PAYROLL ACCOUNTING

WHAT IS PAYROLL?

Payroll – total amount earned by all employees for a pay period.

Pay Period – an amount of time over which an employee is paid.

Payroll is often one of the largest expenses of a business.

WHY ARE PAYROLL RECORDS IMPORTANT?

Two goals of payroll system:

Collect and process all information needed to prepare and issue payroll checks.

Generate payroll records needed for accounting purposes and for reporting to government agencies, management, etc.

Inaccuracies in payroll records could cost a business thousands of dollars.

HOW DO I CALCULATEGROSS EARNING?

Gross earnings – total amount of money an employee earns in a pay period before deductions (a.k.a. total earnings).

Depends on basis of payment

Salary

Hourly wage

Commission

Salary plus commission or bonus

Overtime pay

SALARY

Fixed amount of money paid to an employee for each pay period.

Same amount regardless of hours worked.

Usually used for managers or supervisors.

HOURLY WAGE

An amount of money paid to an employee at a specified rate per hour worked.

Time card is used to keep track of hours worked (may be electronic or manual)

Time is rounded to the nearest quarter hour.

Hours worked times hourly wage equals gross earnings .

HOURLY WAGE (CONT.)

1. Calculate regular hours.

2. Calculate overtime hours.

3. Add Hours Reg and Hours OT columns and enter totals.

4. Add Hours column.

3

4

2

1

Lesson 13-1, page 313

COMMISSION

An amount paid to an employee based on a percentage of the employee’s sales.

Often used to encourage salespeople to increase their sales.

Example: Joyce Torrez is paid a 5% commission on all her sales. Last week Joyce’s total sales were $8,254.

What was Joyce’s gross earnings?

$8.254 x .05 = $412.70

SALARY PLUS COMMISSION OR BONUS

Some salespeople earn a base salary plus a commission or bonus on the amount of their sales.

Example: Juan Espito is paid a salary of $200 per week plus a commission of 3% of his sales. Juan’s sales were $4,810 last week.

What was Juan’s gross earnings?

$200 + ($4,810 x .03) = $344.30

OVERTIME PAY

State and federal laws regulate hours worked.Generally overtime is paid for employees who

work more than 40 hours per week.Overtime rate is 1 ½ times regular hourly rate.Example: Jesse Dubow worked 43 hours last

week. Jesse’s hourly rate is $6.60.What is Jesse’s gross earnings?

Regular earnings: 40 x $6.60 =$264.00

Overtime earnings: 3 x 9.90 = 29.70

Gross Earnings: $293.70

WORK TOGETHER PROBLEM

Complete Work Together 12-1

Begin worksheet on back of notes

Begin Application Problem 12-1

HOMEWORK

Complete Application Problem 12-1

Worksheet on back of notes

Begin working on Study Guide 13