LESSON 13-1 Recording A Payrollpehs.psd202.org/documents/rrodrigu/1518619330.pdfLESSON 13-1...

CENTURY 21 ACCOUNTING © Thomson/South-Western

LESSON 13-1

Recording A Payroll


Different Forms of Payroll Information

Payroll information for each pay period is recorded in

a payroll register

Each pay period the payroll information for each

employee is also recorded on each employee

earnings record

Separate payroll accounts for each employee are not

kept in the general journal ledger

Instead, accounts are kept in the general ledger to

summarize total earnings and deductions for all

employees

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LESSON 13-1


Chapter 13:

The payroll register and employee earnings records

provide all the payroll information needed to prepare

payroll and payroll tax reports

Journal entries are made to record the payment of

the payroll and the employer payroll taxes

In addition, various quarterly and annual payroll tax

reports are required to report the payment of payroll

taxes

Now we will learn how to record the payroll in the

necessary accounts

It is extremely important the payroll be journalized!

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LESSON 13-1


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LESSON 13-1

PAYROLL REGISTER page 369

Similar to a special journal, the column totals of a payroll register provide

the debit and credit amounts needed to journalize a payroll

The payroll journal entry is based on the totals of Earnings Total

Account column, “each” deduction column, and the Net Pay column

only


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LESSON 13-1

ANALYZING PAYMENT OF A PAYROLL page 370

“Total Earnings”

column total

(Debit)

Deductions

(Credit)

Check amount

written for

payroll (net pay)

(Credit)


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LESSON 13-1

6. Write the titles of accounts credited (posted individually to ledger accounts).

JOURNALIZING PAYMENT OF A

PAYROLL

12

3 4 5

6

page 371

December 15. Paid cash for payroll, $4,609.46. Check No. 335.

71. Write the date.

2. Write the title of the account

debited.

3. Write the check number.

4. Write the account debited. 7. Write the amounts credited.

5. Write the total amount paid to employees (net pay) (posted at end of month to ledger

account)


LESSON 13-2

Recording Employer

Payroll Taxes


Payroll Taxes

Employers must pay to the government the taxes

withheld from employee earnings

Federal Income Tax

Social Security Tax

Medicare Tax

The amounts withheld are liabilities to the business

until they are actually paid to the government

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LESSON 13-1


Payroll Taxes

In addition, employers must pay several of their own

payroll taxes

Employer payroll taxes are business expenses

Most employers pay four (4) separate payroll taxes:

Employer Social Security Tax

Medicare Tax

Federal Unemployment Tax

State Unemployment Tax

Employer payroll taxes expense is based on a

percentage of employee earnings

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LESSON 13-1


Employer Social Security and Medicare Taxes

Social Security and Medicare Taxes are the only

payroll taxes paid by both the employees and the

employer

Hobby Shack owes the same amount of Social

Security and Medicare taxes as the amount withheld

from employees

Congress sets the Social Security and Medicare tax

rate for employees and employers

Social Security 6.2% (.062) up to $87,000

Medicare 1.45% (.0145)

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LESSON 13-1


Unemployment Tax (Federal)

Federal Unemployment Tax—a federal tax used for state

and federal administrative expenses of the unemployment

program

The federal unemployment tax is 6.2% (.062) of the first $7,000 earned

by an employee

An employer generally can deduct from federal unemployment

payments the amounts paid to state unemployment funds

The deduction cannot be more than 5.4% of taxable earnings

The effective federal unemployment tax rate in more states is,

therefore, 0.8% on the first $7,000 earn by each employee

Federal, 6.2% - deductible for state, 5.4% = 0.8% (.008)

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LESSON 13-1

Unemployment

Taxable Earnings

Federal

Unemployment Rate

Federal

Unemployment Tax

$790.00 0.8% (.008) $6.32x =


Unemployment Tax (State)

State Unemployment Tax—a state tax used to pay benefits to

unemployed workers

The Social Security Act specifies certain standards for

unemployment compensation laws

However, details of state unemployment laws do differ

Many states require that employers pay unemployment tax of 5.4%

(.054) on the first $7,000 earned by each employee

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LESSON 13-1

Unemployment

Taxable Earnings

State Unemployment

Rate

State Unemployment

Tax

$790.00 5.4% (.054) $42.66x =


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LESSON 13-1

UNEMPLOYMENT TAXABLE EARNINGS

2

3

page 374

1

1. Enter accumulated earnings and total earnings for each employee.

2. Enter unemployment taxable earnings.

3. Total the Unemployment Taxable Earnings column.


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LESSON 13-1

Federal

Unemployment

Tax

=

Federal

Unemployment

Tax Rate

×

Unemployment

Taxable

Earnings

State

Unemployment

Tax

=

State

Unemployment

Tax Rate

×

Unemployment

Taxable

Earnings

UNEMPLOYMENT TAXES page 375

$6.32=0.8% (.008)×$790.00

$42.66=5.4% (.054)×$790.00


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LESSON 13-1

JOURNALIZING EMPLOYER

PAYROLL TAXES page 376

December 15. Recorded

employer payroll taxes expense,

$485.92, for the semimonthly pay

period ended December 15.

Taxes owed are: social security

tax, $354.11; Medicare tax,

$82.83; federal unemployment

tax, $6.32; state employment tax,

$42.66. Memorandum No. 63.

(continued on next slide)


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LESSON 13-1

JOURNALIZING EMPLOYER

PAYROLL TAXES

1

2

3

5

4

6

page 376

4. Write the debit amount.1. Write the date.

5. Write the titles of the liability

accounts credited.

2. Write the title of the expense

account debited.

6. Write the credit amounts.3. Write the memorandum number.

(continued from previous slide)


LESSON 13-3

Reporting Withholding And

Payroll Taxes


W-2 Wage and Tax Statement

Each employer who withholds income tax, social security

tax, and Medicare from employee earnings must furnish

each employer with an annual report of these withholdings

The report shows total year’s earnings and the amounts

withheld for taxes for an employee

The report is prepared on the Internal Revenue Service

Form W-2, Wage and Tax Statement

Employers are required to furnish Form W2 to each

employee by January 31 of the next year

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LESSON 13-1


W-2 Wage and Tax Statement

Four (4) copies (A-D) of Form W-2 are prepared for

each employee:

Copy A – Social Security Administration copy

Copy B – Employee attaches it to a personal federal income

tax return

Copy C – Employee keeps for a personal record

Copy D – Kept for the business records

Businesses in states with state income tax must

prepare additional copies of Form W-2 to attach to

the state income tax return

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LESSON 13-1


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LESSON 13-1

EMPLOYER ANNUAL REPORT TO

EMPLOYEES OF TAXES WITHHELD page 378


EMPLOYER’S QUARTERLY FEDERAL

TAX RETURN

Each employer is required by law to periodically report the payroll taxes

withheld from employee salaries and the employer payroll taxes due the

government (some reports are submitted quarterly and others annually)

Each employer must file a quarterly federal tax return showing the federal

income tax, social security tax, and Medicare due the government

One reason for this report is so that the IRS can monitor a company’s deposits

of withheld taxes

The information is submitted every three months on Form 941,

Employer’s Quarterly Federal Tax Return

Form 941 is filed before the last day of the month following the end of a

calendar quarter

The information needed to prepare Form 941 is obtained from employee

earnings records

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LESSON 13-1


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LESSON 13-1


TAX RETURN pages 379-380(continued on next slide)

1

2

1. Heading 2. Number of employees


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LESSON 13-1


TAX RETURN page 379(continued on next slide)

3. Total quarterly earnings

4. Income tax withheld

5. Employee and employer social

security and Medicare taxes 7. Total taxes

6. Social security plus Medicare

taxes

4

5

3

6

7


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LESSON 13-1


TAX RETURN page 379(continued from previous slide)

8 8 89

8. Total taxes for each month 9. Total taxes


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LESSON 13-1

EMPLOYER ANNUAL REPORTING OF

PAYROLL TAXES page 381


LESSON 13-4

Paying Withholding and

Payroll Taxes


PAYING THE LIABILITY FOR EMPLOYEE INCOME TAX,

SOCIAL SECURITY TAX, AND MEDICARE TAX

Employers must pay to the federal, state, and local

governments all payroll taxes withheld from employee

earnings as well as the employer payroll taxes

The payment of payroll taxes with the government is referred

to as a deposit

Two (2) amounts determine how often deposits are made to

the federal government:

1. The amount of payroll taxes collected during the current deposit

period

2. The amount of payroll taxes owed during a prior 12-month period

3. The 12-month period that ends on June 30th of the prior year is called

the lookback period

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LESSON 13-1


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LESSON 13-1


SOCIAL SECURITY TAX, AND MEDICARE TAX page 383

The IRS gives

businesses

this flowchart

to determine

when to make

tax deposits.



SOCIAL SECURITY TAX, AND MEDICARE TAX

Hobby Shack is classified as a monthly depositor

The payroll taxes are deposited with a local

authorized financial institution by the 15th day of the

following month accompanied by Form 8109 (Federal

Deposit Form) (page 384)

The type of tax (federal income, social security, and

Medicare taxes) is indentified by marking the 941 circle

The calendar quarter is identified on the right side of the

form

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LESSON 13-1


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LESSON 13-1

FORM 8109,

FEDERAL DEPOSIT COUPON page 384


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LESSON 13-1

JOURNALIZING PAYMENT OF LIABILITY FOR

EMPLOYEE INCOME TAX, SOCIAL SECURITY

TAX, AND MEDICARE TAX

1

2

3

4

5

page 385

January 15. Paid cash for liability for employee income tax,

$757.00; social security tax, $1,451.38; and Medicare tax, $339.42;

total, $2,547.80 (the balances of the liability accounts are reduced

(debit) by this transaction). Check No. 347 (credit)

1. Write the date.

2. Write the titles of the three

accounts debited.


4. Write the debit amounts.

5. Write the amount of the cash

credit.


PAYING THE LIABILITY FOR

FEDERAL UNEMPLOYMENT TAX

Federal unemployment insurance is paid by the end of the

month following each quarter if the liability amount is $100.

However, ALL unemployment tax liabilities outstanding at the

end of a calendar year should be paid

Federal unemployment tax is paid to the federal government by

making a tax deposit with an authorized bank

The deposit for federal unemployment is similar to the deposit

required for income tax, social security tax, and Medicare tax

Form 8190, Federal Tax Deposit Coupon accompanies the

employment tax deposit

The total of federal unemployment taxes paid during a calendar year

is reported on 940 circle on the 8109 form (page 386)

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LESSON 13-1


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LESSON 13-1

PAYING THE LIABILITY FOR

FEDERAL UNEMPLOYMENT TAX page 386


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LESSON 13-1

JOURNALIZING PAYMENT OF LIABILITY

FOR FEDERAL UNEMPLOYMENT TAX

1 2 3 4 5

page 387

January 31. Paid cash for federal unemployment tax liability for quarter

ended December 31, $34.60 (the balances of the liability accounts are

reduced (debit) by this transaction). Check No. 367 (credit).

1. Write the date.

5. Write the amount of the credit to Cash.

4. Write the debit amount.


2. Write the title of the account debited.


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LESSON 13-1

JOURNALIZING PAYMENT OF LIABILITY

FOR STATE UNEMPLOYMENT TAX page 387

January 31. Paid cash for state unemployment tax liability for

quarter ended December 31, $233.55. Check No. 368.

1. Date

5. Credit amount

4. Debit amount

3. Check number

2. Account debited

1 2 3 4 5

LESSON 13-1 Recording A Payrollpehs.psd202.org/documents/rrodrigu/1518619330.pdfLESSON 13-1...

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