tax to be withheld is--$ 390 $ 400

400 410

540 550 550 560 560 570 570 580 580 590

600 590 610 600

610 620 620 630 630 640 640 650

0

29 31

52 53 55 56 58 596162646567

1 2 3 4 5 6 7 8 9 10

2122

43 44 46 47 49 5052 53 55 56 58

16

34 36 37 39 40 4243 45 46 4849

10 11

2527283031333436373940

4 0 0 0 0 0 00 0 0 0 0

000

0 5

19 13 7 120212223242527283031

14151617181920212223

8 2 0 0 09 3 0 00

10 4 0 11 5 0

0 00 0

12 6 0 0 0

15

13 7 1 0 014 8 2 0 015 9 3 0 016 10 4 0 017 11 5 0 0

Step #3 Find the amountwhere they cross.

This is the amountto be withheld.

FICA TAX WITHHOLDING

Includes amounts for: Social Security

• provides pension and disability benefits

Medicare• provides health insurance

Required by the Federal Insurance Contributions Act (FICA)

FICA TAX WITHHOLDING

Tax rates are set by Congress: Social Security

• 6.2% on maximum earnings of $87,000

Medicare • 1.45% on ALL earnings

Rates are changed frequently

FICA TAX WITHHOLDING

EXAMPLE: Sarah Cadrain had earnings of $1,600 for the pay period, December 6-12. Bringing her earnings year-to-date to $86,340

Sarah’s earnings have not yet reachedthe maximum of $87,000.

ALL of her earnings for this week are subject to Social Security and Medicare tax.

FICA TAX WITHHOLDING

EXAMPLE: Sarah Cadrain had earnings of $1,600 for the pay period, December 6-12. Bringing her earnings year-to-date to $86,340

$1,600

Gross Pay X Tax Rate Tax

Social Security 6.2%

Medicare 1.45%

$99.20

23.20$122.40

FICA TAX WITHHOLDING

EXAMPLE: The following week Sarah earns $1,660, bringing her earnings year-to-date to $88,000 (over the Social Security maximum).

$88,000Year-to-date earnings

87,000Social Security maximum

Amount not subject to S.S. tax 1,000

FICA TAX WITHHOLDING

EXAMPLE: The following week Sarah earns $1,660; bringing her earnings year-to-date to $88,000 (over the Social Security maximum).

$1,660Gross Pay1,000Amount not subject to S.S. tax

Amount subject to S.S. tax 660Tax Rate 6.2%Social Security Tax $ 40.92

FICA TAX WITHHOLDING

EXAMPLE: The following week Sarah earns $1,660, bringing her earnings year-to-date to $88,000 (over the Social Security maximum).

$1,660Gross Pay

Medicare has no maximum earnings.Therefore, all Sarah’s gross payis subject to the Medicare tax.

FICA TAX WITHHOLDING

EXAMPLE: The following week Sarah earns $1,660, bringing her earnings year-to-date to $88,000 (over the Social Security maximum).

$1,660Gross Pay

Tax Rate 1.45%

Medicare Tax $ 24.07

Sarah’s total FICA tax is $64.99($40.92 SS + $24.07 Med.)

VOLUNTARY DEDUCTIONS

Deductions that are optional: many depend on specific agreements between the employee and employer.

Examples:• United States savings bond purchases• Health insurance premiums• Credit union deposits• Pension plan payments• Charitable contributions

COMPUTING NET PAYEXAMPLE: Let’s return to Ken Istone’s $545 gross pay for the week ended December 19 and determine his net pay.

Gross Pay $545.00Deductions:

Federal Income Tax $ 7.00

From Wage Bracket Tables

COMPUTING NET PAYEXAMPLE: Let’s return to Ken Istone’s $545 gross pay for the week ended December 19 and determine his net pay.

Gross Pay $545.00Deductions:

Federal Income Tax $ 7.00Social Security Tax 33.79

All his pay is subject to S.S. tax:$545 x 6.2%

COMPUTING NET PAYEXAMPLE: Let’s return to Ken Istone’s $545 gross pay for the week ended December 19 and determine his net pay.

Gross Pay $545.00Deductions:

Federal Income Tax $ 7.00Social Security Tax 33.79Medicare Tax 7.90 $545 x 1.45%

COMPUTING NET PAYEXAMPLE: Compute the net pay of Ken Istone for the week ended December 19. His health insurance premiums are $10 per week.

Gross PayDeductions:

Federal Income Tax $ 7.00Social Security Tax 33.79Medicare Tax 7.90Health Insurance Premiums 10.00

Total Deductions 58.69Net Pay

$545.00

$486.31

PAYROLL RECORDS

Name, address, occupation, Social Security #, marital status, and # of withholding allowances

Gross earnings, date of payment, period covered by each payroll

Gross earnings accumulated for the year Amounts of taxes and other items withheld

Should provide the following information on each employee:

PAYROLL RECORDS

Three types:PAYROLLREGISTER

PAYROLL CHECKwith earnings statement

EMPLOYEEEARNINGS RECORD

PAYROLL REGISTER

ALLOW.# MARITAL

STATUSNAME

EARNINGSREGULAR OVER-

TIMETOTAL

A Payroll Register is a form usedto assemble the data required

at the end of each payroll period.

PAYROLL REGISTER

ALLOW.# MARITAL

STATUSNAME

Cadrain, Sarah 4 M

EARNINGSREGULAR OVER-

TIMETOTAL

Since marital status and# of allowances are used tocompute withholding taxes,

they are recorded on thePayroll Register.

PAYROLL REGISTER

ALLOW.# MARITAL

STATUSNAME

Cadrain, Sarah 4 M

EARNINGSREGULAR OVER-

TIME

1,600.00 60.00

TOTAL

1,660.00

Earnings for this periodare shown, categorized by

Regular and Overtimeearnings.

PAYROLL REGISTER

TOTALEARNINGS

88,000.001,660.00

CUMULATIVE TOTAL

TAXABLE EARNINGSUNEMPLOYMENT

COMP.SOCIAL

SECURITY

660.00

This pay period has taken Sarah’s earningsabove the Social Security maximum.

As computed earlier, only $660 of this period’s earnings is subject to the

Social Security tax.

PAYROLL REGISTER

FEDERAL INCOME TAX

40.92234.00

DEDUCTIONSSOC. SEC.

TAXMEDICARE

TAX

24.07

HEALTH INSURANCE

UNITED WAY

All deductions fromtotal earnings are listed.

PAYROLL REGISTER

UNITED WAY

TOTAL NET PAY CHECK NO.

HEALTH INSURANCE

DEDUCTIONS

298.99 1,361.01 409

Deductions are totaledand subtracted from

Total Earnings to arriveat Net Pay.

PAYROLL REGISTER

ALLOW.# MARITAL

STATUSNAME

Cadrain, Sarah 4 M

EARNINGSREGULAR OVER-

TIME

1,600.00 60.00

TOTAL

1,660.00

Guder, James 1 S 760.00 140.00 900.00

The payroll information forthe other employees

is recorded in the same manner.

PAYROLL REGISTER

TOTALEARNINGS

88,000.001,660.00

CUMULATIVE TOTAL

TAXABLE EARNINGSUNEMPLOYMENT

COMP.SOCIAL

SECURITY

660.00

900.00 43,400.00 900.00

PAYROLL REGISTER

FEDERAL INCOME TAX

40.92234.00

DEDUCTIONSSOC. SEC.

TAXMEDICARE

TAX

24.07

HEALTH INSURANCE

UNITED WAY

146.00 55.80 13.05 20.00

PAYROLL REGISTER

UNITED WAY

TOTAL NET PAY CHECK NO.

HEALTH INSURANCE

DEDUCTIONS

298.99 1,361.01 409

20.00 234.85 665.15 410

PAYROLL REGISTER

ALLOW.# MARITAL

STATUSNAME

Cadrain, Sarah 4 M

EARNINGSREGULAR OVER

TIME

1,600.00 60.00

TOTAL

1,660.00

Guder, James 1 S 760.00 140.00 900.00

Istone, Ken 6 M 545.00 545.00

PAYROLL REGISTER

TOTALEARNINGS

88,000.001,660.00

CUMULATIVE TOTAL

TAXABLE EARNINGSUNEMPLOYMENT

COMP.SOCIAL

SECURITY

660.00

900.00 43,400.00 900.00

545.00 27,025.00 545.00

PAYROLL REGISTER

FEDERAL INCOME TAX

40.92234.00

DEDUCTIONSSOC. SEC.

TAXMEDICARE

TAX

24.07

HEALTH INSURANCE

UNITED WAY

146.00 55.80 13.05 20.00

7.00 33.79 7.90 10.00

PAYROLL REGISTER

UNITED WAY

TOTAL NET PAY CHECK NO.

HEALTH INSURANCE

DEDUCTIONS

298.99 1,361.01 409

20.00 234.85 665.15 410

10.00 58.69 486.31 411

PAYROLL REGISTER

ALLOW.# MARITAL

STATUSNAME

Cadrain, Sarah 4 M

EARNINGSREGULAR OVER-

TIME

1,600.00 60.00

TOTAL

1,660.00

Guder, James 1 S 760.00 140.00 900.00

Istone, Ken 6 M 545.00 545.00

Kuzmik, Helen 2 M 480.00 294.00 774.00

PAYROLL REGISTER

TOTALEARNINGS

88,000.001,660.00

CUMULATIVE TOTAL

TAXABLE EARNINGSUNEMPLOYMENT

COMP.SOCIAL

SECURITY

660.00

900.00 43,400.00 900.00

545.00 27,025.00 545.00

774.00 31,000.00 774.00

PAYROLL REGISTER

FEDERAL INCOME TAX

40.92234.00

DEDUCTIONSSOC. SEC.

TAXMEDICARE

TAX

24.07

HEALTH INSURANCE

UNITED WAY

146.00 55.80 13.05 20.00

7.00 33.79 7.90 10.00

69.00 47.99 11.22 13.00 20.00

PAYROLL REGISTER

UNITED WAY

TOTAL NET PAY CHECK NO.

HEALTH INSURANCE

DEDUCTIONS

298.99 1,361.01 409

20.00 234.85 665.15 410

10.00 58.69 486.31 411

20.00 161.21 612.79 41213.00

PAYROLL REGISTER

ALLOW.# MARITAL

STATUSNAME

Cadrain, Sarah 4 M

EARNINGSREGULAR OVER-

TIME

1,600.00 60.00

TOTAL

1,660.00

Guder, James 1 S 760.00 140.00 900.00

Istone, Ken 6 M 545.00 545.00

Kuzmik, Helen 2 M 480.00 294.00 774.00

Lee, Hoseoup 3 M 440.00 440.00

PAYROLL REGISTER

TOTALEARNINGS

88,000.001,660.00

CUMULATIVE TOTAL

TAXABLE EARNINGSUNEMPLOYMENT

COMP.SOCIAL

SECURITY

660.00

900.00 43,400.00 900.00

545.00 27,025.00 545.00

774.00 31,000.00 774.00

440.00 22,340.00 440.00

PAYROLL REGISTER

FEDERAL INCOME TAX

40.92234.00

DEDUCTIONSSOC. SEC.

TAXMEDICARE

TAX

24.07

HEALTH INSURANCE

UNITED WAY

146.00 55.80 13.05 20.00

7.00 33.79 7.90 10.00

69.00 47.99 11.22 13.00 20.00

15.00 27.28 6.38 13.00

PAYROLL REGISTER

UNITED WAY

TOTAL NET PAY CHECK NO.

HEALTH INSURANCE

DEDUCTIONS

298.99 1,361.01 409

20.00 234.85 665.15 410

10.00 58.69 486.31 411

20.00 161.21 612.79 41213.00

13.00 61.66 378.34 413

PAYROLL REGISTER

ALLOW.# MARITAL

STATUSNAME

Cadrain, Sarah 4 M

EARNINGSREGULAR OVER

TIME

1,600.00 60.00

TOTAL

1,660.00

Guder, James 1 S 760.00 140.00 900.00

Istone, Ken 6 M 545.00 545.00

Kuzmik, Helen 2 M 480.00 294.00 774.00

Lee, Hoseoup 3 M 440.00 440.00

Swaney, Linda 2 S 528.00 198.00 726.00

PAYROLL REGISTER

TOTALEARNINGS

88,000.001,660.00

CUMULATIVE TOTAL

TAXABLE EARNINGSUNEMPLOYMENT

COMP.SOCIAL

SECURITY

660.00

900.00 43,400.00 900.00

545.00 27,025.00 545.00

774.00 31,000.00 774.00

440.00 22,340.00 440.00

726.00 27,500.00 726.00

PAYROLL REGISTER

FEDERAL INCOME TAX

40.92234.00

DEDUCTIONSSOC. SEC.

TAXMEDICARE

TAX

24.07

HEALTH INSURANCE

UNITED WAY

146.00 55.80 13.05 20.00

7.00 33.79 7.90 10.00

69.00 47.99 11.22 13.00 20.00

15.00 27.28 6.38 13.00

81.00 45.01 10.53

PAYROLL REGISTER

UNITED WAY

TOTAL NET PAY CHECK NO.

HEALTH INSURANCE

DEDUCTIONS

298.99 1,361.81 409

20.00 234.85 665.15 410

10.00 58.69 486.31 411

20.00 161.21 612.79 41213.00

13.00 61.66 378.34 413

136.54 589.46 414

PAYROLL REGISTER

ALLOW.# MARITAL

STATUSNAME

Cadrain, Sarah 4 M

EARNINGSREGULAR OVER

TIME

1,600.00 60.00

TOTAL

1,660.00

Guder, James 1 S 760.00 140.00 900.00

Istone, Ken 6 M 545.00 545.00

Kuzmik, Helen 2 M 480.00 294.00 774.00

Lee, Hoseoup 3 M 440.00 440.00

Swaney, Linda 2 S 528.00 198.00 726.00

Tucci, Paul 5 M 490.00 490.00

PAYROLL REGISTER

TOTALEARNINGS

88,000.001,660.00

CUMULATIVE TOTAL

TAXABLE EARNINGSUNEMPLOYMENT

COMP.SOCIAL

SECURITY

660.00

900.00 43,400.00 900.00

545.00 27,025.00 545.00

774.00 31,000.00 774.00

440.00 22,340.00 440.00

726.00 27,500.00 726.00

490.00 25,050.00 490.00

PAYROLL REGISTER

FEDERAL INCOME TAX

40.92234.00

DEDUCTIONSSOC. SEC.

TAXMEDICARE

TAX

24.07

HEALTH INSURANCE

UNITED WAY

146.00 55.80 13.05 20.00

7.00 33.79 7.90 10.00

69.00 47.99 11.22 13.00 20.00

15.00 27.28 6.38 13.00

81.00 45.01 10.53

8.00 30.38 7.11 10.00

PAYROLL REGISTER

UNITED WAY

TOTAL NET PAY CHECK NO.

HEALTH INSURANCE

DEDUCTIONS

298.99 1,361.01 409

20.00 234.85 665.15 410

10.00 58.69 486.31 411

20.00 161.21 612.79 41213.00

13.00 61.66 378.34 413

136.54 589.46 414

10.00 55.49 434.51 415

PAYROLL REGISTER

ALLOW.# MARITAL

STATUSNAME

Cadrain, Sarah 4 M

EARNINGSREGULAR OVER

TIME

1,600.00 60.00

TOTAL

1,660.00

Guder, James 1 S 760.00 140.00 900.00

Istone, Ken 6 M 545.00 545.00

Kuzmik, Helen 2 M 480.00 294.00 774.00

Lee, Hoseoup 3 M 440.00 440.00

Swaney, Linda 2 S 528.00 198.00 726.00

Tucci, Paul 5 M 490.00 490.00

Wiles, Harry 1 S 300.00 300.00

PAYROLL REGISTER

TOTALEARNINGS

88,000.001,660.00

CUMULATIVE TOTAL

TAXABLE EARNINGSUNEMPLOYMENT

COMP.SOCIAL

SECURITY

660.00

900.00 43,400.00 900.00

545.00 27,025.00 545.00

774.00 31,000.00 774.00

440.00 22,340.00 440.00

726.00 27,500.00 726.00

490.00 25,050.00 490.00

300.00 6,300.00 300.00 300.00

PAYROLL REGISTER

FEDERAL INCOME TAX

40.92234.00

DEDUCTIONSSOC. SEC.

TAXMEDICARE

TAX

24.07

HEALTH INSURANCE

UNITED WAY

146.00 55.80 13.05 20.00

7.00 33.79 7.90 10.00

69.00 47.99 11.22 13.00 20.00

15.00 27.28 6.38 13.00

81.00 45.01 10.53

8.00 30.38 7.11 10.00

24.00 18.60 4.35

PAYROLL REGISTER

UNITED WAY

TOTAL NET PAY CHECK NO.

HEALTH INSURANCE

DEDUCTIONS

298.99 1,361.01 409

20.00 234.85 665.15 410

10.00 58.69 486.31 411

20.00 161.21 612.79 41213.00

13.00 61.66 378.34 413

136.54 589.46 414

10.00 55.49 434.51 415

46.95 253.05 416

PAYROLL REGISTER

ALLOW.# MARITAL

STATUSNAME

Cadrain, Sarah 4 M

EARNINGSREGULAR OVER

TIME

1,600.00 60.00

TOTAL

1,660.00

Guder, James 1 S 760.00 140.00 900.00

Istone, Ken 6 M 545.00 545.00

Kuzmik, Helen 2 M 480.00 294.00 774.00

Lee, Hoseoup 3 M 440.00 440.00

Swaney, Linda 2 S 528.00 198.00 726.00

Tucci, Paul 5 M 490.00 490.00

Wiles, Harry 1 S 300.00 300.00

5,143.00 692.00 5,835.00

PAYROLL REGISTER

TOTALEARNINGS

88,000.001,660.00

CUMULATIVE TOTAL

TAXABLE EARNINGSUNEMPLOYMENT

COMP.SOCIAL

SECURITY

660.00

900.00 43,400.00 900.00

545.00 27,025.00 545.00

774.00 31,000.00 774.00

440.00 22,340.00 440.00

726.00 27,500.00 726.00

490.00 25,050.00 490.00

300.00 6,300.00 300.00 300.00

5,835.00 270,615.00 300.00 4,835.00

PAYROLL REGISTER

FEDERAL INCOME TAX

40.92234.00

DEDUCTIONSSOC. SEC.

TAXMEDICARE

TAX

24.07

HEALTH INSURANCE

UNITED WAY

146.00 55.80 13.05 20.00

7.00 33.79 7.90 10.00

69.00 47.99 11.22 13.00 20.00

15.00 27.28 6.38 13.00

81.00 45.01 10.53

8.00 30.38 7.11 10.00

24.00 18.60 4.35

584.00 299.77 84.61 46.00 40.00

PAYROLL REGISTER

UNITED WAY

TOTAL NET PAY CHECK NO.

HEALTH INSURANCE

DEDUCTIONS

298.99 1,361.01 409

20.00 234.85 665.15 410

10.00 58.69 486.31 411

20.00 161.21 612.79 41213.00

13.00 61.66 378.34 413

136.54 589.46 414

10.00 55.49 434.51 415

46.95 253.05 416

46.00 40.00 1,054.38 4,780.62

METHODS OF PAYMENT

Cash Check:

• With attached earnings statement

Electronic Funds Transfer (EFT): • Copy of check and earnings statement are given

to employee• Provides better internal control than payment

by check

EMPLOYEE EARNINGS RECORD

REGULAR OVERTIMEPERIOD ENDED

EARNINGSTOTAL CUMULATIVE

TOTAL

GENDER DEPARTMENT OCCUPATION SOCIAL SECURITY #M F

X Maintenance Service 393-58-8194

12/05

12/12

11/28 545.00

545.00

545.00

75.00

75.00

75.00

620.00

620.00

620.00

25,240.00

25,860.00

26,480.00A separate earnings record

is maintained for each employee.

EMPLOYEE EARNINGS RECORD

REGULAR OVERTIMEPERIOD ENDED

EARNINGSTOTAL CUMULATIVE

TOTAL

GENDER DEPARTMENT OCCUPATION SOCIAL SECURITY #M F

X Maintenance Service 393-58-8194

12/05

12/12

11/28 545.00

545.00

545.00

75.00

75.00

75.00

620.00

620.00

620.00

25,240.00

25,860.00

26,480.00Let’s record the last entryof the year for Ken Istone.

EMPLOYEE EARNINGS RECORD

REGULAR OVERTIMEPERIOD ENDED

EARNINGSTOTAL CUMULATIVE

TOTAL

GENDER DEPARTMENT OCCUPATION SOCIAL SECURITY #M F

X Maintenance Service 393-58-8194

12/05

12/12

11/28 545.00

545.00

545.00

75.00

75.00

75.00

620.00

620.00

620.00

25,240.00

25,860.00

26,480.00

12/19 545.00 545.00 27,025.00

Earnings for this periodare recorded and the cumulative

earnings are updated.

EMPLOYEE EARNINGS RECORD

UNEMPLOYMENT COMPENSATION

SOCIAL SECURITY

TAXABLE EARNINGSFEDERAL

INCOME TAXSOCIAL

SECURITY TAX

MARITAL STATUS ALLOWANCES PAY RATE

DEDUCTIONS

M $545/week

620.00

620.00

620.00

15.00

15.00

15.00

38.44

38.44

38.44

545.00 7.00 33.79

Deductions are noted.

EMPLOYEE EARNINGS RECORD

MEDICARE HEALTH INSURANCE

UNITED WAY

OTHER

DATE OF BIRTH DATE HIRED NAME/ADDRESS

DEDUCTIONS

8/17/64 1/3/87Ken M. Istone

1546 Swallow DriveSt. Louis, MO 63144-4752

8.99

8.99

8.99

10.00

10.00

10.00

7.90 10.00

EMPLOYEE EARNINGS RECORD

OTHER TOTAL CHECK #

AMOUNT

NAME/ADDRESS EMPLOYEE NUMBER

DEDUCTIONS

Ken M. Istone

1546 Swallow DriveSt. Louis, MO 63144-4752

3

84.43

84.43

84.43

387

395

403

547.57

547.57

547.57

58.69 411 486.31

Deductions are totaled,net pay is recorded, along

with the paycheck’s #.

GENERAL JOURNAL

DATE DESCRIPTION PR DEBIT CREDIT

1

2

3

4

5

6

7

8

9

10

11

Journal entries are now made to recordthe payroll expenses and liabilities.

GENERAL JOURNAL

DATE DESCRIPTION PR DEBIT CREDIT

1

2

3

4

5

6

7

8

9

10

11

Payroll Register is the source for the journal entry.

GENERAL JOURNAL

DATE DESCRIPTION PR DEBIT CREDIT

1

2

3

4

5

6

7

8

9

10

11

Dec. 19 Wages and Salaries Expense 5,835.00

GROSS PAY

GENERAL JOURNAL

DATE DESCRIPTION PR DEBIT CREDIT

1

2

3

4

5

6

7

8

9

10

11

Dec. 19 Wages and Salaries Expense 5,835.00

Employee Income Tax Pay.

Social Security Tax Payable

Medicare Tax Payable

Health Ins. Prem. Payable

United Way Contrib. Pay.

584.00

299.77

84.61

46.00

40.00

Each deduction is recordedin a separate liability account.

GENERAL JOURNAL

DATE DESCRIPTION PR DEBIT CREDIT

1

2

3

4

5

6

7

8

9

10

11

Dec. 19 Wages and Salaries Expense 5,835.00

Employee Income Tax Pay.

Social Security Tax Payable

Medicare Tax Payable

Health Ins. Prem. Payable

United Way Contrib. Pay.

Cash

584.00

299.77

84.61

46.00

40.00

4,780.62

NET PAY

GENERAL JOURNAL

DATE DESCRIPTION PR DEBIT CREDIT

1

2

3

4

5

6

7

8

9

10

11

Dec. 19 Wages and Salaries Expense 5,835.00

Employee Income Tax Pay.

Social Security Tax Payable

Medicare Tax Payable

Health Ins. Prem. Payable

United Way Contrib. Pay.

Cash

584.00

299.77

84.61

46.00

40.00

4,780.62

If the payroll is paid from a separatepayroll checking account,

an additional entry is made.

19 Payroll Cash

Cash

4,780.62

4,780.62

PAYROLL LIABILITIES

EMPLOYEE INCOME TAX PAYABLE

DEBIT CREDIT

Credited when federalincome tax is withheld from

employees.

PAYROLL LIABILITIES

EMPLOYEE INCOME TAX PAYABLE

DEBIT CREDIT

Debited when withheld taxesare paid to the IRS.

PAYROLL LIABILITIES

SOCIAL SECURITY TAX PAYABLE

DEBIT CREDIT

Both the employer and employeepay Social Security taxes.

PAYROLL LIABILITIES

SOCIAL SECURITY TAX PAYABLE

DEBIT CREDIT

Credited when taxesare withheld.

PAYROLL LIABILITIES

SOCIAL SECURITY TAX PAYABLE

DEBIT CREDIT

Also credited to recognizedemployer’s matching tax.

PAYROLL LIABILITIES

SOCIAL SECURITY TAX PAYABLE

DEBIT CREDIT

Debited when taxesare paid.

PAYROLL LIABILITIES

MEDICARE TAX PAYABLE

DEBIT CREDIT

EXACTLY THE SAME AS SOCIAL SECURITY TAX PAYABLE

PAYROLL RECORD-KEEPING METHODS

Manual:• Same information recorded several times• Can be very inefficient

Payroll Processing Center:• A business that sells payroll record-keeping

services

Electronic System:• A computer system that performs all payroll

record-keeping and prepares payroll checks

ELECTRONIC PAYROLL SYSTEM

INPUT PROCESSING OUTPUT

EMPLOYEE:

SOCIAL SECURITY #

HOURS WORKED

Only employee’s SocialSecurity # and hours

worked are input each pay period.

ELECTRONIC PAYROLL SYSTEM

INPUT PROCESSING OUTPUT

EMPLOYEE:

SOCIAL SECURITY #

HOURS WORKED

COMPUTER

Payroll Register

Paychecks

Employee Earnings Record