Chapter 11
Payroll
339
In Summary
Describe payroll accounting
➭
➭
Employment standards include minimum guidelines for items such as pay rate, vacation time
allowed, and how much time must be given or paid out to terminate the employment.
Calculate gross pay and net pay
➭
➭
Gross pay is the amount earned by the employee and can be calculated as a salary amount or
an hourly amount.
➭
➭
Deductions are subtracted from the gross pay, which leaves the net pay that the employee
actually receives in cash. Net Pay = Gross Pay – Deductions
Describe payroll liabilities, employer's contributions and payroll payments
➭
➭
Statutory payroll liabilities include the Canada Pension Plan (CPP), Employment Insurance
(EI) and income taxes. In Quebec, employers have the Quebec Pension Plan (QPP) instead
of the CPP, plus an additional deduction for the Quebec Parental Insurance Plan (QPIP).
➭
➭
Voluntary deductions can include items such as union dues, health plans, savings plan and
charitable donations.
Record payroll liabilities, employer's contributions and payroll payments
➭
➭
A payroll journal entry includes a debit to increase salaries expense by the gross pay amount.
All deductions are recorded as credits to liability accounts to increase the amounts owed.
➭
➭
The employer must match the employee’s deduction for CPP and pay 140% of employees' EI
deductions.These are required by the government.
➭
➭
Employers may also pay for other benefits for the employee, such as all or some of a health plan.
➭
➭
Payments of payroll deductions to the government must be made on a regular schedule.
This includes the employee and employer portions of CPP and EI, as well as the income tax
deducted from the employees pay.
➭
➭
Payments to other institutions, such as unions or insurance companies, must also be made on
a regular schedule.
Prepare payroll registers
➭
➭
A payroll register is used to record gross pay, deductions and net pay when a business has
more than one employee.The totals from the register are used to create the payroll entries.
➭
➭
The business must keep records of gross pay, deductions, hours worked, and a variety of other
information about every employee.
➭
➭
The information is used for hiring, creating tax forms and employment termination.
Describe payroll controls
➭
➭
Payroll controls can protect the company’s payroll from theft. Controls can include start
packages, tracking hours worked, authorization for pay increase and terminations or an
imprest bank account.
Access
ameengage.com
for integrated resources including tutorials, practice exercises, the digital textbook
and more.
