Ch 12: Payroll Accounting Ms. Alltucker Accounting II.
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Transcript of Ch 12: Payroll Accounting Ms. Alltucker Accounting II.
Ch 12: Payroll Accounting
Ms. Alltucker
Accounting II
Ch 12: Section 1: Calculating Gross Earnings What you’ll learn:
The importance of accurate payroll records. How to calculate gross earnings
Why it’s important: For many businesses payroll is the largest
expense. It is essential that the payroll system accurately determine the gross pay for each employee for every pay period.
The importance of Payroll Records Payroll list of the employees and the
payments due to each employee for a specific pay period Biggest expense for most companies Most companies set up a payroll system for
recording and reporting employee earnings information
Payroll system goals: 1. The collection and processing of all the information
needed to prepare and issue payroll checks 2. The generation of payroll records needed for
accounting purposes and for reporting to government agencies, mgmt
Often operated by a payroll clerk
Payroll Records Payroll clerk
Makes sure employees are paid on time Makes sure each employee is paid the correct
amount Completes payroll records Submits payroll reports Pays payroll taxes
Payroll Records
Computing Gross Pay Gross Pay the total amount of money an
employee earns in a pay period Can be based on:
Salary Hourly wage Commission Salary plus commission or bonus Overtime pay
Also called salary expense
Computing Gross Pay Salary
Fixed amount of money paid to an employee for each pay period
Generally paid to managers and/or supervisors Earns the same amount regardless of the number
of hours worked during the pay period Hourly wage
Amount of money paid to an employee at a specified rate per hour worked
Hours worked X hourly wage = gross earnings 40 hours X $10.00 = $400 gross earning
Computing Gross Pay Hourly wage
Many employees required to keep time cards of hours worked during a given pay period
Divide the hour into 15 minute quarters for measuring work time
Quarter Hour Example On the hour 2:00 pm 15 mins after the hour 2:15 pm 30 mins after the hour 2:30 pm 45 mins after the hour 2:45 pm
Employees seldom arrive and leave exactly on the quarter hour Round the hours to the nearest quarter hour
Computing Gross Pay Commission amount paid to an employee
based on a percentage of the employee’s sales Incentive to employees to increase sales
Example: Joyce Torrez is paid a 5% commission on all her
sales Sales = $8,254 8254 X .05 = $412.70 gross earnings
Computing Gross Pay Salary plus commission or bonus
Earn a base salary plus a commission or bonus on the amount of the sales
Example: Weekly salary= $200 plus 3% commission on sales
Weekly sales: $4,810 200 + (4810 X .03) = $344
Computing Gross Pay Overtime Pay
State and federal laws regulate the number of hours some employees may work in a week
40 hours/week Overtime = hours work above and beyond 40
hours a week Overtime rate = 1.5 times the employee’s regular
hourly pay rate Example: Jesse worked 43 hours last week at an
hourly rate of $6.60. What is his overtime rate? What is his gross earnings?
Computing Gross Pay Overtime pay 6.60 X 1.5 = $9.90 (overtime rate)
Hours Rate 40 (regular) X 6.60 = $264.00 3 (overtime) X 9.90 = 29.70 $ 293.70
Thinking Critically List two goals a payroll system should
achieve.
How does an electronic badge reader record the correct arrival and departure time?
Do problems 12-1 and 12-5