Accounting Test Chapter 9, 10, and 11

Payroll Register

A form used to assemble the payroll data at the end of each payroll period and contains detailed information on earnings, taxable earnings, deductions, and net pay

Adjusting Entry at the End of the Year for Over-payment

DEBIT Insurance refund receivable CREDIT Workers compensation insurance expense

Blank

Simply sign name, now anyone can cash

Unemployment Tax and Worker's Compensation:

Taxes paid by the employer to support the unemployment insurance program

all adjusting entries on the add side are a ....

debit to cash

At the end of the day after receiving cash payments:

Add up the total money in the drawer Subtract out the change fund (beginning cash) Deposit the difference Journalize that days sales (debit to cash and credit to sales)

Restrictive

Adds words "Pay to the Order of"

Change Fund Journalize

After the account has been set-up it will never again be Dr unless it is to INCREASE the account Change Fund Cash

W-3

Along with the copy of the W-2 to Social Security, a W-3 Transmittal of Wage and Tax Statements will be sent, it is due on February 28. Shows the total wages and tips, total federal income taxes withheld, total FICA Social Security and Medicare taxable wages, total of each FICA withheld, and other tax information. Totals must match the grand total on the W-2 and the four quarterly Form 941's for the year.

gross pay

An employee's total earnings but are subject to certain deductions

Payroll Tax Expense

An expense, Dr balance, income statement FICA (social security and medicare) Federal unemployment taxes (FUTA) State unemployment taxes (SUTA)

Adjusting Entry at End of the Year for Underpayment: (premiums)

DEBIT workers compensation insurance expense CREDIT workers compensation insurance payable

EMPLOYEE RECORD THE PAYROLL

Debit wages expense with gross earnings credit social security tax payable credit medicare tax payable credit employee federal income tax payable credit wages payable with net pay

Journal Entry for Payment: FICA and Federal income tax

Employee Federal Income Tax Payable Social Security Tax Payable Medicare Tax Payable Cash

Employer Payroll Taxes:

Employers are also required to pay taxes on their employees. These are additions to wages

Federal Unemployment Tax Act (FUTA) (EMPLOYER ONLY)

Employers pay .6% of the first 7000$ annual wages per employee.

State Unemployment Taxes (SUTA) (EMPLOYER ONLY)

Employers pay 5.4% of the first 7000$ of annual wages per employee.

Federal Income Tax Withholding

Estimated amount of income that's going to be withheld. based on earnings, withholding allowances, marital status, length of pay period- comes from W-4

Reporting and Payment of Taxes

Federal Income Tax and FICA Taxes FUTA Taxes SUTA Taxes Employee Wage and Tax Statement W-2 Summary of employee wages and taxes W-3 Employment eligibility verification I-9

Total Payroll Cost of an Employee

Gross wages + Employer SS taxes + Employers Medicare taxes + Federal Unemployment Taxes + State Unemployment Taxes

EMPLOYER PAYROLL TAXES

debit Payroll Tax Expense payable credit social security payable credit medicare payable credit FUTA payable credit SUTA Payable

when a bank deducts any amount other than a paid check from a depositors account it issues a form called (Take money out!)

debit memorandum

EMPLOYER PAY TAXES (paying both shares for medicare and ss)

debit the tax(s) credit cash

PAY YOUR EMPLOYEE

debit wages payable credit cash

Paid by employer

Futa, Suta, SS, Medicare

Contractor

owns their own business, hired by your company for a job and you pay them them but you are not responsible for wages (they provide everything)

Payee

person receiving payment

Drawer

person writing the check

Deposit Slips

record the amount of currency, coins, checks, listed singly, to be deposited into the account; usually done in duplicate so that the business keeps a copy.

Drawee

the bank on which the check is written

FORM 940

used to report the FUTA tax for the year (annual) NOT PAY unless under under 500

Endorsements

writing or stamping the payee's name or other information on the back of a check

Internal Controls

A system of controls put into place to keep the business and cash safe from theft and fraud. No one person should take care of all the cash handling procedures, ie. Opening mail, recording payments, depositing payments, journalizing, etc.

Social Security Act of 1935

(OASDI - Old Age Survivor Disability Insurance) calculated at a rate if 6.2% of the first 142,800$ of annual earnings

Employers will calculate gross earnings:

(Pay rate x total hours worked) + hours over 40 x (pay rate x .5)

Steps for Petty Cash Fund Reimbursement

1. Total the columns of the petty cash 2. Prove the petty cash fund by adding the cash on hand and the total payments 3. Write a check to restore the fund to the original balance and put it back in the lock box 5. Make a summarizing journal entry for the expenses & credit cash

lookback period

4 quarter period ending June 30 of the preceding year

Social Security Taxes Payable

Liability acct, Cr balance, Balance Sheet Employee's share of SS - 6.2% limit of 142,800$ Employer's share of SS - 6.2% limit of 142,800$ = 12.4% TOTAL

Bank Statements

Prepared from the Bank's viewpoint; the customer is a liability to the bank (A/P or Deposit's Payable)

net pay

The employee's pay after deductions are taken out

FORM 941

Used to report social security, medicare, and federal income tax (quarterly) the taxes are due either monthly or semi weekly NOT PAY

Promissory Notes

Written promise to pay specified amount, specific due date, & interest rate - may be for an overdue accounts receivable

the column totals in the payroll register

are used in the journal entry to record payroll

non-salary exempt

can work overtime and can get paid for it

Salary Exempt

can work overtime will not get paid for it

Checks Issued by a firm that were paid by the bank and returned to the firm with the bank statement are called ....

canceled checks

Which of the following is NOT a reason why the book balance of cash may not agree with the balance on the bank statement

canceled checks

Cash Add

collection of promissory notes interest income errors (recorded too much from a check) EFT's

all adjusting entries on deduct side are

credit to cash

Bank Add

deposit in transit

Reasons for Bank Balance to not match Cash Balance:

deposit in transit outstanding check collection of promissory notes interest income NSF check service charge errors

When setting up the Petty Cash fund

determine what is good and safe amount, for your company, to keep on hand. Designate a person to be in charge.

Which of the following is a check that is returned to the depositor unpaid?

dishonored check

Which of the following is recorded in the wages expense account

employees' gross pay

Salary

expressed in annual terms: can be broken down into weekly, biweekly, semi monthly, or monthly pay periods

OT premium

hours over 40 x (pay rate x .5)

Cash Short and Over...

is never in a financial statement

Medicare Taxes

medical care eligible at 65 years old- withheld at a rate of 1.45% of all earnings.

Employee Earnings Record

A separate record for each employee that contains information about each pay period for a specific employee.

Bank Statements maintain a .......

CREDIT balance --> DEBIT the account means the customer withdrew --> CREDIT the account means the customer deposited money

Journal Entry for Promissory Note Payment: (Banks can also collect on a payment for you)

Cash notes receivable interest revenue

Petty Cash

Cash on hand that a company will use to pay for items of a small amount

Change Fund

Cash on hand to make change for sales transactions

W-2

Completed by the Employer and received by the Employee at the end of the year. Includes information about Wages received and Taxes deducted during the year plus any deductions for retirement contributions, or sick pay, etc. Four copies are issued; 1) Social Security Administration; 2) Employee's individual federal tax return; 3) Employee; 4) Employer's records; If state taxes and/or city taxes are withheld, and additional copies will be sent to the state tax department and one for the employee's individual state tax return.

Cash Short and Over = OVER

Considered a Revenue account with a Credit Balance Debit cash Credit short and over Credit sales

Cash Short and Over = SHORT

Considered an Expense account with a Debit Balance Debit Cash Debit cash short and over Credit Sales

Journal Entry at Beginning of the Year: (premiums)

DEBIT prepaid workers compensation insurance CREDIT cash

Employee

Hired by you and works directly for your company, As the employer you will be directing their work, providing them with the means to accomplish tasks (ex. equipment) and telling them how to accomplish those things. - responsible for wages and any withholding.

Wages

Hourly pay: hours worked x pay rate. Require a time record.

Total OT earned

Hours over 40 x (pay rate x 1.5)

Medicare Taxes Payable

Liability, Cr Bal, Balance Sheet Employee's share Medicare - 1.45% Employer's share Medicare - 1.45% = 2.9% TOTAL

State Unemployment Tax (SUTA) Payable

Liability, Cr Bal, Balance Sheet Employers Share - 5.4% of the first 7000$ in earnings

Federal Unemployment Tax (FUTA) Payable

Liability, Cr Bal, Balance sheet Employers Share- .6% of the first 7000$ in earnings

Withholding NOT Required by Law

Life Insurance Medical Insurance Retirement Bank savings plans or loan repayments Employer loan repayments Union Dues

Cash Deduct

NSF check service charge errors (recorded too little) Unrecorded ATM

Journal Entry for an exchange of an A/R into a promissory note:

Notes receivable Accounts receivable

Bank Deduct

Outstanding Check

Piece Rate

Paid based on the number of units made

Employer is required to keep records of:

Personal data on employees including- name, address, social security number, date of birth, marital status, # of withholding allowances Hours worked daily/weekly, wages paid both regular and overtime Cumulative wages Amount of income tax, SS and Medicare tax withheld for each pay period Proof that the employee is a U.S citizen (I-9) Cost of health insurance coverage if provided by employer

Credit memorandum

Put money in

Payment of SUTA:

Quarterly deposits Journal Entry for Payment: DEBIT SUTA payable CREDIT Cash

Payment of FUTA:

Quarterly deposits unless liability is less than $500 then paid in the next quarter Uses Form 940 annually -- Due January 30 Journal Entry for Payment: DEBIT FUTA payable CREDIT Cash

Worker's Compensation Insurance:

Required by most states and paid by employers for employees that may be hurt, injured or killed on the job. The premium varies depending on the amount of risk each employee has and the company's claim history. Premiums are usually paid in advance at the beginning of the year using Estimated Payroll for the year. At the end of the year, the employer will calculate the exact premium based on actual payroll for the year. An adjusting entry will be made to show either a debit (if over-payment) to the prepaid account or a credit (for underpayment) to the payable.

Paid by employee

SS, Medicare, Federal income Tax

Commission

Sales % of net sales

Fair Labor Standards Act

Sets the minimum hourly rate of pay and the maximum amount of hours of week per work (any hours over 40 you get overtime. for overtime you get time an a half (1.5)

To reimburse the Petty Cash fund

The total vouchers (payments) + cash on hand = the amount of the fund (replenish when low or at the end of the month)

Use Form 941 every 3 months (Quarterly)

due the last day of the month following the end of each calendar quarter. Used to report the tax liabilities and the amounts of the deposits made each month unless the depositor is allowed to pay tax liabilities at the time of the 941 due date. (March 31 - April 30, June 30 - July 31, October 31 - November 30, December 31 - January 31)

At the End of the Fiscal Period (Adjusting) CREDIT BALANCE

you would debit cash short and over and credit miscellaneous expense

At the End of the Fiscal Period (Adjusting) DEBIT BALANCE

you would debit miscellaneous expense and credit cash short and over