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PAYROLL ACCOUNTING PDF

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add employees, make journal entries for payroll, print payroll reports, and From the menu bar, click on Help; About Peachtree Accounting. The Installed Tax. The Fundamentals of Payroll Accounting. Midwest Regional Payroll Conference. Kansas City, Missouri. Merrill Vogel, Deloitte Tax LLP. PDF Watermark Remover DEMO: Purchase from www. long-term liabilities. We will explain current liabilities, along with payroll accounting, in this chapter. We.


Payroll Accounting Pdf

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Payroll Accounting (Explanation). Print PDF. Part 1. Introduction to Payroll Accounting In this explanation of payroll accounting we'll introduce payroll, fringe. Payroll data is used in financial recordkeeping for: • General Accounting – record transactions in company's books and prepare financial statements (internal. proper amount of employer-specific taxes are also withheld to accompany the amounts deducted for the employee. 2 / Accounting for Payroll.

Many services are provided to a business by other than employees. These services may include janitorial support, legal services, air conditioner repairs, audits, and so forth. An independent contractor is one who performs a designated task or service for a company. The company has the right to control or direct only the result of the work done by an independent contractor. The business controls the work that will be done and how it will be done. The distinction is very important, because the payroll tax and record keeping requirements differ for employees and independent contractors.

This information is furnished to each employee and the government. It helps employees accurately prepare their own annual federal and state income tax returns and allows the government to verify amounts reported by those individual taxpayers.

Accuracy is vital in payroll accounting. Oftentimes, a business may hire an outside firm that specializes in payroll management and accounting. The outside firm manages the payroll, recordkeeping, government compliance, timely processing of tax deposits, and the like. When a business manages its own payroll, very accurate data must be maintained. Most firms will set up a separate payroll journal or database that tracks information about each employee, as well as in the aggregate.

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In addition, it is quite common to open a separate payroll bank account into which the gross pay is transferred and from which paychecks and tax payments are disbursed. This system provides an added control to make sure that employee funds are properly maintained, processed, and reconciled.

Employers who fail to do so are subject to harsh penalties for the obvious reason that the funds do not belong to the employer. Likewise, employees who participate in, or are aware of misapplication of such funds can expect serious legal repercussions. The government has made it very simple for employers to remit withheld amounts, as most commercial banks are approved to accept such amounts from employers. Online systems also allow easy funds transfer. The frequency of the required remittance is dependent upon the size of the employer and the total payroll.

Current Liabilities and Employer Obligations. A person who works for a specific business and whose activities are directed by that business. A form required to be issued to an independent contractor reporting amounts paid; to assist with tax compliance issues this form used to report other payments like interest, etc.

Also known as gross earnings; this it is the total amount earned by an employee before any deductions. Also known as net earnings; this is the gross pay less all applicable deductions "take home pay".

A form filled out by an employee stating the amount of exemptions to which they are entitled for tax purposes; such exemptions bear on the amount of income tax withholdings. Federal Insurance Contributions Act also known as social security and Medicare ; establishes a tax that employers must withhold and match for government-based retiree benefit.

Federal Unemployment Tax levied on employer to provide funds for unemployed workers; rate is dependent on existence of SUTA and employer history of layoffs, etc.

State Unemployment Tax levied on employer to provide funds for unemployed workers; rate is adjusted for employer history of layoffs, etc. An annual statement provided to employees stating the amount of earnings and withholdings; assists employee in preparing their own tax returns.

Did you learn? What is the significance of the distinction between an employee and an independent contractor?

What is a ? Distinguish between gross pay and net pay. Identify the nature of social security and Medicare taxes, and understand the calculations related to the rate and base.

How do income taxes and other deductions enter into the calculation of net pay? Be able to record journal entries for payroll and withholdings. What is a W-2, and what is a W-4? Be able to record the payroll taxes levied on the employer. Describe the importance of maintaining accurate payroll records. Visit the Bookstore.

Payroll Accounting with Payroll Journal Entry Examples – Basic Accounting Help

Chapters Chapter 1: Welcome to the World of Accounting Chapter 2: Information Processing Chapter 3: Income Measurement Chapter 4: The Reporting Cycle Chapters Chapter 5: Special Issues for Merchants Chapter 6: Cash and Highly-Liquid Investments Chapter 7: Accounts Receivable Chapter 8: Inventory Chapters Chapter 9: Long-Term Investments Chapter Current Liabilities and Employer Obligations Chapter Long-Term Obligations Chapter Corporate Equity Accounting Chapters Chapter Financial Reporting and Concepts Chapter Introduction to Managerial Accounting Chapter Government agencies at various levels require employers to withhold income taxes from employees' wages.

In the United States, " payroll taxes " are separate from income taxes, although they are levied on employers in proportion to salary; the programs they fund include Social Security , and Medicare.

Before considering the payroll taxes, it is necessary to talk about the basic formula for the Net Pay. From gross pay the salary paid to the employee one or more deductions are subtracted, to arrive at Net Pay. Thus the employee's gross pay pay rate times number of hours worked, including any overtime minus payroll tax deductions, minus voluntary payroll deductions, is equal to Net Pay.

Payroll tax deductions play a critical role and because they are provided by law they are known as Statutory payroll tax deductions. The employer must withhold payroll taxes from an employee's check and hand them over to several tax agencies by law. Payroll taxes include the following:. In the earlier part we have considered payroll taxes related to employee's side.

Now it's the moment to talk about the Employer Payroll Taxes Employers are responsible for paying their portion of payroll taxes. These payroll taxes are an expense over and above the expense of an employee's gross pay. The employer-portion of payroll taxes include the following:.

Payroll Accounting with Payroll Journal Entry Examples

Very often you can hear people using FICA in their terminology. As we explained earlier both parties pay half of these taxes.

Employees pay half, and employers pay the other half. Social Security and Medicare taxes are paid both by the employees and the employers. In summary together both halves of the FICA taxes add up to Any employer is responsible for paying the employer's share of payroll taxes, for depositing tax withheld from the employees' paychecks, preparing various reconciliation reports, accounting for the payroll expense through their financial reporting, and filing payroll tax returns.

As you see this suite of employer payroll tax responsibilities is far above issuing paychecks to employees. Companies typically generate their payrolls at regular intervals, for the benefit of regular income to their employees.

The regularity of the intervals varies from company to company, and sometimes between job grades within a given company. Common payroll frequencies include: Businesses may decide to outsource their payroll functions to an outsourcing service like a Payroll service bureau or a fully managed payroll service.

These can normally reduce the costs involved in having payroll trained employees in-house as well as the costs of systems and software needed to process a payroll. Where this may reduce the cost for some companies many will foot a bigger bill to outsource their payroll if they have a special designed payroll program or payouts for their employees.

For example, restaurant payrolls which typically include tip calculations, deductions, garnishments and other variables, can be difficult to manage especially for new or small business owners.

Payroll bureaus also produce reports for the businesses' account department and payslips for the employees and can also make the payments to the employees if required. As of 6 April , umbrella companies are no longer able to offset travel and subsistence expenses and if they do, they will be deemed liable to reimburse to HMRC any tax relief obtained.

Furthermore, recruitment companies and clients may be potentially liable for the unpaid tax. Another reason many businesses outsource is because of the ever-increasing complexity of payroll legislation.

Annual changes in tax codes, Pay as you earn PAYE and National Insurance bands as well as statutory payments and deductions having to go through the payroll often mean there is a lot to keep abreast of in order to maintain compliance with the current legislation. On the other hand, businesses may also decide to utilize payroll software to supplement the efforts of a payroll accountant or office instead of hiring more payroll specialists and outsourcing a payroll company.

Payroll software base its calculation on entered rate, approved data obtained from other integrated tools like the electronic Bundy clock , and other essential digital HR tools. From Wikipedia, the free encyclopedia. For financial firms, see Payroll service bureau. For the film, see Payroll film. This article has multiple issues. Please help improve it or discuss these issues on the talk page.

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