Ch 15 Lecture Guide

1
ACCOUNTING-I

For best online viewing, select Browse Full
Screen
Chapter 15
Lecture Guide
Accounting for a Partnership Payroll Accounting
-- Taxes Reports
2
I. RECORDING A PAYROLL TRANSACTION 1
Source Payroll Register
15-1 (p 352)
ONE DEBIT (Total Earnings/Gross Pay column
total) ? Salary Expense ALL CREDITS
(Deduction column totals) ? Employee Income Tax
Payable ? FICA Tax Payable ? Employee
Choices (all totals on register)
Ex. Health Ins. Payable US Savings Bonds
Payable United Way Payable ? Cash (Net
Pay/ value of check to Payroll Acct.) A
cash payment is ALWAYS a credit!
T Accounts (p 330) 15-1 (p 352) 15-2 (p
353)
3
I. RECORDING A PAYROLL TRANSACTION 1
Post as usual 1. Post each amount shown in the
General columns to the account title listed in
the Account Title column. 2. The net pay total
is entered in the Cash Cr column on the first
line of the journal entry and is posted as part
of the column total at the end of the month.
15-3 (pp 353-4)
4
II. EMPLOYER P/R TAXES CALCULATIONS
Employers pay 3 types of payroll taxes 1.
FICA 2. Federal Unemployment 3. State
Unemployment All 3 types are based on a of
employees TOTAL earnings.
1. FICA (8) -- SS Medicare Employers
contribution MATCHES () the total withheld
from employees pay checks. SS 6.5 on all
earnings up to 55,500 Medicare 1.5 on
all earnings up to 130,200
Calculations (p 355)
5
II. EMPLOYER P/R TAXES CALCULATIONS
2. Federal Unemployment .8 of total earnings
up to 7,000/employee/yr Ex 1
Employee Accumulated earnings by 7/31
6,900 Earnings 8/15 P/R 400
Federal Unemployment Taxable Earnings applicable
to the employees 8/15 payroll is the portion
of the 400 needed to 7000
100 Employers FUTx liability 100 .008
0.80
6
II. EMPLOYER P/R TAXES CALCULATIONS
3. State Unemployment ( depends on the
state) 5.4 of total earnings up to
7,000/employee/yr Ex 1 Employee Accumulate
d earnings by 7/31 6,800 Earnings 8/15
P/R 400
State Unemployment Taxable Earnings applicable
to the employees 8/15 payroll is the portion of
the 400 needed to 7000
200 Employers SUTx liability 200 .054
10.80
Texas Unemployment Taxes
7
II. EMPLOYER P/R TAXES TRANSACTION 2
Journal entry to record employers liabilities
(amounts owed) for a particular payroll All
amounts are entered in the General columns of
the journal. ONE DEBIT (Total Earnings/Gross
Pay column total) ? Payroll Taxes Expense
normal expense balance/ side Dr CREDITS
(the 3 types of Employer Payroll Taxes) ?
FICA Tax Payable ? Unemployment Tax Payable --
Federal ? Unemployment Tax Payable -- State
normal liability balance/ side Cr
15-5 (p 357)
8
II. EMPLOYER P/R TAXES TRANSACTION 2
Post as usual 1. All amounts to be posted are
entered in the General columns. 2. Post each
amount to the account listed in the Account
Title column. Note Cash is not involved in
this transaction.
15-6 (pp 358-9)
9
Audit Your Understanding (p 360)
1. What account title is used to journalize the
Total Earnings column of the payroll
register? 2. What account title is used to
journalize the Federal Income Tax column of the
payroll register? 3. What account title is used
to journalize the FICA Tax column of the payroll
register?
10
III. REPORTING WITHHOLDING PAYROLL TAXES
Employers are required by law to prepare and
submit 3 forms -- one for each type of employers
tax
1. 941 Employers Quarterly Federal Tax
Return Filed each quarter
15-7 (p 361)
2. W-2 Annual Report to Employees of Taxes
Withheld Mailed/delivered at the end of each
year
15-8 (p 363)
3. W-3 Transmittal of Income and Tax
Statements Filed at the end of each year
15-9 (p 364)
Note As of 1995, employers with more than 250
employees file reports electronically.
11
III. REPORTING WITHHOLDING PAYROLL TAXES

• Employers are identified on all forms by the
  Employers Identification Number. (EIN)
• This must be obtained from the government
  before any employee can be paid.
• It serves the same purpose as an employees
  Social Security unique identification

12
III. REPORTING WITHHOLDING PAYROLL TAXES

• 941 Employers Quarterly Federal Tax Return
• Employers must file a federal tax return (941)
  every quarter.
• Total employees earnings for the quarter are the
  basis of the report.

• Completing the form is as simple as reading the
  instruction on each line and entering the
  required information.

Note The SS and Medicare calculations used on
lines 6a, 6b, 7 are based on the combined
employees the employers tax rates SS
(6.5 6.5) 13 Medicare (1.5 1.5) 3
15-7 (p 361)
13
III. REPORTING WITHHOLDING PAYROLL TAXES

• W-2 Annual Report to Employees
• Employers must send a W-2 form to each employee
  by January 31 of each year for the prior calendar
  year -or- within 30 days of the date employment
  is terminated during the year.
• Each W-2 form shows total earnings and totals of
  each type of tax withheld for the employee.

15-8 (p 363)
14
III. REPORTING WITHHOLDING PAYROLL TAXES

• W-2 Annual Report to Employees (cont)
• 4 copies of each W-2 are prepared

A sent to the government by the employer B
sent to the employee (for attachment to the
employees income tax return) C sent to the
employee (personal copy) D kept by the
employer (for business records)
Note Additional copies are required in states
which charge state income tax.
15
III. REPORTING WITHHOLDING PAYROLL TAXES

• W-3 Transmittal of Income and Tax Statements
• Must be sent to the Social Security
  Administration by 2/28 each year for the prior
  year
• Reports previous years earnings and payroll
  taxes withheld for all employees
• A copy of each employees W-2 form (Copy A) is
  attached to the W-3 form.

Note The totals needed to complete the W-3
report can be calculated by adding totals shown
on 941 reports.
15-9 (p 364)
16
Audit Your Understanding (p 364)
1. What is the FICA tax rate employers must
pay? 2. What is the federal unemployment tax
rate employers must pay?
17
IV. PAYING WITHHOLDING PAYROLL TAXES
Payments of tax liabilities MUST be made (usually
after the end of each quarter) on special forms
(tax deposit coupons) provided by the government
as follows

• Employee Income Tax
  (all) FICA Taxes

15-10 (p 365)

• Federal Unemployment Tax

15-12 (p 366)

• State Unemployment Tax

forms vary
18
IV. PAYING WITHHOLDING PAYROLL TAXES

• Form 8109 Employee Income Tax (all) FICA
  Taxes
• Payment includes the employers FICA tax
  liability plus all employees income and FICA
  taxes withheld.
• Payment is made to a Federal Reserve Bank a
  check is written for the amount of the total
  taxes being paid.
• The check is clipped (not stapled) to a completed
  Federal Tax Deposit Coupon form appropriate
  ovals are colored in to identify the type and
  time period of the payment being made.

15-10 (p 365)
Journal Entry
15-11 (p 366)
19
IV. PAYING WITHHOLDING PAYROLL TAXES
Form 8109 Federal Unemployment Tax

• Payment covers the employers FUTx liability.
• Payment is made to a Federal Reserve Bank a
  check is written for the amount of the total
  taxes being paid.
• The check is clipped (not stapled) to a completed
  Federal Tax Deposit Coupon form appropriate
  ovals are colored in to identify the type and
  time period of the payment being made.

15-12 (p 366)
Journal Entry
15-13 (p 367)
20
IV. PAYING WITHHOLDING PAYROLL TAXES
State Unemployment Tax Note Forms and reporting
procedures vary by state.

• Payment covers the employers SUTx liability.
• Payments are usually made quarterly.
• A check is written for the amount of the total
  taxes being paid.

Journal Entry
15-14 (p 367)
21
Audit Your Understanding (p 368)
1. What taxes are included in the quarterly
federal tax return filed by the
employer? 2. When must employers furnish a W-2
statement to their employees? 3. What two taxes
are paid to the government by the employer in one
payment?
22
SUMMARY OF JOURNAL ENTRIES
See Illustration 15-15, p 368.
23
CREDITS
Based on Century 21 Accounting Ross, Hanson,
et al Southwestern Publishing Company, 1995
Restart Presentation
Esc to End