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22 Cards in this Set
- Front
- Back
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Direct deposit |
A payroll method in which the employee does not handle the paycheck; payment is made by the employer directly to the employee's bank |
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Electronic system |
A computer system based on a software package that performs all payroll record keeping and prepares payroll checks. |
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Employee |
Someone who works under the control and direction of an employer.
Involves: - More laws and regulations - Taxes that must be deducted - Payroll records to maintain - Numerous reports to file |
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Employee earnings record |
A seperate record of each employee's earnings |
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Fair Labor Standards Act (FLSA) |
A law that requires employers to pay overtime at 1 1/2 times the regular rate to any hourly employee who works over 40 hours in a week. |
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FICA taxes |
Payroll taxes withheld to provide Social Security and Medicare benefits.
Required by the Federal Insurance Contributions Act. Tax rates are set by Congress, and can be changed annually by Congress. No maximum earnings for medicare. Social security maximum earnings of $110,000. |
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Gross pay |
An employee's total earnings |
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Independent contractor |
Someone who performs a service for a fee and does not work under the control and direction of the company paying for the service.
Requires only an 1099 form. |
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Manual system |
Payroll system in which all records are prepared by hand. |
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Net pay |
Gross less mandatory and voluntary deductions.
AKA take-home pay |
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Payroll processing center |
A business that sells payroll record-keeping services |
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Payroll register |
A form used to assemble the data required at the end of each payroll period. |
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Salary |
Compensation for managerial or administrative services.
Expressed in biweekly, monthly, or annual terms. |
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Wage-bracket method |
A method of determining the amount to withhold from an employee's gross pay for a specific time period. Wage-bracket tables are provided by the Internal Revenue Service. |
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Wages |
Compensation for skilled or unskilled labor.
Expressed in terms of hours, weeks, or units produced. |
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Withholding allowance |
A specific dollar amount of an employee's gross pay that is exempt from federal income tax withholding.
Computed on the W-4 form is the Employee's Withholding Allowance Certificate. Based upon marital status and number of allowances claimed. |
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Deductions from total earnings |
3 Categories: 1. Federal (possibly state and city) income tax withholdings 2. Employee FICA tax withholding 3. Voluntary deductions |
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Income tax withholding |
Required by law. Applied toward the payment of the employee's federal income tax.
Amount withheld determined by: Total earnings, maritial status, number of withholding allowance claimed and length of the pay period. |
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Voluntary deductions |
Optional and depend on specific agreements between the employee and employer.
Examples: Health insurance premiums, credit union deposits, pension plan payments, us savings bond purchases, charitible contributions. |
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Payroll Records |
1. Payroll register 2. Payroll check w/earnings statement 3. Employee earnings record. |
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Journalizing payroll transactions |
After checks are prepared. Entries are made to record the payroll expenses and liabilities. The payroll register is the source for the journal entry.
Debit: Wages and salaries expense account (Use the gross pay amount for all employees paid) Credit: Each deduction is recorded in a seperate liability account. Credit: Cash account for the net pay amount of all employees. |
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Recording in T-accounts |
Wages and salaries expense. Debit gross pay of employees for each pay period.
Employee income tax payable. Credited when federal income tax is withheld from employees. Debited when withheld taxes are paid to the IRS.
Social security tax payable AND Medicare tax payable accounts. Both the employer and employee pay social security taxes. Credited when taxes are withheld from employee's earnings. Also credited for taxes imposed on the employer. Debited when taxes are paid.
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