Chapter 14 PAYROLL RECORDS

Salary--The money paid for employee services.

Pay Period--The period covered by a salary payment.

Payroll--The total amount earned by all employees for a pay period.  The payroll is reduced by state and federal taxes and other deductions, such as health insurance, to determine the recording of payroll transactions in a journal.

PAYROLL TIME CARDS

A payroll system must include an accurate record of the time each employee has worked.  Several methods are used for keeping time records.  One of the more frequently used methods is a time card.  Time cards are used as the basic source of information to prepare a payroll.

CALCULATING HOURS WORKED

First calculate regular hours worked.  Hours are rounded to the nearest quarter hour.

Overtime hours are then calculated at time and a half( Take 1.5 time the pay rate and take the resulting $ amount time the actual hours worked.

PAYROLL TAXES

Payroll Taxes--Taxes based on the payroll o a business.  A business is require by law to withhold certain payroll taxes from employee salaries.  All payroll taxes are based on employee total earnings.  Payroll taxes withheld represent a liability for the employer until payment is made. Federal payroll taxes may be paid to a Federal Reserve Bank or a bank authorized by the government to receive such payments.  Local and State governments designate how, when and where a business will pay the liability for employee taxes withheld.

Employee Taxes withheld--Employee Income Tax, 1/2 of FICA Tax,

Employer Taxes---Unemployment Tax for State and Federal and 1/2 of FICA Tax.

EMPLOYEE INCOME TAX --A tax paid by all 50 states-- a W-4 -Employee Withholding Allowance Certificate is used to determine this deduction---Marital Status, Withholding Allowances as well as income is used to determine what the deduction amount will be.

Employee & Employer Social Security TAX--Three programs operate under the federal social security law.  1.  Old-age, survivors, and disability insurance benefits for qualified employees and their spouses, widows or widowers, dependent children, and parents. 2.  Payments to senior citizens for the cost of certain hospital and related services.  The federal health insurance program for people who have reached retirement age (Medicare). 3. Grants to states that provide benefits for persons temporarily unemployed and for certain relief and welfare purposes.

Each employee must have a social security number.  Current law requires that most infants who are a least one year old by the end of a tax year have a social security number.

FICA TAX (Federal Insurance Contributions Act)--A federal tax paid by employees and employers for old-age, survivors, disability, and hospitalization insurance.

Federal Unemployment Tax -A federal tax used for state and federal administrative expenses of the unemployment program.  This tax is paid entirely by the employer.

State Unemployment Tax-State tax used to benefit unemployed workers.  This tax is paid entirely by the employer.

RETENTION OF RECORDS--Records pertaining to social security must be retained for four years others may be longer.  May vary from state to state.

PAYROLL REGISTER--A business form used to record payroll information.  A register summarizes the total earnings and payroll withholdings of all employees.

EFT-Electronic Fund Transfer

PAYROLL BANK ACCOUNT  --A separate checking account for payroll checks helps to protect and control payroll payments.  The exact amount needed to pay the payroll is deposited in the special payroll account.

AUTOMATIC CHECK DEPOSIT --Depositing an employee's earnings directly to their checking or savings account.

EMPLOYEE EARNINGS RECORD--A business form used to record details affecting payments made to an employee.

PEGBOARD--A special device used to write the same information at one time on several forms.  The name pegboard comes from the pegs along one side of the board.

SUMMARY OF PREPARING PAYROLL RECORDS

1.  A time card is used to record employee hours worked and to calculate regular, overtime, and total earnings.  Payroll taxes are calculated using tax tables and information on the form W-4.  This information is recorded for each employee in a payroll register.

2.  A check is written on a general checking account for the total of the Net Pay column on the payroll register.  The check is deposited in a special payroll checking account.

3.  Payroll checks are written on the special payroll checking account for the net pay of each employee.

4.  Information from the payroll register is recorded on each employee earnings record.