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payrollgross earningssalaryhourly wageovertime ratecommissiondeductionsFederal Insurance Contributions Act (FICA)Social Security tax
Medicare taxtotal gross earningsperpetual inventory systempoint-of-sale terminalsperiodic inventory systemspecific identification methodfirst-in-first-out method (FIFO)last-in, first-out method (LIFO)
Chapter
8
Managing Payroll and Inventory
The Importance of Payroll RecordsChapter
8
Managing Payroll and Inventory
Common Steps in the Payroll System
Calculate Gross Earnings
Calculate PayrollDeductions
Prepare PayrollRecords
PreparePaychecks
Record Payroll Information in the Accounting Records
Report Payroll Information to the Government
1
2
3
4
5
6
Calculating Payroll DeductionsChapter
8
Managing Payroll and Inventory
Voluntary Deductions
Health or Life Insurance Programs
Union Dues
Contributions to Charities
Pensions and Other Retirement Plans
Direct Deposits to a Credit Union or Bank
Preparing Payroll RecordsChapter
8
Managing Payroll and Inventory
Sections of the Payroll
Register Pertaining to Money
Earnings
Overtime Pay
Gross Earnings
Preparing PaychecksSection 1
Chapter
8
Managing Payroll and Inventory
The Benefits of Direct Deposit
Employees do not have to go to the bank to deposit paychecks
No risk of misplacing or losing a check
Funds are usually available faster
Employers save the expense of paper and labor
Employer’s Payroll TaxesChapter
8
Managing Payroll and Inventory
Employer’s Share of FICA TaxesFederal law requires that the employer match the total amount deducted from employees’ paychecks for Social Security and Medicare.
Federal and State Unemployment TaxesThe employer pays both federal and state unemployment taxes.
The federal unemployment tax is 6.2 percent on the first $7,000 of an employee’s annual wages.
State unemployment tax rates and maximum taxable amounts vary among states.
Reporting Payroll Information to the Government
Chapter
8
Managing Payroll and Inventory
Issues Addressed by the Internal Revenue Code (IRC)
Determining whether the federal tax coverage rules apply
Computing an employee’s taxable wages
Calculating the amount of employment taxes to be withheld
Depositing the correct amount of taxes with the government
Filing employment tax returns
Payroll Accounting in Financial Management
Chapter
8
Managing Payroll and Inventory
Accurate payroll records are essential for controlling business expenses.
Payroll is often the biggest expense of running a business.
Establishing an Inventory SystemChapter
8
Managing Payroll and Inventory
The Stages of Merchandise
Tracking and controlling inventory is a major function of an accounting system.
StoringMerchandise
DisplayingMerchandise
SellingMerchandise
1 2 3 4
OrderingMerchandise
Controlling InventoryChapter
8
Managing Payroll and Inventory
Inventory Too Large
You may have purchased the wrong quantity
Cash may not be available for operating expenses
Merchandise may have to be sold at a loss
Inventory Too Low
Not enough choice for customers
Less cash from sales as customers go elsewhere
Disappointed customers may be lost forever
Analyzing Inventory TurnoverChapter
8
Managing Payroll and Inventory
InventoryTurnover
Average InventoryInventory Turnover LevelsDays in Stock
StockLists
Basic Stock ListModel Stock ListNever-Out List