Preparing Payroll
Time Cards
In this Chapter…

We will learn how to prepare a payroll,
payroll checks, and the records that
must be maintained.
Child Labor Laws
Rules govern the types of jobs youth
can hold and the hours of the day they
can work……
 A bar chart would be an appropriate
chart style, with the hours on the vertical
axis and the age groups on the
horizontal axis.

Payroll
One of the largest expenses of a
business.
 Today we will focus on completing a
payroll time card.

How do you track your hours?
What type of system?
 What happens if you are a few minutes
late?
 How do you record overtime?
 Do you have to record time away from
your job when you take a break?

Terminology
SALARY- the money paid for employee
services. (p. 340)
 PAY PERIOD- the period covered by a
salary payment. (p. 340)
 PAYROLL- the total amount earned by
all employees for a pay period. (p. 340)
 TOTAL EARNINGS- the total pay due
for a pay period before deductions. (p.
343)

FYI
Salaries are usually stated as a fixed
amount on a weekly, biweekly,
semimonthly, or monthly basis.
 Salaried workers do not normally
receive overtime pay.

Time Clocks
ANALYZING A PAYROLL TIME
CARD
9
page 341
LESSON
12-1
CALCULATING EMPLOYEE HOURS
WORKED
1
2
page 342
1. Calculate the number
of regular hours for each
day and enter the
amounts.
2. Calculate the number of
overtime hours and enter
the amounts.
3. Add Hours Reg and
Hours OT columns and
enter the totals.
4. Add the Hours column.
3
4
10
LESSON
12-1
CALCULATING EMPLOYEE TOTAL
EARNINGS
page 343
1. Enter the rate for regular
time in the Rate column.
2. Calculate the regular
earnings. Enter the amount.
3. Enter the rate for overtime.
4. Calculate the overtime
earnings. Enter the amount.
5. Add the Amount column to
calculate total earnings.
Enter the amount of total
earnings.
1
2
3
4
5
11
LESSON
12-1
TERMS REVIEW
salary
 pay period
 payroll
 total earnings

12
LESSON 12-1
page 344
To do list…
 Aplia
12.1
 Work Together and On Your
Own
 EXIT TICKET
Exit Ticket

Briefly summarize the procedures for
calculating regular, overtime, and total
hours.
PAYROLL!!!!
Determining Payroll
Tax Withholding
Bell Ringer

OSADI- "Old Age, Survivor's, and
Disability Insurance" and is also called
FICA. In 2010 you get to pay a
generous 6.2% of your pay and your
employer also gets to match that
amount! But hey, the good news is that
this tax stops once your earnings it
$106,800 for the year!
Bell Ringer

HI is the Medicare ("health insurance")
portion of your Social Security tax. It is
1.45% of your gross pay, without limit.

payroll taxes-taxes based on the
payroll of a business. (p. 345)

withholding allowance-a deduction
from total earnings for each person
legally supported by a taxpayer,
including the employee. (p. 346)

social security tax-a federal tax paid
for old-age, survivors, and disability
insurance. (p. 349)

Medicare tax-a federal tax paid for
hospital insurance. (p. 349)
tax base-the maximum amount of
earnings on which a tax is
calculated. (p. 349)
All Employers….
Are required to withhold employee
payroll taxes from pay checks.
 Payroll taxes are calculated as a
percentage of employee’s gross pay.
 In many areas employers are required to
withhold state, city or county income
taxes from employee earnings in
addition to federal income taxes.

Amount taken out?

Determined by the employee’s marital
status and number of dependants.

Let’s take a look at a W-4 form…this is
the basis for the payroll entries related
to federal income tax withholding.
EMPLOYEE’S WITHHOLDING
ALLOWANCE CERTIFICATE
3
page 346
2
1
4
5
1.
2.
3.
4.
5.
23
Write the employee’s name and address
Write the employee’s social security number.
Check the appropriate marital status block.
Write the total number of withholding allowances claimed.
The employee signs and dates the form.
LESSON
12-2
Important!!!
•You must fill this form out correctly
because the information will be used to
calculate your federal income tax
withholding for the entire year.
•Errors may result in you having to pay
additional taxes at the end of the year.
FYI
•ALL EMPLOYEES MUST HAVE A SOCIAL
SECURITY NUMBER
•YOU ARE RESPONSIBLE FOR LETTING
YOUR EMPLOYEER KNOW IF YOUR
NUMBER OF DEPENDANTS CHANGE.
EMPLOYEE’S INCOME TAX
WITHHOLDING – MARRIED
PERSONS
1
2
page 348
3
1. Select the appropriate table.
2. Locate the employee’s total earnings.
3. Intersection of wages and number of allowances column.
26
LESSON
12-2
Employee SS and Medicare Tax

Always subject to change

Total earnings X SS Tax rate = SS
Deduction

Total earnings X Medicare Tax Rate =
Medicare Tax Deduction.
TERMS REVIEW
payroll taxes
 withholding allowance
 social security tax
 Medicare tax
 tax base

28
LESSON 12-2
page 350
To do list
1.
Apply Math Skills Handout
2.
Aplia 12-2 Work Together, On
Your Own & Application Problem
3.
Audit your Understanding Page
350.
Preparing Payroll
Records
Objectives 12-3 & 12-4
Complete a Payroll register and an
employee earnings record.
 Prepare a Payroll Check

Terminology 12-3

payroll register-a business form used to
record payroll information. (p. 351)

net pay-the total earnings paid to an
employee after payroll taxes and other
deductions. (p. 352)

employee earnings record-a business
form used to record details affecting
payments made to an employee. (p. 353)
PAYROLL REGISTER
page 351
1
2
4
5
6
7
8
9
10
11
3
13
12
1. Pay period date
2. Payment date
3. Employee personal data
4. Earnings
5. Federal income tax withheld
6. Social security tax withheld
7. Medicare tax withheld
33
8. Health insurance premium deductions
9. Other employee payroll deductions
10. Total deductions
11. Net pay
12. Total, prove, and rule
13. Check number
LESSON
12-3
Employee Earnings Record

A business must sent quarterly reports
to federal and state governments
showing employee taxable earnings and
taxes withheld from employee earnings.

The earning record is maintained for
each employee.
EMPLOYEE EARNINGS RECORDS
page 353
1. Last day of
quarter
2. Employee
personal data
3. Beginning
accumulated
earnings
4. Pay period 2
4
1
5
3
5. Earnings,
deductions,
net pay
6. Updated
accumulated
earnings
6
7
7. Total and prove
35
LESSON
12-3
TERMS REVIEW

payroll register a business form used to record payroll
information. (p. 351)

net pay the total earnings paid to an employee after
payroll taxes and other deductions. (p. 352)

employee earnings record a business form used to record details affecting
payments made to an employee. (p. 353)
36
LESSON 12-3
page 355
Preparing Payroll
Checks
PAYROLL BANK ACCOUNT
1
2
1. Prepare the check stub.
2. Prepare the check.
38
LESSON 12-4
page 356
EMPLOYEE’S PAYROLL CHECK
1
page 357
2
1. Prepare the check stub of each employee’s payroll check.
2. Prepare each employee’s payroll check.
39
LESSON
12-4
To do list for
 Aplia
12-3 & 12-4
 Work Together and On Your Own +
Application problem
 Study Guide Chapter 12
 Xtra! Study Tools
(c21accounting.com)
 Tutorial Quiz (c21accounting.com)
 Explore Accounting Page 359 (10
Points)
Recording A
Payroll
Previously…

We prepared a payroll register….

Today we will use the information from
the payroll register to record the
payment of the payroll and to record and
pay payroll taxes / reports.

Calculate Payroll Taxes
PAYROLL REGISTER
page 369
The payroll register column totals are the
source of information needed to prepare
a journal entry for the payroll.
43
LESSON
13-1
PAYROLL REGISTER
page 369
Total earnings should always equal the
total deductions PLUS Net Pay.
44
LESSON
13-1
ANALYZING PAYMENT OF A
PAYROLL
 The
total earnings column of
the payroll register is the debit
amount for Salary Expense.
 This is the amount of money
the employees actually
earned before deductions
are subtracted.
ANALYZING PAYMENT OF A
PAYROLL
 The
Net pay column is the
credit amount for Cash.
 This is the amount of cash that
was actually paid to the
employees.
ANALYZING PAYMENT OF A
PAYROLL
 All
other columns provide the
other credit parts of the entry.
 These
credits become liabilities,
so add “Payable” to the end of
each column heading and you
have your liability account.
ANALYZING PAYMENT OF A
PAYROLL
48
page 370
LESSON
13-1
JOURNALIZING PAYMENT OF
A PAYROLL
page 371
December 15. Paid cash for payroll, $4,609.46. Check No. 335.
2
1
3
4
6
1. Write the date.
2. Write the title of the account
debited.
3. Write the check number.
4. Write the account debited.
49
5
7
5. Write the total amount paid to
employees.
6. Write the titles of accounts
credited.
7. Write the amounts credited.
LESSON
13-1
UNEMPLOYMENT TAXABLE
EARNINGS
page 374
2
3
1
1. Enter accumulated earnings and total earnings for each employee.
2. Enter unemployment taxable earnings.
3. Total the Unemployment Taxable Earnings column.
50
LESSON
13-2
UNEMPLOYMENT TAXES
Unemployment
Taxable
Earnings
$790.00
Unemployment
Taxable
Earnings
$790.00
51
page 375
×
Federal
Unemployment
Tax Rate
=
Federal
Unemployment
Tax
×
0.8%
=
$6.32
×
×
State
Unemployment
Tax Rate
5.4%
=
=
State
Unemployment
Tax
$42.66
LESSON 13-2
JOURNALIZING EMPLOYER
(continued on next slide)
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.
52
LESSON
13-2
JOURNALIZING EMPLOYER
(continued from previous slide)
PAYROLL TAXES
2
1
4
3
5
1. Write the date.
2. Write the title of the expense
account debited.
3. Write the memorandum number.
53
page 376
6
4. Write the debit amount.
5. Write the titles of the liability
accounts credited.
6. Write the credit amounts.
LESSON
13-2
To Do List for
 Make
sure you have completed
 Accounting in the Real Word (page
367)
 Internet Activity (page 367)
 Aplia 13-1 (Work Together & One
Your Own, Application Problem)
 Aplia 13-2 (Work Together & One
Your Own, Application Problem)
Reporting
Withholding And
Payroll Taxes
Today’s Objective
Prepare
selected payroll
tax reports
Question for you…

Who has received a W-2 form (Wage
and Tax Statement)?
 This
is a statement employers
must prepare for each employee.
It reports to the federal
government the amount of
earnings paid to each employee
during the year.
W-2 Form

This is only one of several forms a
business must prepare.

We will look at three forms today.
W-2
Must be made for each employee
 The W-2 reports total earnings and the
taxes that have been withheld from the
employee’s pay for the year
 The information on the W-2 is sent to
the IRS with copies sent to the
employee
 A copy of the W-2 must be attached to
an individual’s income tax return

EMPLOYER ANNUAL REPORT TO
EMPLOYEES OF TAXES
WITHHELD
60
page 378
LESSON
13-3
EMPLOYER’S QUARTERLY FEDERAL
TAX RETURN

The purpose of this form is to show the
federal gov’t the total earnings of ALL
employees of the business.

In addition, it reports the total income tax
withheld, and total social security and
Medicare tax (both employees’ and
employer’s tax) owed to the federal gov’t
for the quarter being reported.
EMPLOYER’S QUARTERLY
FEDERAL
(continued on next slide)
TAX RETURN
page 379
1
2
1. Heading
62
2. Number of employees
LESSON
13-3
EMPLOYER’S QUARTERLY FEDERAL
(continued on next slide)
TAX RETURN
page 379
3
4
5
6
7
3. Total quarterly earnings
4. Income tax withheld
5. Employee and employer social
security and Medicare taxes
63
6. Social security plus Medicare
taxes
7. Total taxes
LESSON
13-3
EMPLOYER’S QUARTERLY FEDERAL
(continued from previous slide)
TAX RETURN
page 379
9
8
8
8. Total taxes for each month
64
8
9. Total taxes
LESSON
13-3
W-3 (Employer Annual Reporting
of Payroll Taxes)
Sent to the Social Security
Administration each year with a copy of
the W-2
 Reports total earnings of all employees
for the year plus total federal income
tax, social security tax and Medicare Tax
withheld.
 Serves as a summary to the IRS

EMPLOYER ANNUAL REPORTING
OF PAYROLL TAXES
66
page 381
LESSON
13-3
To do List
Aplia 13-3- Work Together & On Your
Own + Application Problem
 Aplia Study Guide Chapter 13
 Payroll Handout-Memo

Paying Withholding and
Payroll Taxes
Today’s Objectives
 Finish
Chapter 13.4
 Paying Withholding And
Payroll Taxes
 Work in Aplia
 Open Book Test – Chapter 13
Important!!!
It is important to pay withholding and
payroll taxes accurately and on time.
 Some of the consequences of not
paying on time are:

 Additional Interest and penalties assessed
 Legal action in extreme cases
Frequency and Method of
Payment

This all depends on the total amount of
tax paid per year.

The government provides a flow chart
on how to “deposit” employment taxes
PAYING THE LIABILITY FOR EMPLOYEE INCOME TAX,
SOCIAL SECURITY TAX, AND MEDICARE TAX
72
page 383
LESSON
13-4
What to take from this…
A monthly depositor is one who paid
$50K or less in the pervious four
quarters.
 A monthly depositor must pay by the
15th day of the following month.
 Businesses with large amounts of
payroll taxes must pay the amounts
every few days.
 Businesses with lesser amounts pay
once a month.

FORM 8109,
FEDERAL DEPOSIT COUPON
page 384
This coupon accompanies the payment.
941 (Type of Tax)-Federal Income, SS and Medicare
74
LESSON
13-4
JOURNALIZING PAYMENT OF LIABILITY FOR
EMPLOYEE INCOME TAX, SOCIAL SECURITY TAX,
AND MEDICARE TAX

Paying the liabilities for employee
federal income tax, social security tax
and Medicare taxes reduces the liability
accounts and the cash account

The liability accounts are debited and
Cash is credited.
JOURNALIZING PAYMENT OF LIABILITY FOR EMPLOYEE
INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX
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. Check
No. 347.
1
5
3
2
1. Write the date.
2. Write the titles of the three
accounts debited.
76
4
3. Write the check number.
4. Write the debit amounts.
5. Write the amount of the credit.
LESSON
13-4
PAYING THE LIABILITY FOR
FEDERAL UNEMPLOYMENT TAX
page 386
Unemployment tax (940)
77
LESSON
13-4
JOURNALIZING PAYMENT OF LIABILITY FOR
FEDERAL UNEMPLOYMENT TAX
page 387
January 31. Paid cash for federal unemployment tax liability for quarter
ended December 31, $34.60. Check No. 367.
1
2
3
4
5
1. Write the date.
2. Write the title of the account debited.
3. Write the check number.
4. Write the debit amount.
5. Write the amount of the credit to Cash.
78
LESSON
13-4
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
2
3
4
5
1. Date
2. Account debited
3. Check number
4. Debit amount
5. Credit amount
79
LESSON
13-4
To Do List

page 389
Aplia 13-4
 Work Together & On Your Own
 Application Problem
 Chapter 13 Test (Open Book)
80
LESSON 13-4