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Copyright 2006 Pearson Education Canada Inc. 8-1
Copyright 2006 Pearson Education Canada Inc. 8-2
Outline Payroll Accounting Deductions From Pay and Voluntary Payroll
Deductions Recording Payroll Employer’s Payroll Taxes Adjusting Entry - Accrual for Employer’s Share
of Taxes Independent Contractors Controlling Salaries and Wages Expense The Tip Credit
Copyright 2006 Pearson Education Canada Inc. 8-3
Payroll Accounting
GROSS SALARIES - Salaries and wages earned by employees
DEDUCTIONS FROM PAY - Includes withheld taxes and voluntary deductions
NET PAY – The amount received by an employee after all deductions have been made
EMPLOYER’S PAYROLL TAXES – Payroll-related federal and provincial taxes and insurance payments which constitute an additional expense
Copyright 2006 Pearson Education Canada Inc. 8-4
Deductions from pay
Federal withholding taxes
Provincial and local withholding taxes (Quebec has some municipal income taxes)
Canada Pension Plan, employee’s share
Employment Insurance, employee’s share
Voluntary deductions
Copyright 2006 Pearson Education Canada Inc. 8-5
Voluntary Payroll Deductions
Supplemental medical insurance
Savings plans
Loan repayments
Charitable contributions
Copyright 2006 Pearson Education Canada Inc. 8-6
RECORDING PAYROLL
Copyright 2006 Pearson Education Canada Inc. 8-7
PAYROLL JOURNAL ENTRY
Copyright 2006 Pearson Education Canada Inc. 8-8
EMPLOYER’S PAYROLL EXPENSES JOURNAL ENTRY
Employer must send each month’s money to Ottawa by the 15th of the next month.
Copyright 2006 Pearson Education Canada Inc. 8-9
Payroll Taxes – Employer’s Share
Canada Pension Plan or Quebec Pension Plan
Workplace Insurance Employment Insurance Employer Health Tax
Copyright 2006 Pearson Education Canada Inc. 8-10
Adjusting Entry - Accrual for Employer’s Share of Taxes
Copyright 2006 Pearson Education Canada Inc. 8-11
Independent Contractors
Persons working for several business entities without becoming the exclusive employee of any of them
Employer is not responsible for deducting employee payroll taxes
Examples include musicians or entertainers, temporary helpers, cleaners, consultants
Copyright 2006 Pearson Education Canada Inc. 8-12
Controlling Salaries and Wages Expense
Separation of responsibilities for the following payroll functions:
Control of personnel filesPreparation of payrollPaying employeesRecording payroll informationReconciling the payroll bank account
Copyright 2006 Pearson Education Canada Inc. 8-13
The Tip Credit
Great impact on the hospitality industry
Allows employers to consider tips as part of the employee’s minimum wage
Separate records of wages, tips deemed wages, and other tips must be maintained