Payroll Accounting,
Taxes, and Reports
Chapter 13
Do Now
 If you owed money to your parents but had to wait to
be paid by your part-time job employer:
 Which party would represent the government for
payroll purposes (your employer, you, or your
parents)? Why?
 If you had to choose three columns from the payroll
register to make a journal entry, which would they
be?
 Which type of journal would you use to record
payroll?
13-1: Recording a Payroll
 Payroll information for each pay period
recorded in payroll register
 Each pay period, payroll information for each
employee recorded on employee earnings
record
Provide all payroll information needed to
prepare payroll and payroll tax reports
Journal entries made to record payment of
payroll and employer payroll taxes
13-1: Recording a Payroll
 Column totals of payroll register provide debit and credit
amounts needed to journalize a payroll
 Based on total of Earnings Total column, each
deduction column, and Net Pay column
Earnings total = “Salary Expense”
Deductions = Liability; “Payable”
Net Pay = Cash
Page 370 text reference
Exercises
13-1 WT: Text page 372, WP page 327
13-1 OYO: Text page 372, WP page 328
Reading Activity
 Read the following article and write down:
How often you’d want to be paid as
employee…explain why
How often you’d like to pay employees as
an employer…explain why
13-2: Recording Employer Payroll
Taxes
 Amount of taxes withheld from employee
earnings are liabilities of employers until they
are paid to government
 Employers must also pay their own taxes
Employer payroll taxes are business
expenses
13-2: Recording Employer Payroll
Taxes
 Employers pay 4 separate payroll taxes:
1. Employer social security tax
2. Medicare tax
3. Federal unemployment tax
4. State unemployment tax
o
Employer payroll taxes based on
percentage of employee earnings
13-2: Recording Employer Payroll
Taxes
 Social security and Medicare taxes are only payroll taxes
paid by both employees and employer
 Employers pay total of those columns in payroll register
for the pay period
 Congress sets social security and Medicare tax rates for
employees and employers and may change tax rates
and tax base
 Social Security = 6.2% on maximum tax base of
$87,000
 Medicare = 1.45%, no tax base
13-2: Recording Employer Payroll
Taxes
 Employers must pay taxes for unemployment
compensation
 Total earnings subject to unemployment tax is
unemployment taxable earnings
 Applied to first $7,000 earned by each employee for
calendar year
 Visual aid on text page 374
13-2: Recording Employer Payroll
Taxes
 Federal unemployment tax: federal tax used for state
and federal administrative expenses of the
unemployment program
 Usually 6.2% of first $7,000 earned by each employee
 Can deduct amounts paid to state unemployment
funds to a maximum of 5.4%
 Results in 0.8% being the effective federal
unemployment tax rate in most states on the first
$7,000 earned by each employee
 Unemployment taxable earnings used to calculate
federal unemployment tax
13-2: Recording Employer Payroll
Taxes
 Example:
Unemployment Taxable Earnings: $790.00
Federal Unemployment Tax Rate: 0.8%
$790.00 X 0.008 = $6.32
Federal Unemployment Tax = $6.32
13-2: Recording Employer Payroll
Taxes
 State unemployment tax: state tax used to pay benefits
to unemployed workers
 5.4% on first $7,000 earned by each employee
 Unemployment taxable earnings used to calculate
federal unemployment tax are also used to calculate
state unemployment tax
13-2: Recording Employer Payroll
Taxes
 Example:
 Unemployment Taxable Earnings: $790.00
 State Unemployment Tax Rate: 5.4%
 $790.00 X 0.054 = $42.66
 Federal Unemployment Tax = $42.66
13-2: Recording Employer Payroll
Taxes
 Transaction to record employer payroll
taxes expense is journalized on same date
payroll is journalized
 Salary expense and employer payroll taxes
expense both recorded in same
accounting period
Exercises
13-2 WT: Text page 377, WP page 329
13-1 OYO: Text page 377, WP page 330