CHAPTER 6 ANALYZING AND JOURNALIZING PAYROLL TRANSACTIONS
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Transcript CHAPTER 6 ANALYZING AND JOURNALIZING PAYROLL TRANSACTIONS
CHAPTER 6
ANALYZING AND
JOURNALIZING
PAYROLL TRANSACTIONS
Developed by Lisa Swallow, CPA CMA MS
ACCOUNTING FOR
PAYROLL TRANSACTIONS
Payroll requires entering data (in order) in
the following places:
Payroll Register
Employee Earnings Records
General Journal
journalize wages
journalize payroll taxes and workers comp
journalize period end accruals
Post to General Ledger
Payroll Register
Payroll register shows (in rows)
each employee’s gross wages
all taxes withheld and other deductions
net pay by employee
Payroll register shows (in columns)
total of gross wages, each deduction and net
“Foot” or prove payroll register by ensuring that
columns and rows all total to bottom right hand
number
*Use payroll register to journalize*
Employee
Earnings Records
Employee Earnings Record used to track
cumulative totals (wages and taxes)
Enter row of data each pay period
important because different wage caps for
FUTA, SUTA and OASDI taxes
need to track cumulative totals in order to
issue W-2s and do quarterly SUTA reports
prepare various internal and external reports
Two Journal Entries to
Record Payroll
Number 1 - Record gross wages,
withholdings and net pay
Number 2 - Record employer payroll tax
expense
*These two journal entries are always the same in
format and you must make both of them every
time you issue any paycheck (even if a check for
one day’s wages, for example)*
Journal Entry #1
Debit Wage Expense for gross payroll
Credit each withholding account - they are all liabilities
Credit cash (or wages payable) for net payroll
A
B
Total
1000.00
76.50
83.00
21.00
845.00
64.64
91.00
29.00
$ 1,845.00 $ 141.14 $ 174.00 $ 50.00 $
103.00
716.50
88.00
572.36
191.00 $ 1,288.86
Journal entry
Wage Expense
1845.00
FICA Payable
FIT Payable
SIT Payable
Insurance Payable
Cash
141.14
174.00
50.00
191.00
1,288.86
Journal Entry #2
Debit Payroll Tax Expense for total of all payroll taxes that ER pays
Credit each account - they are all liabilities
Payroll for Period Ended 5/15/01
0.8%
2.8%
6.2%
1.45%
EE
Gross
FUTA Wages
SUTA Wages
OASDI Wages
HI Wages
A
1000.00
0.00
800.00
1000.00
1000.00
B
845.00
215.00
845.00
845.00
845.00
Total
$ 1,845.00 $
215.00 $
1,645.00 $
1,845.00 $ 1,845.00
Tax
$
1.72
$
46.06
$
114.39
Calculate all employer taxes utilizing varying wage bases and percentages
Journal entry
Payroll Tax Expense
FUTA Payable
SIT Payable
OASDI Payable
HI Payable
188.92
1.72
46.06
114.39
26.75
$
26.75
Recording Deposit of
Payroll Taxes
Look in general ledger, in each applicable
liability account, for amount due
Oasdi Payable
Deposit 941 taxes
HI Payable
124.00
29.00
Deposit state income tax
SIT Payable
Cash
Deposit FUTA and SUTA
SUTA Payable
Cash
FUTA Payable
Cash
FIT Payable
Cash
18.50
18.50
5.29
5.29
85.00
238.00
43.00
43.00
Workers Compensation
Workers compensation is an expense for the
employer, who is required to purchase insurance
to protect employees against work related
injuries/disabilities
laws differ by state
premiums are calculated based on employment
classification (clerical people are at different rate than
factory workers) per $100 of payroll pay premiums
in advance based on forecast
then at year end report actual wages and pay
additional or receive credit towards next year
Recording Workers
Compensation
Debit Work Comp Insurance Expense for premium paid
Credit cash (if paying) or insurance payable (if accruing)
Payroll for Period Ended 5/15/01
EE
A
B
Total
Gross
Position
1000.00 Fabricator
845.00 Administrator
$ 1,845.00
Journal entry
Workers Comp Insurance Expense
Cash or Insurance Payable
Per $100 of payroll
Work Comp Rate
$
9.08
$
1.05
Premium
90.80
8.87
$
99.67
99.67
99.67
Journalize Period End
Accruals
Accrued Wages should be recorded for wages
earned by workers but not yet paid (gross)
Wage Expense
Wages Payable
1589.96
1589.96
Accrued Vacation Pay should be recorded for
amount of vacation pay owed employees
Vacation Benefits Expense
Vacation Benefits Payable
520.00
520.00
Nontax Deductions from
Payroll
Any deduction that the ER makes from EE
paycheck goes into a liability account,
because they owe it to someone, such as:
Health insurance premiums
Purchase EE or HH government bonds
Union dues
Deferred compensation (contributions to
pension plan)
Garnishments
A creditor can, through the courts, seek
repayment of his/her money by
garnishment
Employer is required to comply with
garnishment order
ER must withhold funds from EE’s paycheck
and submit it to appropriate authorities
cannot legally withhold more than 25% of
disposable income (after tax earnings)