Transcript CHAPTER 12 ACCOUNTING FOR A PAYROLL SYSTEM

CHAPTER 12
ACCOUNTING FOR A PAYROLL
SYSTEM
ACCOUNTING FOR A
PAYROLL SYSTEM
CHAPTER OJECTIVES
 Importance of accurate payroll records.
 Calculate gross earnings using different
methods.
 How to calculate different types of
deductions from gross earnings.
 Prepare a payroll register.
 Prepare an employee’s earnings record.
 Knowledge of all accounting terms
introduced in this chapter.
UNIT 1
CALCULATING GROSS EARNINGS
IMPORTANCE OF PAYROLL RECORDS
PAYROLL– is a list of the employees and the
payments due to each employee or a specific
time period.
 PAY PERIOD—is the amount of time over
which an employee is paid. Most businesses
use weekly, bi-weekly (every 2-weeks) or semimonthly (2 times monthly)

UNIT 1
CALCULATING GROSS EARNINGS
IMPORTANCE OF PAYROLL RECORDS
1)
2)
The Payroll– is a major expense for most
companies. A well designed payroll system
serves 2 roles.
The collection and processing of all data
needed to prepare and issue payroll checks.
The generation of payroll records needed for
accounting purpose and reporting required
information to government agencies,
management and other board members.
UNIT 1
CALCULATING GROSS EARNINGS
IMPORTANCE OF PAYROLL RECORDS
PAYROLL CLERK– is the person responsible for
processing and preparing the payroll.
Their duties include:
1) Make sure all paid on time.
2) Ensure employee’s get the correct amount.
3) Completes all payroll records.
4) Submits all necessary payroll reports.
5) Pays payroll taxes.

UNIT 1
CALCULATING GROSS EARNINGS
CALCULATING GROSS EARNINGS

Gross Earnings—this calculation depends on
the basis on which an employee is paid. The
employee’s pay is based on the following:
 SALARY
 HOURLY WAGE
 COMMISSION
 SALARY PLUS COMMISSION/BONUS
 OVERTIME PAY
UNIT 1
CALCULATING GROSS EARNINGS
CALCULATING GROSS EARNINGS

SALARY—is a fixed amount of money paid to
an employee for each pay period. Someone
who gets paid on a salary basis gets paid the
same amount of money regardless of the
number of hours they work.
UNIT 1
CALCULATING GROSS EARNINGS
CALCULATING GROSS EARNINGS

HOURLY WAGE—is an amount of money paid
to an employee at a specified rate per each
hour worked. Example: John worked 35 hours
last week at $7.25 per hour.
GROSS EARNINGS:
35 x 7.25==$253.75
Therefore John’s gross earnings were

UNIT 1
CALCULATING GROSS EARNINGS
CALCULATING GROSS EARNINGS

TIME CARD—is a record of the times an
employees reports to work each day. These
times may be recorded manually or by an
electronic clock.
UNIT 1
CALCULATING GROSS EARNINGS
CALCULATING GROSS EARNINGS

COMMISSION—is an amount paid to an
employee based on a certain percentage of the
employee’s sales. These are used as incentive
laden terms so that this encourages the
employee to strive harder for sales because
their earnings are directly related to their
productivity.
UNIT 1
CALCULATING GROSS EARNINGS
CALCULATING GROSS EARNINGS

SALARY & COMMISSION—is a way in which
employee has a guaranteed “base” and
additionally get a commission from their sales.
EXAMPLE::
Mary gets paid $250.00 per week plus %5 sales
Mary had sales last week of $2500.00
$250.00 + ($2,500.00 x .05) = $375.00
Thus: Mary’s earnings for the week were $375.00

CALCULATING GROSS EARNINGS
CALCULATING GROSS EARNINGS
OVERTIME PAY– is the amount of pay by law
required to pay an employee who works hourly over a 4
work week. The overtime rate of 1 ½ times per hour ov
the 40 was set by the “Fair Labor & Standards Act”
1938.
EXAMPLE– Jose is a machinist for Dillon’s Repair he works
at a rate of $7.75 hourly and he worked 47 hour last week.
HOURS
Regular
40
Overtime
7
RATE
$7.75
$11.65
= $310.00
= $81.55
$391.55
CALCULATING GROSS
EARNINGS—Problem 12-1
TOTAL PAY REGULAR OT
GROSS
EMPLOYEE HOURS RATE EARNINGS EARNS. EARNS.
David Clune 33 ½ 6.95
232.83
0
232.85
Richard L
Jane L.
Betty Q.
John S.
Kelly T.
Gene T.
Heidi V.
Kevin W.
38
43
44 ¼
39 ½
40
42 ½
34 ½
46
7.80
7.25
8.30
8.30
7.5
9.75
8.75
9.25
296.40
290.00
332.00
327.85
300.00
0
32.63
52.91
0
0
296.40
322.63
384.91
327.85
300.00