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Transcript of Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 11-1.
11-1Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Unit 11Unit 11
Accounting for Payroll Accounting for Payroll
McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
11-3Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Accounting Records for Payroll
• Chart of accounts:– is a listing of all the general ledger accounts used by a
business – serves as a guide for the recording of transactions.– represent assets, liabilities, and expense items.
• Assets: – are things of value owned by a business: – cash, bank accounts, office furniture, buildings, delivery vans, furniture,
merchandise on hand. • Liabilities are debts or loans,• Expenses are the costs of operating the business
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
11-4Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Accounting Records for Payroll
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
11-5Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Accounting Records for Payroll
• Most accounting systems are built around two basic types of records: – Journals:
• is a (day-by-day) listing of transactions
11-6Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Accounting Records for Payroll
• Ledgers: • ledger is a group of accounts• each account shows everything-that happened over a
period of time
11-7Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Assets
Liabilities
Expenses
Amounts that are owed
Things of value owned by a business
Costs of operating the business
Accounting Records for Payroll
•Double entry accounting system: at least two accounts are affected by each transaction.
•To ensure that the accounting records are kept up-to-date, the journal entries and posting to the ledger are made as soon as possible after the transactions occur.
11-8Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Understanding the Ledger Accounts
• Salaries Wages and Expenses: ― Payroll causes an
increase in the operating expenses of a business.
― the salaries and wages expense account must be debited for the total gross earnings of the employees.
11-9Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Understanding the Ledger Accounts
• Salaries and Wages Payable:– are a liability of the
company. ―is increased by the
amount of net pay earned by the employees.
11-10Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Understanding the Ledger Accounts
Deductions: • difference between
Salaries and Wages Expense account and Salaries and Wages Payable
• deductions will increase the liabilities
Each payable accountCredit eachaccount for amountof tax withheld
11-11Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Understanding the Ledger Accounts
• Deductions: – Employee Federal Income
Taxes Payable– State Disability Insurance
Taxes Payable– Social Security Taxes Payable– Medicare Taxes Payable– Employee State Income Taxes
Payable– IRA Contributions Payable– Savings Bonds Payable
11-12Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Payroll Journal Entry
The journal entry to record payroll for week ending January 17, 2005 is:
11-13Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Payroll Payment Journal Entry
Cash Account
Credit for amount equal to net pay
Wages & Salaries Payable
Debit for amount ofnet pay
• Disbursement (payment) journal entry:– On Payday:
• liability account, (Salaries and Wages Payable) must be debited
• Cash account must be credited for the net pay amount
11-14Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Payroll Payment Journal Entry
11-15Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Payroll Taxes Expense
Debit for total amount of employer’s payroll taxes.
Each Liability AccountCredit each account for the individual tax amounts.
Recording the Employer’s Payroll Taxes
• Employer’s payroll taxes: – Employer’s Social Security Contribution– Employer’s Medicare Contribution, – Federal ( FUTA) and State (SUTA) unemployment taxes.
• These items cause:– an increase in operating expenses – and an increase in liabilities until the sums are remitted to the correct
government agencies.
11-16Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Recording the Employer’s Payroll Taxes
11-17Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Cash Each Liability Account
Credit for amount being paid.
Debit foramount being depositedto government agencies.
• Payment/deposit of the payroll taxes:– each liability account must be debited – cash credited for the amount of tax being
deposited to the correct government agency.
Depositing the Taxes Withheld
11-18Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Depositing the Taxes Withheld
11-19Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Unit Summary
11-20Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Questions?