Welcome Back Atef Abuelaish 1 Welcome Back Time
Welcome Back Atef Abuelaish 1
Welcome Back Time for Any Question Atef Abuelaish 2
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CHAPTER # 09 REVIEW Atef Abuelaish 4
Chapter 9 Chapter 09 Cash Section 1: Cash Receipts Section Objective 9 -1 Account for cash short or over. Atef Abuelaish 5
Account for Cash Short or Over • Royal Jewelry Store, a retail business, keeps a $200 change fund in its cash register. • Royal Jewelry Store started business on September 29. • The cash sales as per the cash register tape on September 29 were $2, 200. The cash count was $2, 397. The cash register was short by $3, calculated as follows. Atef Abuelaish 6
Account for Cash Short or Over Journal entry to record the sales and cash shortage: Atef Abuelaish 7
Account for Cash Short or Over • The cash sales as per the cash register tape on September 30 were $2, 100. • The cash count was $2, 301. • The cash register was over by $1, calculated as follows. Atef Abuelaish 8
Account for Cash Short or Over Journal entry to record the sales and cash overage Atef Abuelaish 9
Cash Received on Account • Generally a business makes sales on account and bills customers once after a specified period (say, a month. ) • It sends a statement of account that shows the transactions during the month and the balance owed. • Checks from credit customers are journalized and posted, and then the checks are deposited in the bank. Atef Abuelaish 10
Promissory Note A promissory note is a written promise to pay a specified amount of money on a certain date. Promissory notes are specified interest bearing notes. They are used by businesses to extent credit. Also used to replace an accounts receivable balance when an account is overdue. Atef Abuelaish 11
Collection of a Promissory Note and Interest On July 31 Maxx-Out Sporting Goods accepted a six-month promissory note from Stacee Fairley, who owed $800 on account. Atef Abuelaish 12
On July 31, Maxx-Out Sporting Goods recorded a general journal entry to increase notes receivable and to decrease accounts receivable for $800. The asset account, Notes Receivable, was debited. The Accounts Receivable account was credited. Atef Abuelaish 13
Computation of Interest Amount owed = $800 Interest rate = 9% per year Rate for six-month period = = (9%) ÷ 2 4. 5% Interest amount = = $800 x 4. 5% $36 Total amount with interest = = $800 + $36 $836 Atef Abuelaish 14
Chapter 9 Cash Section 2: Petty Cash and Internal Controls for Cash Section Objectives 9 -2 Demonstrate a knowledge of procedures for a petty cash fund. 9 -3 Demonstrate a knowledge of internal control routines for cash. Atef Abuelaish 15
Demonstrate a knowledge of procedures for a petty cash fund. Atef Abuelaish 16
Establishing the fund The amount of petty cash fund depends upon the need of the business. The cashier is responsible for the petty cash. The establishment of petty cash fund should be recorded as: Atef Abuelaish 17
The Petty Cash Analysis Sheet Used to record transactions involving petty cash. Contains two major columns: Receipts and Payments. Contains special columns such as: Supplies, Delivery Expense, and Miscellaneous Expense. Other Accounts Debit column for entries that do not fit in a special column. Atef Abuelaish 18
Replenishing the Fund • The total vouchers plus the cash on hand should always be equal to the amount of the fund. • Replenish the petty cash fund at the end of each month or sooner if the fund is low. • A check is written to restore the petty cash fund to its original balance. • A journal entry is prepared to record the check. Atef Abuelaish 19
The Petty Cash Analysis Sheet Total Payment equal Total of individual expense accounts Replenish fund equals the Total Payments Atef Abuelaish 20
Internal Control Procedures The following internal control procedures apply to petty cash: 1. Use the petty cash fund only for small payments that cannot conveniently be made by check. 2. Limit the amount set aside for petty cash to the approximate amount needed to cover one month's payments from the fund. 3. Write petty cash fund checks to the person in charge of the fund, not to the order of "Cash. " Atef Abuelaish 21
Internal Control Procedures 4. Assign one person to control the petty cash fund. This person has sole control of the money and is the only one authorized to make payments from the fund. 5. Keep petty cash in a safe, a locked cash box, or a locked drawer. 6. Obtain a petty cash voucher for each payment. The voucher should be signed by the person who receives the money and should show the payment details. This provides an audit trail for the fund. Atef Abuelaish 22
Demonstrate a knowledge of internal control routines for cash. Essential Cash Receipt Controls 1. Have only designated employees receive and handle cash. In some businesses employees handling cash are bonded. 2. Keep cash receipts in a cash register, a locked cash drawer, or a safe while they are on the premises. 3. Make a record of all cash receipts as the funds come into the business. Atef Abuelaish 23
Essential Cash Receipt Controls 4. Check the funds to be deposited against the record made when the cash was received. 5. Deposit cash receipts in the bank promptly. Deposit the funds intact. 6. Enter cash receipt transactions in the accounting records promptly. 7. Have the monthly bank statement sent to and reconciled by someone other than the employees who handle, record, and deposit the funds. Atef Abuelaish 24
Advantage of handling and recording cash receipts • Funds reach the bank sooner. • Cash receipts are not kept on the premises for more than a short time. • Funds are safer and are readily available for paying bills owed by the firm. Atef Abuelaish 25
Essential Cash Payment Controls 1. Make all payments by check except for payments from special purpose cash funds such as a petty cash fund. 2. Issue checks only with an approved bill, invoice, or other document that describes the reason for the payment. 3. Have only designated personnel approve bills and invoices. 4. Have checks prepared and recorded in the checkbook or check register by someone other than the person who approves the payments. Atef Abuelaish 26
Essential Cash Payment Controls 5. Have still another person sign and mail the checks to creditors. 6. Use prenumbered check forms. 7. During the bank reconciliation process, compare the canceled checks to the checkbook or check register. 8. Enter promptly in the accounting records all cash payment transactions. Atef Abuelaish 27
Chapter 9 Cash Section 3: Banking Procedures Section Objectives 9 -4 Write a check, endorse checks, prepare a bank deposit slip, and maintain a checkbook balance. 9 -5 Reconcile the monthly bank statement. 9 -6 Record any adjusting entries required from the bank reconciliation. 9 -7 Understand how businesses use online banking to manage cash activities. Atef Abuelaish 28
Objective 9 -4 Write a check, endorse checks, prepare a bank deposit slip, and maintain a checkbook balance. Atef Abuelaish 29
A. Checks and Check Stubs This check is a negotiable financial instrument. Atef Abuelaish 30
Check Stubs Before writing the check, complete the check stub. The check stub shows: l l Balance brought forward: $12, 025. 50 Check amount: $1, 500 Atef Abuelaish l Balance: $10, 525. 50 31
B. Endorsements Full Endorsement PAY TO THE ORDER OF FIRST TEXAS NATIONAL BANK Maxx-Out Sporting Goods 38 -14 -98867 Blank Endorsement Restrictive Endorsement PAY TO THE ORDER OF Maxx Ferraro FIRST TEXAS NATIONAL BANK 38 -14 -98867 Maxx-Out Sporting Goods Atef Abuelaish FOR DEPOSIT ONLY 38 -14 -98867 32
C. Preparing the Deposit Slip Atef Abuelaish 33
D. Reconcile the monthly bank statement. The difference between the bank balance and the book balance is due to errors. Errors made by banks Errors made by businesses Arithmetic errors Giving credit to the wrong depositor Not recording a check or deposit Charging a check against the wrong account Recording a check or deposit for the wrong amount Many banks require that errors in the bank statement be reported within a short period of time, usually 10 days. Atef Abuelaish 34
Why balances may not equal Other than errors, there are four reasons why the book balance of cash may not agree with the balance on the bank statement. 1. Outstanding checks. 2. Deposit in transit. 3. Service charges and other deductions not recorded in the business records. 4. Deposits, such as the collection of promissory notes, not recorded in the business records. Atef Abuelaish 35
Format of a bank reconciliation statement First Section Bank statement balance Second Section = Book balance + deposits in transit + deposits not recorded – outstanding checks – deductions + or – bank errors Adjusted bank balance Atef Abuelaish + or – = errors in books Adjusted book balance 36
The Bank Side of the Bank Reconciliation Steps to prepare the bank reconciliation statement: First Section 1. Enter the balance on the bank statement. 2. Compare the deposits in the checkbook with the deposits on the bank statement. 3. List the outstanding checks. 4. List any bank errors. 5. Compute the adjusted bank balance. Atef Abuelaish 37
The Book Side of the Bank Reconciliation Steps to prepare the bank reconciliation statement: Second Section 1. Enter the balance in books from the Cash account. 2. Record any deposits made by the bank that have not been recorded in the accounting records. 3. Record deductions made by the bank. 4. Record any errors in the accounting records that were discovered during the reconciliation process. 5. Compute the adjusted book balance. Atef Abuelaish 38
Record any adjusting entries required from the bank reconciliation. For Maxx-Out Sporting Goods, two entries must be made. GENERAL JOURNAL DATE Jan 31 1. 2. DESCRIPTION Accts. Rec. /David Newhouse Bank Fees Expense Cash To record NSF check and service charge POST. REF. PAGE DEBIT 17 CREDIT 525. 00 550. 00 The first entry is for the NSF check from David Newhouse, a credit customer. The second entry is for the bank service charge. The effect of the two items is a decrease in the Cash account balance. Atef Abuelaish 39
Understand how businesses can use online banking to manage cash activities. Using On-line Banking Many businesses now manage many transactions online: Electronic Funds Transfers – EFT’s Payments to government agencies Payments from customers Payments to vendors Atef Abuelaish 40
Chapter 10 Payroll Computations, Atef Abuelaish 41
Chapter 10 Payroll Computations, Records, and Atef Abuelaish 42
Chapter 10 Payroll Computations, Records, and Payment Atef Abuelaish 43
Chapter Payroll Computations, Records, and Payment 10 Section 1: Payroll Laws and Taxes Section Objectives 10 -1 Explain the major federal laws relating to employee earnings and Atef Abuelaish withholding. 10 -44
Characteristics of an Employee l Works under the control and direction of the employer l Uses tools or equipment provided by the employer l Works certain hours that are set by the employer Atef Abuelaish 10 -45
Legal Aspects of Employee Payroll Employee Independent Contractor Someone whose work is under the direction of the employer Performs a job for the employer but decides how to do the work Withhold taxes Do not withhold taxes
Objective 10 -1 Explain the major federal laws relating to employee earnings and withholding. Atef Abuelaish 10 -47
The Fair Labor Standards Act of 1938 l Also referred to as the Wage and Hour Law. l Applies only to firms engaged directly or indirectly in interstate commerce. l Sets a minimum hourly rate of pay and maximum hours of work per week to be performed at the regular rate of pay. Employees who work beyond 40 hours a week are entitled to “time and a half” times the regular rate of pay for the Atef Abuelaish extra hours. 10 -48
Fair Labor Standards Act Applies to businesses operating across state lines Sets minimum wage Sets a 40 hour work week at the normal pay rate Sets 1½ times the normal hourly rate as the minimum overtime pay rate 9 -49
Federal Insurance Contributions Act (FICA) Social Security Benefits Medicare Benefits Retirement, disability, and survivors Medical 2016 Rate 6. 2% on first $118, 500 2016 Rate 1. 45% on all earnings 9 -50
1) Social Security Tax The amount of social security tax is determined by: As of 2016 rate Ø 6. 2% earnings up to a calendar year earnings Ø $ base 118, 500 The rate (6. 2%) has remained constant in recent years. Ø Ø The earnings base has increased each year. The tax provides for retirement, disability, and death benefits. It also provides survivor benefits for the worker’s minor dependent children and spouse if the worker dies or is disabled. Atef Abuelaish 10 -51
2) Medicare Tax The amount of Medicare tax is determined by: Ø Ø rate earnings 1. 45% total earnings Ø Ø The rate (1. 45%) has remained constant in recent years. The Medicare tax does not have an earnings base limit. Atef Abuelaish 10 -52
3) State and Local Taxes l Most states, and many local governments, may require employers to withhold income taxes from employees’ earnings to prepay the employees’ state and local income taxes. l The rules are generally almost identical to those governing federal income tax withholding. Atef Abuelaish 10 -53
4) Employer’s Payroll Taxes and Insurance Costs l Employers withhold social security and Medicare taxes from employees’ earnings. l In addition, employers pay social security and Medicare taxes on their employees’ earnings. l Employers are also required to pay: l Federal l State unemployment tax (FUTA) unemployment tax (SUTA) l Workers’ compensation insurance in some states. (Not a tax) l The FUTA and SUTA tax rates are applied to a taxable earnings base. l This text assumes that the taxable earnings base is 10 -54 Atef Abuelaish $7000.
5) Worker’s Compensation Insurance QUESTION: What is workers’ compensation insurance? ANSWER: Workers’ compensation insurance is the insurance that protects employees against losses from job-related injuries or illnesses, or compensates their families if death occurs in the course of employment. Atef Abuelaish 10 -55
Employee Records Required by Law Federal laws require that certain payroll records be maintained. For each employee the employer must keep a record of: Employee’s name, address, social security number, and date of birth. l Hours worked each day and week, and wages paid at the regular and overtime rates (certain exceptions exist for employees who earn salaries. ) l Cumulative wages paid during the year. l Amount of income tax, social security tax, and Medicare tax withheld for each pay period. l Proof that the employee is a United States citizen or has a valid work permit. l Atef Abuelaish 10 -56
Chapter 10 Payroll Computations, Records, and Payment Section 2: Calculating Earnings and Taxes Section Objectives 10 -2 Compute gross earnings of employees. 10 -3 Determine employee deductions for social security tax. 10 -4 Determine employee deductions for Medicare tax. 10 -5 Determine employee deductions for income tax. Atef Abuelaish 10 -6 Enter gross earnings, deductions, and net pay in the payroll register. 10 -57
1) Compute Gross Earnings of Employees. The first step in preparing payroll is to compute the gross wages or salary for each employee. There are several ways to compute earnings. Hourly rate basis l Salary basis l Commission basis l Piece-rate basis l Atef Abuelaish 10 -58
Computing Gross Pay The gross pay for hourly employees for the week ended January 6 is determined as follows: Total hours Alicia Martinez 40 hours Jorge Rodriguez 40 hours Atef Abuelaish Rate of pay Gross pay X $ 10. 00 = $400. 00 X $ = $380. 00 9. 50 10 -59
Overtime George Dunlap earns $9. 00 per hour. He worked 45 hours. He is paid 40 hours regular rate of pay and 5 hours at time and a half. Therefore, Dunlap’s gross pay adds up to: Regular earnings: Overtime earnings: Gross Pay Atef Abuelaish 40 hours X $ 9. 00 = $360. 00 5 hours X $13. 50 = $ 67. 50 $427. 50 10 -60
Withholdings Required by Law Recall that federal law requires employers to make three deductions from employees’ gross pay: l FICA (Social Security and Medicare) tax l Federal income tax withholding Atef Abuelaish 10 -61
2) Determine employee deductions for Social security tax. Tax-exempt Wages l Earnings in excess of the base amount ($118, 500 as of 2016) are not subject to Social Security withholding. l If an employee works for more than one employer during the year, the FICA tax is deducted and matched by each employer. l When the employee files a federal income tax return, any excess FICA tax withheld from the employee’s earnings is refunded by the government or is applied to payment of the employee’s federal income taxes. Atef Abuelaish 10 -62
3) Determine employee deduction for Medicare tax. Medicare Tax To compute the Medicare tax to withhold from the employee’s paycheck, multiply the wages by the Medicare tax rate, 1. 45 percent. Employee Alicia Martinez Jorge Rodriguez George Dunlap Cecilia Wu Total Medicare tax Atef Abuelaish Gross pay $400. 00 380. 00 427. 50 560. 00 Tax rate X X 1. 45% 1. 45 Tax = = $ $ 5. 80 5. 51 6. 20 8. 12 $25. 63 10 -63
4) Determine employee deductions for income tax. The amount of federal income tax to withhold from an employee’s earnings depends on the: earnings during the pay period. l frequency of the pay period (weekly, bi-weekly, semi-monthly etc. ) l marital status. l number of withholding allowances. l Atef Abuelaish 10 -64
Withholding Allowances In the simplest circumstances, a taxpayer claims a withholding allowance for: the taxpayer. l a spouse who does not also claim an allowance. l each dependent for whom the taxpayer provides more than half the support during the year. l As the number of withholding allowances increases, the amount of federal income tax withheld decreases. Atef Abuelaish 10 -65
Employer’s Annual Withholding Reporting Form W-2 10 -66
Employer’s Annual Withholding Reporting Form W-3 10 -67
QUESTION: What is the Employee’s Withholding Allowance Certificate, Form W-4? ANSWER: The Employee’s Withholding Allowance Certificate, Form W-4 is a form used to claim exemptions (withholding allowances). Atef Abuelaish 10 -68
Federal and State Income Tax Withholding Form W-4 Employee’s Withholding Allowance Certificate Marital Status Number of Withholding Allowances Gross pay is the total amount an employee earns before deductions. 9 -69
Employee’s Withholding Allowance Certificate (Form W-4) 9 -70
Computing Federal Income Tax Withholding l The wage-bracket table method is the most common way to compute the federal income tax withholding. l The wage-bracket tables are in the Federal Publication 15, Circular E. Atef Abuelaish 10 -71
Federal Income Tax Withholding The employer uses a withholding table (called Circular E) from the IRS to compute the amount of federal taxes to withhold. 9 -72
Withholding Table Example—Single Persons Paid Weekly 9 -73
Withholding Table Example—Married Persons Paid Monthly 9 -74
Cecilia Wu is married, claims two withholding allowances, and earned $560 for the week. The tax to withhold is $30; this is where the row and column intersect. 1. Go to the table for married persons paid weekly. 2. Find the line covering wages between $560 and $570. 3. Find the column for two withholding allowances. Atef Abuelaish 10 -75
5) Other Deductions Required by Law l Most states and some local governments require employers to withhold state and local income taxes from earnings. l In some states employers are also required to withhold unemployment tax or disability taxes. l The procedures are similar to those for federal income tax withholding. l Apply the tax rate to the earnings, or use withholding tables. Atef Abuelaish 10 -76
Voluntary Deductions There are many payroll deductions not required by law but made by agreement between the employee and the employer. Some examples are: l l l l Group life insurance Group medical insurance Company retirement plans Bank or credit union savings plans or loan repayments United States savings bonds purchase plans Stocks and other investment purchase plans Employer loan repayments Union dues Atef Abuelaish 10 -77
Enter gross earnings, deductions, and net pay in the payroll register PAYROLL REGISTER NAME Martinez, Alicia Rodriguez, Jorge Dunlap, George Wu, Cecil Booker, Cynthia (A) WEEK BEGINNING NO. OF ALLOW. MARITAL STATUS 1 1 3 2 1 M S S M S (B) January 1, 2016 CUMULATIVE EARNINGS NO. OF HRS. RATE 40 40 45 40 40 (C) (D) 10. 00 9. 50 9. 00 14. 00 480. 00 (E) Enter the employee’s name (Column A), number of withholding allowances and marital status (Column B), and rate of pay (Column E). Atef Abuelaish 10 -78
Completing the Payroll Register PAYROLL REGISTER NAME Martinez, Alicia Rodriguez, Jorge Dunlap, George Wu, Cecil Booker, Cynthia (A) WEEK BEGINNING NO. OF ALLOW. MARITAL STATUS 1 1 3 2 1 M S S M S (B) January 1, 2016 CUMULATIVE EARNINGS NO. OF HRS. 40 40 45 40 40 (C) (D) RATE 10. 00 9. 50 9. 00 14. 00 480. 00 (E) The Cumulative Earnings column (Column C) shows the total earnings for the calendar year before the current pay period. Since this is the first payroll period for the year, there are no cumulative earnings prior to the current pay period. Atef Abuelaish 10 -79
Completing the Payroll Register AND ENDING NAME Martinez, Alicia Rodriguez, Jorge Dunlap, George Wu, Cecil Booker, Cynthia (A) January 6, 2016 PAID TAXABLE WAGES SOCIAL MEDICARE SECURITY 400. 00 380. 00 427. 50 560. 00 480. 00 2, 247. 50 (J) (K) FUTA 400. 00 380. 00 427. 50 560. 00 480. 00 2, 247. 50 (L) January 8, 2016 DEDUCTIONS SOCIAL MEDICARE SECURITY 24. 80 5. 80 23. 56 5. 51 26. 51 6. 20 34. 72 8. 12 29. 76 6. 96 139. 35 32. 59 (M) (N) The Taxable Wages columns shows the earnings subject to taxes for social security (Column J), Medicare (Column K), and FUTA (Column L). Only the earnings at or under the earnings limit are included in these columns. Atef Abuelaish 10 -80
Completing the Payroll Register AND ENDING NAME Martinez, Alicia Rodriguez, Jorge Dunlap, George Wu, Cecil Booker, Cynthia (A) January 6, 2016 SOCIAL SECURITY 24. 80 23. 56 26. 51 34. 72 29. 76 139. 35 (M) DEDUCTIONS MEDICARE 5. 80 5. 51 6. 20 8. 12 6. 96 32. 59 (N) PAID INCOME TAX 19. 00 34. 00 23. 00 30. 00 49. 00 155. 00 (O) January 8, 2016 HEALTH INSURANCE 40. 00 80. 00 (P) The Deductions columns show the withholding for social security tax (Column M), Medicare tax (Column N), federal income tax (Column O), and medical insurance (Column P). Atef Abuelaish 10 -81
Completing the Payroll Register AND ENDING NAME Martinez, Alicia Rodriguez, Jorge Dunlap, George Wu, Cecil Booker, Cynthia (A) January 6, 2016 PAID January 8, 2016 DEDUCTIONS DISTRIBUTION INCOME HEALTH NET CHECK OFFICE SHIPPING TAX INSURANCE AMOUNT NO. SALARIES WAGES 19. 00 350. 40 1601 400. 00 34. 00 316. 93 1602 380. 00 23. 00 40. 00 331. 79 1603 427. 50 30. 00 447. 16 1604 560. 00 49. 00 394. 28 1605 480. 00 155. 00 80. 00 1, 840. 56 480. 00 1, 767. 50 (O) (P) (Q) (R) (S) (T) Subtract the deductions (Columns M, N, O, and P) from the gross earnings (Column H). Enter the results in the Net Amount column (Column Q). This is the amount paid to each employee. Atef Abuelaish 10 -82
Payroll Register Continued…… 9 -83
Chapter 10 Payroll Computations, Records, and Payment Section 3: Recording Payroll Information Section Objectives Journalize payroll transactions in the general journal. 10 -7 Atef Abuelaish 10 -8 Maintain an earnings record for each employee. 10 -84
Journalize payroll transactions in the general journal. Recording. Payroll Recording payroll information involves two separate entries: 1. Record the payroll expense. 2. Pay the employees. Atef Abuelaish 10 -85
AND ENDING January 6, 2013 PAID January 8, 2013 DEDUCTIONS DISTRIBUTION NAME INCOME HEALTH NET CHECK OFFICE SHIPPING TAX INSURANCE AMOUNT NO. SALARIES WAGES Martinez, Alicia 19. 00 350. 40 1601 400. 00 Rodriguez, Jorge 34. 00 316. 93 1602 380. 00 Dunlap, George 23. 00 40. 00 331. 79 1603 427. 50 Wu, Cecil 30. 00 447. 16 1604 560. 00 Booker, Cynthia 49. 00 394. 28 1605 480. 00 The information 155. 00 in 80. 00 1, 840. 56 480. 00 1, 767. 50 the register is used (A) (O) (P) (Q) (R) for recording the GENERAL JOURNAL payroll expense DATE 20 -Jan. DESCRIPTION 8 Office Salaries Expense Shipping Wages Expense Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Health Insurance Premiums Payable Salaries and Wages Payable Atef Abuelaish Payroll for week ending Jan. 6 POST. REF. (S) (T) PAGE DEBIT 1 CREDIT 480. 00 1, 767. 50 139. 35 32. 59 155. 00 80. 00 1, 840. 56 10 -86
AND ENDING January 6, 2016 PAID January 8, 2016 DEDUCTIONS MEDICARE NAME SOCIAL INCOME HEALTH SECURITY TAX INSURANCE Martinez, Alicia 24. 80 5. 80 19. 00 Rodriguez, Jorge 23. 56 5. 50 34. 00 Dunlap, George 26. 51 6. 19 23. 00 40. 00 Each type of deduction is credited to Wu, Cecil 34. 72 8. 12 30. 00 40. 00 account. 49. 00 Booker, Cynthiaa separate 29. 76 liability 6. 96 139. 35 32. 58 155. 00 80. 00 (A) liability(M) A separate account is set up for each deduction DATE 20 -Jan. (N) Office Salaries Expense Shipping Wages Expense Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Health Insurance Premiums Payable Salaries and Wages Payable Atef Abuelaish (P) GENERAL JOURNAL DESCRIPTION 8 (O) Payroll for week ending Jan. 6 POST. REF. PAGE DEBIT 1 CREDIT 480. 00 1, 767. 50 139. 35 32. 59 155. 00 80. 00 1, 840. 57 10 -87
Paying Employees Most businesses pay their employees by check or by direct deposit. By using these methods, the business avoids the inconvenience and risk involved in dealing with currency. Atef Abuelaish 10 -88
Paying by Check Paychecks may be written on l the la firm’s regular checking account, or payroll bank account. Atef Abuelaish 10 -89
Checks Written on a Separate Payroll Account Many businesses write payroll checks from a separate payroll bank account. This is a two-step process. 1. A check is drawn on the regular bank account for the total amount of net pay and deposited in the payroll bank account. 2. Individual payroll checks are issued from the payroll bank account. Atef Abuelaish 10 -90
Paying by Direct Deposit l A popular method of paying employees is the direct deposit method. l The bank electronically transfers net pay from the employer’s account to the personal account of the employee. l On payday the employee receives a statement showing gross earnings, deductions, and net pay. Atef Abuelaish 10 -91
Maintain an earnings record for each employee. QUESTION: What is an individual earnings record? ANSWER: An individual earnings record (also called a compensation report) is a record that contains information needed to compute earnings and complete tax reports. Atef Abuelaish 10 -92
The earnings records are totaled monthly and at the end of each calendar quarter. This provides information needed to make tax payments and file tax returns. Totaled monthly earnings Atef Abuelaish 10 -93
Homework assignment Ø Using Connect – 7 Questions for 50 Points for Chapter 10. Ø Prepare chapter 11 “Payroll Taxes, Deposits, and Reports. ” Reports Ø Prepare for Exam # 2 for CH 6 – 8 for 50 Points on 11/10/2016 in class. Ø Please Log-in HCC website and complete EGLS 3 Survey, available from 11/5 till 11/20, for this semester, for 10 Points; with proof !!!!! Happiness is having all homework up to date Atef Abuelaish 94
Thank you and See You On Thursday at the Same Time, Take Care Atef Abuelaish 95
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