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CHAPTER 16

PAYROLL PREPARATION

Introduction
The purpose of this chapter is to provide the student with practical skills in the calculation and preparation of payroll records and the accounting entries necessary to record payroll in the books of the business. The chapter has been designed for learners to read the introductory material and then work through the questions relating to each section. The questions are graded. Self-test questions enable learners to check their understanding at relevant points throughout the chapter. This material is divided into the following sections: 1. 2. 3. Employment records Calculation of the payroll (16.1 16.8) Payroll records (i) Payroll register (16.9 16.11) (ii) Employee earnings record (16.12) Accounting entries to record payroll (16.13 16.18) Comprehensive questions (16.19)

4. 5.

Self-test questions (solutions in Chapter 18) appear after questions 16.8, 16.11, 16.18 and 16.19.

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1.

Employment records

Payroll preparation affects almost every business. Some of the information used to calculate the payroll comes from within the business, such as hours worked by the employees. Other information is obtained from sources outside the business, for example, PAYG withholding income tax rates come from the Australian Taxation Office, pay rates and conditions are contained in an employment consent agreement or Federal or State awards. Once the necessary information is collected and recorded, the payroll can then be calculated. The payroll function in a business involves the following areas: (a) (b) (c) (d) creation and maintenance of the required employment records; calculation of the payroll; payment of the payroll to employees; and accounting entries to record the payroll.

Creation and maintenance of employment records


When an employee starts working with a business an employee record is prepared. This record contains data and information about the employee, date commenced working, rates of pay and leave due and taken. The record is continuously adjusted for any changes and acts as an employment history for that employee. A separate record is required for every employee. The record can be kept in different formats. It may be kept on computer, in paper files or on cards. In addition to the records kept by the business, the Australian Taxation Office (ATO) has a number of documents employees are asked to complete when commencing employment. One of these is a Tax File Number declaration. All new employees who will be paid any earnings are asked to complete this form. It is not compulsory for employees to complete the tax file number declaration, however if the employer does not receive the completed form they must deduct tax at the highest rate, which is currently 48.5%, from all earnings. Any completed tax file declarations are forwarded to the ATO and tax can then be deducted or withheld as per the ATOs PAYG withholding tax tables. Tax deducted from salaries and wages of employees up until June 2000 was a PAYE (pay as you earn) system. From 1 July 2000, with the introduction of GST, the taxation of earnings also changed to a PAYG (pay as you go) system. The system has two components, PAYG instalments and PAYG withholding. PAYG instalments replaced provisional tax and requires the payment of expected tax liability quarterly in advance and mainly affects primary producers and those receiving income from a business or investments. PAYG withholding replaced PAYE and affects most salaries and wages earners. The employer withholds the calculated amount (according to the tables) from employee earnings each pay period. The PAYG tax withheld is forwarded to the ATO weekly, monthly or quarterly depending on the size of the business.

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An employment history record could contain the following details:


Name: Address: Telephone: Date of birth: Classification Noel Causley 3 Smith Street Newtown 9935 6243 7.12.1960 Weekly wage
$

Employee no: Date commenced: Date terminated: Reason: Marital status: Dependants: Hourly rate
$

46789 31.12.20X2

Single Nil Reason for increase

Minimum hours 40 40 40 40

Date of increase

Welder

410.00 426.40 439.20 447.98 PAYG Withholding Income Tax

10.25 10.66 10.98 11.20 Health Insurance

1.12.20X4 1.12.20X6 1.12.20X7

National Wage 4% Consent agreement 3% 12.X6 and 2% 12.X7 Superannuation Other

DEDUCTIONS

Date Declaration Lodged 2.1.20X3

Dependant Rebate
$

Insurer MBF

Amount
$

Fund MPA

Amount 32.00

Union Subs
$

Nil

15.00

3.00

Leave Record Sick Leave Date from 31.12.X2 1.6.X3 31.12.X3 1.07.X4 31.12.X4 15.03.X5 31.12.X5 To Entitlement 3.6.X3 Entitlement 14.07.X5 Entitlement 20.03.X5 Entitlement Days (3) 15 (10) 15 (5) 15 Balance 15 12 27 17 32 27 42 Date due 1.12.X3 5.12.X3 1.12.X4 2.01.X5 1.12.X5 1.09.X5 1.12.X6 To Entitlement 14.12.X3 Entitlement 31.01.X5 Entitlement 14.09.X5 Entitlement Annual Leave Days 10 20 20 20 10 20 Balance 20 10 30 10 30 20 40

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2.

Calculation of payroll (16.1 16.8)

Payrolls can be calculated weekly, fortnightly or monthly. When preparing the payroll wages/salary for each employee the gross and net wages for the period need to be calculated. Gross wages is the amount earned by the employee in that payroll period. It will include overtime if worked. Gross wages = hours worked x rate of pay Overtime is hours worked above the standard or normal hours for the payroll period and is calculated as a multiple of the ordinary rate. The overtime rate is usually 1.5, 2 or 2.5 times the ordinary rate. If overtime has been worked then: Gross wages = (ordinary (hours (worked ordinary) x rate of ) pay ) + (overtime (hours (worked overtime x loading ordinary) x rate of ) pay )

Net wages is the amount received by the employee after all the authorised deductions have been deducted from the gross wages. Net wages = Gross wages PAYG withholding income tax other deductions Other deductions can include superannuation, medical fund premiums, union fees, insurance premiums, loan and HECS repayments. PAYG withholding income tax rates are determined by the Australian Taxation Office. An extract of rates appears on pages 512519.

ILLUSTRATIVE EXAMPLE 1
Below are the records for Claires Chairs. You are required to calculate the net pay for each employee.
Payroll records of Claires Chairs Hours worked Ordinary Employees O Claire S Peters H Martha F Davids D Gregson Hourly rate
$

Overtime 1.5 2.0 4 4 7 3 2

PAYG withholding income tax


$

Superannuation
$

36.50 16.50 24.00 30.00 26.00

35 20 35 35 35

392.00 82.50 282.00 341.50 253.50

115.00 29.50 75.00 14.50 82.00

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Solution
(a) Calculate gross wages
Payroll records of Claires Chairs Employees O Claire S Peters H Martha F Davids D Gregson Hourly rate
$

Hours worked Ord 35 20 35 35 35 Overtime 1.5 2.0 4 4 7 3 2

Ordinary wages
$

Overtime 1.5
$

2.0
$

Gross wages
$

36.50 16.50 24.00 30.00 26.00

1 277.50 330.00 840.00 1 050.00 910.00

292.00 144.00 315.00 144.00 104.00

1 569.50 330.00 1 128.00 1 365.00 1 014.00

(b) Calculate net wages


Payroll records of Claires Chairs PAYG withholding income tax
$

Employees O Claire S Peters H Martha F Davids D Gregson

Gross wages
$

Superannuation
$

Total deductions
$

Net wages
$

1 569.50 330.00 1 128.00 1 365.00 1 014.00

392.00 82.50 282.00 341.50 253.00

115.00 29.50 75.00 94.50 82.00

507.00 112.00 357.00 436.00 335.00

1 062.50 218.00 771.00 929.00 679.00

Questions 16.1 to 16.8 and self-test questions 16A and 16B relate to illustrative example 1.

3.

Payroll records

There are two main payroll records which must be prepared or updated every pay period. They are:

(i) payroll register; and (ii) employees earnings record.

(i) Payroll register (16.9 16.11)


The payroll register is prepared every pay period. It records the total amount of wages/salaries earned and paid for all employees for that period (see sample document 1). As with the other payroll records the payroll register can be prepared manually or on computer. A payroll register can also be called a pay sheet, wages sheet or wages book. When the payroll register is prepared, a pay advice is also prepared for each employee. This shows employees how their earnings for that pay period were calculated.

Payment of payroll to employees


When the payroll has been calculated and the payroll records prepared, the employees are then paid the amount of their net wages.

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This amount can be paid in cash, by cheque or by electronic transfer into a nominated bank account. The method used to pay employees is often chosen by the employer after consulting the employees.

ILLUSTRATIVE EXAMPLE 2
Preparation of the payroll register
Payroll records of Daniels Motors Actual hours worked 37 39 45 35 40 PAYG withholding income tax
$

Employee P Ford J Toyota D Holden M Mazda V Waggon

Ordinary rate
$

HECS
$

Super Yes Yes No Yes No

15.25 22.00 18.00 27.50 16.50

149.50 255.00 250.50 289.00 204.00

77.00 96.00

All employees are paid weekly at rates set out in the enterprise agreement. For all employees the standard working week is 35 hours. Any hours worked in excess of the standard 35 hours per week is paid at an excess hours rate of $20.50 per hour. PAYG withholding income tax is deducted as indicated. Employees who pay superannuation do so at a rate of 5% of their standard gross earnings (that is, not including overtime). Required: Calculate the net wages of each employee and prepare the payroll register.

Solution
Payroll register of Daniels Motors Actual hours worked 37 39 45 35 40 Ordinary rate
$

Employee P Ford J Toyota D Holden M Mazda V Waggon

Overtime rate
$

Ordinary wages
$

Overtime wages
$

Total gross wages


$

15.25 22.00 18.00 27.50 16.50

20.50 20.50 20.50 20.50 20.50

457.50 770.00 630.00 962.50 577.50 3 397.50

41.00 82.00 205.00 102.50 430.50

498.50 852.00 835.00 962.50 680.00 3 828.00

Payroll register of Daniels Motors Total gross


$

Employee P Ford J Toyota D Holden M Mazda V Waggon

PAYG withholding income tax


$

HECS
$

Super
$

Total deductions
$

Net wages
$

498.50 852.00 835.00 962.50 680.00 3 828.00

149.50 255.00 250.50 289.00 204.00 1 148.00

77.00 96.00 173.00

23.00 39.00 48.00 110.00

172.50 371.00 250.50 433.00 204.00 1 431.00

326.00 481.00 584.50 529.50 476.00 2 397.00

Questions 16.9 to 16.11 and self-test question 16C relate to illustrative example 2.

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Sample document 1

Payroll register

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(ii) Employees earnings record (16.12)


The employer must record every employees earnings. The employer must keep an individual earnings record for every employee. This record is cumulative and is kept for the taxation year, 1 July to 30 June each year. The earnings record is updated every pay period, so that it shows the year to date amounts earned (that is, calculated from 1 July to current pay period) for each employee. Employee earnings can be kept manually (see sample document 2) or on computer. At 30 June each year, these records are used to prepare a PAYG payment summary for each employee. The payment summary shows total gross earnings, allowances and PAYG withheld during that taxation year (see sample document 3). The PAYG payment summary is required by the Australian Taxation Office to be included with the employees income tax return for that year.

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Sample document 2

Employee earnings record

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In this PAYG payment summary the details of the employee earnings record in sample document 2 have been used.
PAYG Payment Summary Individual Non Business Payment Summary Payers ABN number Payers name Payees name Payees Address for the year ending 30 June 20X3 78 644 237 026 Marin Motors Pty Ltd WILSON Joseph Henry 6 Prince Street Normanville 2091 Payees Income Tax File Number 242 176 492 Payees date of birth 30.09.1954

Gross Salary, Wages, Bonus, etc. $29 888.70 Allowances (give details)

Period during which payments were made: Signature of Authorised Person W Worland Union Fees, etc. Name of Organisation TWU

01.07.20X2 to 30.06.20X3 Date 01 .07.20X3 Amount $312

Lump Sum Payments A B C

Tax withheld whole dollars only in words


Thousands Hundreds Tens Units Cents

Five

Six

Six

Three

05

Tax withheld (whole dollars) $5 663.05

Sample document 3

PAYG payment summary

Question 16.12 relates to sample documents 2 and 3.

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4.

Accounting entries to record payroll (16.13 16.18)

The accounting entries are entered into the journals from the payroll register. The amount of gross wages/salaries is the wages/salaries expense for the pay period. The payroll payable for the pay period is the amount of net wages/salaries. The entry to record the gross pay, deductions and net pay for the period looks like this:

ILLUSTRATIVE EXAMPLE 3
Note: For the following entries the details of the payroll register in sample document 1 have been used.
General Journal of ACE Plumbing Date 20X5 Nov 13 Particulars Wages/salaries expense (gross) PAYG withholding tax payable Health Insurance Funds payable Superannuation Fund payable Plumbers Union fees payable Payroll payable (net) Being gross payroll payable for the week ending 13 Nov 20X5 Payroll payable (net) Cash at bank Payment of net wages to employees Debit 2 293.80 458.25 30.00 59.00 19.00 1 727.55 1 727.55 1 727.55 Credit

Nov 13 *

At the end of the month the total of all the weekly deductions must be paid to the various bodies and institutions entitled to receive those amounts. For example, if the total of Health Insurance deducted from all employees earnings for the month was $120 an entry would be made:
Nov 30 * Health Insurance Funds Cash at bank Being payment of amounts collected for month of Nov 20X5 120.00 120.00

* These entries could be recorded in the cash payments journal instead of the general journal. In addition to the payroll expense, the employer may have obligations to pay such things as payroll tax and compulsory superannuation. A business may decide to pay benefits for employees such as health insurance or motor vehicle lease costs from its own funds. These are all obligations of the business and are not deducted from employees pay. These amounts are calculated separately from payroll amounts (generally once a month) and then paid in the following month.

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ILLUSTRATIVE EXAMPLE 4
A business owes $6 000 in payroll tax and $4 000 in compulsory superannuation for the month of December. The following entries would be made:
Date Dec 31 Particulars Payroll tax expense Payroll tax payable Superannuation expense Superannuation payable Being amounts owing at 31 Dec Payroll tax payable Superannuation payable Cash at bank Payment of amounts owing at 31 Dec Debit 6 000 6 000 4 000 4 000 6 000 4 000 10 000 Credit

Jan 6 *

* This entry could be recorded in the cash payments journal instead of the general journal. Questions 16.13 to 16.18 and self-test question 16D relate to illustrative examples 3 and 4.

Questions Calculation of payroll (16.1 16.8)


Illustrative example 1 relates to questions 16.1 to 16.8 and self-test questions 16A and 16B. 16.1
Payroll records of Beryls Brownies Employee K Campbell R Kelly M Dwyer K Mullins A Sivier Hours worked 40 42 25 38 35 Rate per hour
$

8.00 9.75 15.25 10.50 12.50

Required: 16.2

Calculate the gross wages for each employee.


Payroll records of Agars Advertising Employee S Abbey R Cabban B Ellim M Galga A Lambert 35 35 35 35 35 Hours worked Ordinary Overtime 4 2 6 Rate per hour
$

8.50 10.25 14.00 11.00 9.25

All overtime worked is paid at 1.5 times the ordinary hourly rate. Required: Calculate the gross wages for each employee.

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16.3
Payroll records of Barossa Wines Hours worked Ordinary Overtime 1.5 2.0 40 2 1 40 2 20 40 4 40 3 1

Employee B Bainton P Darius G Fantome F Jurd T Nguyen

Hourly rate
$

13.50 11.50 10.75 14.50 12.00

Required:

Calculate the gross wages for each employee.

16.4 Using the extract of the current weekly rates of PAYG withholding income tax provided by the Australian Taxation Office on pages 512519, calculate for each of the following persons the amount of PAYG withholding income tax to be deducted from their pay: (a) B Blue earns $185 per week, has completed an employment declaration and claims tax free threshold no leave loading; (b) S Weiss earns $400 per week, has completed an employment declaration form but does not claim the tax free threshold; (c) M See earns $370 per week, has completed an employment declaration but does not have a tax file number and did not complete that section of the declaration. He has applied for a tax file number and expects to receive it shortly; (d) A Able earns $100 per week at a second job. She has completed an employment declaration but claims the general exemption at her first job; and (e) H Quirk earns $500 per week, has completed an employment declaration and claims the tax free threshold with leave loading. 16.5 Phil Smith is a sales representative for Western Hardware Suppliers. He earns a base salary of $1 100 per month plus a 16% commission on sales. The payroll department deducts $40 per month for union subscriptions and $30 for his contributions to the Medicare health fund. The PAYG withholding tax rate on his earnings is 20%. Calculate Phils gross pay and net pay for the month assuming his sales for the month are $70 000. 16.6 Kerry Melon works for Flares Jeans Company earning $9 per hour with a compensation for working in excess of 40 hours of one and half times the ordinary hourly rate. Her payroll deductions include PAYG withholding income tax of 15% of gross earnings and a weekly charitable contribution of $5. Kerry works 44 hours during the week. Required: Calculate her gross pay and net pay for the week. 16.7
Payroll records of Chans Carpet Company Hours worked PAYG withholding Ordinary Overtime Hourly income 1.25 1.5 rate tax
$ $

Employees R Parr V Sartor W Viret L Abbot M Chen

Superannuation
$

9.50 8.25 12.00 15.50 13.00

38 25 38 38 38

3 7 3 2 3

70.00 22.25 125.75 152.00 140.25

18.00 10.00 22.25 29.50 24.00

Required:

Calculate the net pay for each employee.

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16.8
Payroll records of Chriss Coffee Shop Gross earnings
$

Employee J Hall L Morris N Albrecht R Laverty H Ravel

PAYG withholding income tax


$

Super
$

Medical fund
$

Life insurance
$

Union fees
$

650 510 420 420 250

157.35 107.65 75.70 75.70 31.25

39.00 30.10 21.00 21.00 12.50

30.00 22.25 15.55

20.65 6.05 5.75 5.75 5.75

Required:

Calculate the net earnings for each employee.

Self-test Question 16A


(i) (ii)
Payroll records of No Fuss Printing for the week ending 6 June Employee M Aliberti R Gilham S Lee T Zadros Hours worked 37 38 35 38 Rate
$

(answer Chapter 18)

Bob Burns has a weekly pay of $480 for a 40 hour week, and time and a half for overtime. His PAYG withholding tax rate is 20%. Calculate Bobs net take home pay for a 45 hour working week.

PAYG withholding income tax


$

Medical fund
$

Union fees
$

19.00 12.00 16.00 13.00

178.90 91.20 125.60 105.55

20.00 20.00 10.00 10.00

6.00 6.00 6.00 6.00

Employees work a 35 hour week. Any overtime hours are paid at 1.25 times the ordinary rate. All employees contribute 4% of their ordinary gross wages to the superannuation fund. Required: Calculate the net wages for each employee.

Self-test Question 16B


Payroll records of Belindas Birds Employees K Hockley B Borg L Jasek G Anderson R Kelly M 7 7 Tu 7 7 7 7 Hours worked W Th F 7 7 7 7 7 8 7 8 7 10 7 Rate per hour Sa Su 5 7 7 7 5 5
$

(answer Chapter 18)

Superannuation
$

21.50 12.60 16.50 11.25 9.00

42.25 21.40 27.30 4.55 11.25

Belindas Birds is a retail store. Employees are paid: (i) time and a half for hours worked in excess of 7 on week days and the first 4 hours worked on Saturday; and (ii) double time is paid for hours worked in excess of 4 on Saturday and for all hours worked on Sunday. The PAYG withholding income tax rate for all employees is 30%. Round all tax calculations to the nearest 5c. Required: Calculate the net pay for each employee.

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Payroll register
Questions 16.9 16.11 and self-test question 16C relate to illustrative example 2. 16.9 Prepare a payroll register from the following information:
Hours worked 43 46 41 40 Weekly earnings
$

Employee S Barney T Owl B Corn M Pone

PAYG withholding income tax


$

Union subs
$

Charity contributions
$

480 400 920 250

104 135 204 40

10 5 5 5

5 2 2

Other information 1. The weekly earnings column only shows earnings for a 40 hour week. Overtime amounts must be calculated and added. 2. All employees are paid time and a half for hours worked in excess of 40 per week. 16.10
Payroll records of Duncans Dairy Delights PAYG withholding taxation Employees S Pellatt L Vulcan F Bassett K Jellicoe N Lauder Actual hours worked 35 37 45 40 40 Normal weekly wages
$

Tax file number Yes Yes Yes Yes Yes

Tax free threshold claimed Yes Yes Yes No Yes

Super Yes Yes No Yes No

Medical
$

Union fees
$

423.00 406.00 290.50 406.00 323.75

33.00

15.00 22.00

6.00 6.00 6.00 6.00 6.00

All employees are paid weekly at rates set out in the enterprise agreement. For all employees the standard working week is 35 hours. Any hours worked in excess of the standard 35 hours per week is paid at an excess hours rate of $12.90 per hour. PAYG withholding income tax is deducted as per the tax tables on pages 512 519. All employees pay superannuation at a rate of 5% of their standard gross earnings (that is, not including overtime). Required: Calculate the net wages of each employee and prepare the payroll register.

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16.11
Payroll records of Jennis Jazzy Jewellery Hours worked Employees G McCabe L Dujon M Gehrig A Fewtrell A Louie Hourly rate
$

Ordinary 35 35 35 35 35

Overtime 1.15 2 5 4 1.50 6 3 4

Meal allowance
$

Motor vehicle contribution


$

14.20 25.40 15.00 10.00 13.00

18.50 18.50 18.50

25.00 25.00

Employees work a standard 35 hour week. Overtime worked after 5.30 pm on weekdays and on weekends is paid at 1.5 times the ordinary rate. Any other overtime is paid at 1.15 times the ordinary rate. Where employees work evening overtime they are paid a meal allowance. The company provides a fully serviced motor vehicle to some employees. These employees contribute $25 per week towards the cost of the motor vehicle. PAYG withholding income tax is calculated from the tax schedule on pages 512519. All employees have provided their tax file number and are claiming the tax free threshold with leave loading. Required: Calculate the net wages for each of the employees and prepare the payroll register.

Self-test Question 16C


Payroll records of R J Strauss Employees V Carew S Millen C Lourey E Burman G Lloyd Base monthly salary
$

(answer Chapter 18)

Commission
%

Sales made for the month


$

Medical insurance
$

1 000 1 300 1 200 900 800

5 5 5 5 5

2 000 1 500 3 000 4 500 5 500

120 95 60

Employees are paid a base monthly salary and a 5% commission on sales made during the month. PAYG withholding income tax is deducted at a rate of 20c in the dollar. Superannuation is deducted from every employee at the rate of 6% of their base monthly salary. Required: Calculate the net salary of each employee and prepare the payroll register.

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Employee earnings record


Question 16.12 relates to sample documents 2 and 3. 16.12

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PAYG Payment Summary Individual Non Business Payment Summary Payers ABN number Payers name Payees name Payees Address Period during which payments were made: Signature of Authorised Person Union Fees, etc. Name of Organisation for the year ending 30 June 20X3
Payees Income Tax File Number Payees date of birth

Gross Salary, Wages, Bonus, etc. Allowances (give details)

Date Amount
Lump Sum Payments A B

Tax withheld whole dollars only in words


Thousands Hundreds Tens Units Cents Tax withheld (whole dollars)

PAYG Payment Summary Individual Non Business Payment Summary Payers ABN number Payers name Payees name Payees Address Period during which payments were made: Signature of Authorised Person Union Fees, etc. Name of Organisation for the year ending 30 June 20X3
Payees Income Tax File Number Payees date of birth

Gross Salary, Wages, Bonus, etc. Allowances (give details)

Date Amount
Lump Sum Payments A B

Tax withheld whole dollars only in words


Thousands Hundreds Tens Units Cents Tax withheld (whole dollars)

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PAYG Payment Summary Individual Non Business Payment Summary Payers ABN number Payers name Payees name Payees Address Period during which payments were made: Signature of Authorised Person Union Fees, etc. Name of Organisation for the year ending 30 June 20X3
Payees Income Tax File Number Payees date of birth

Gross Salary, Wages, Bonus, etc. Allowances (give details)

Date Amount
Lump Sum Payments A B

Tax withheld whole dollars only in words


Thousands Hundreds Tens Units Cents Tax withheld (whole dollars)

PAYG Payment Summary Individual Non Business Payment Summary Payers ABN number Payers name Payees name Payees Address Period during which payments were made: Signature of Authorised Person Union Fees, etc. Name of Organisation for the year ending 30 June 20X3
Payees Income Tax File Number Payees date of birth

Gross Salary, Wages, Bonus, etc. Allowances (give details)

Date Amount
Lump Sum Payments A B

Tax withheld whole dollars only in words


Thousands Hundreds Tens Units Cents Tax withheld (whole dollars)

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PAYG Payment Summary Individual Non Business Payment Summary Payers ABN number Payers name Payees name Payees Address Period during which payments were made: Signature of Authorised Person Union Fees, etc. Name of Organisation for the year ending 30 June 20X3
Payees Income Tax File Number Payees date of birth

Gross Salary, Wages, Bonus, etc. Allowances (give details)

Date Amount
Lump Sum Payments A B

Tax withheld whole dollars only in words


Thousands Hundreds Tens Units Cents Tax withheld (whole dollars)

PAYG Payment Summary Individual Non Business Payment Summary Payers ABN number Payers name Payees name Payees Address Period during which payments were made: Signature of Authorised Person Union Fees, etc. Name of Organisation for the year ending 30 June 20X3
Payees Income Tax File Number Payees date of birth

Gross Salary, Wages, Bonus, etc. Allowances (give details)

Date Amount
Lump Sum Payments A B

Tax withheld whole dollars only in words


Thousands Hundreds Tens Units Cents Tax withheld (whole dollars)

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PAYG Payment Summary Individual Non Business Payment Summary Payers ABN number Payers name Payees name Payees Address Period during which payments were made: Signature of Authorised Person Union Fees, etc. Name of Organisation for the year ending 30 June 20X3
Payees Income Tax File Number Payees date of birth

Gross Salary, Wages, Bonus, etc. Allowances (give details)

Date Amount
Lump Sum Payments A B

Tax withheld whole dollars only in words


Thousands Hundreds Tens Units Cents Tax withheld (whole dollars)

PAYG Payment Summary Individual Non Business Payment Summary Payers ABN number Payers name Payees name Payees Address Period during which payments were made: Signature of Authorised Person Union Fees, etc. Name of Organisation for the year ending 30 June 20X3
Payees Income Tax File Number Payees date of birth

Gross Salary, Wages, Bonus, etc. Allowances (give details)

Date Amount
Lump Sum Payments A B

Tax withheld whole dollars only in words


Thousands Hundreds Tens Units Cents Tax withheld (whole dollars)

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Accounting a practical approach

Accounting entries to record payroll (16.13 16.18)


Questions 16.13 to 16.18 and self-test question 16D relate to illustrative examples 3 and 4. 16.13 Employees from Peters Party Productions are paid a standard wage per fortnight. They also earn 10% commission for sales made during the period.
Payroll records of Peters Party Productions for fortnight ended 14.10.20X1 Standard ordinary wage
$

Employee N Clayton D Newry V Tang K Warby

Commission earned
$

PAYG withholding income tax


$

Super
$

Medical Fund
$

900 550 550 550

200 950 370 720

243.70 390.40 179.80 304.00

63.00 38.50 38.50 38.50

65.20 75.00

Required: Prepare: (a) the payroll register for Peters Party Productions; and (b) the general journal entry to record the payroll expense and deductions from employees. 16.14 Using the information from the payroll register prepared in question 16.10, prepare: (a) the general journal entry to record the payroll expense and the deductions from employee earnings; and (b) the cash payments journal entry to record the payment of the payroll to the employees. 16.15 Using the information from the payroll register prepared in question 16.11, prepare: (a) the general journal entry to record the payroll expense and the deductions from employee earnings; and (b) the cash payments journal entry to record the payment of the payroll to the employees. 16.16 Crazy Bobs Bargain Store pays their employees once a month. The payroll register shows a salary expense of $40 000 for the month of June. PAYG amounts withheld total $6 000 and health fund contributions to be deducted from employees pay total $1 500. The store is liable for payroll tax of 6%, and compulsory superannuation for employees of 5% of the total salary expense. Make a general journal entry to record and pay the stores monthly payroll expense and other amounts due on 30 June and an entry on 6 July to pay all payroll deductions withheld and any other amounts owing. 16.17 The payroll records for Toms Transport for June 20X9 are as follows:
Gross wages Ordinary
$

Employee B Robbo S Stan R Curly Y Ying

Gross Overtime
$

PAYG withholding income tax


$

Super contribution
$

Union subs
$

Social Club contribution


$

720 320 440 640

54 84 24

153 56 72 137

30 32 26

6 4 6

5 4 4 8

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Required: (a) enter the above information into a payroll register; (b) using the information summarised in the payroll register prepare the general journal entries to record the monthly payroll and pay the wages; (c) the monthly payroll tax is 6% of gross monthly wages prepare the general journal entry to record the payroll tax liability for the month of June; and (d) prepare the general journal entry to record the payment of the payroll tax on 6 July 20X9. 16.18 Information taken from the payroll records of Terrys Tents for the month of September 20X4 shows the following:
Payroll period ended 04.9.20X4 11.9.20X4 18.9.20X4 25.9.20X4 Gross earnings
$

PAYG withholding income tax


$

Super
$

Medical insurance
$

Net pay
$

3 300 3 490 4 100 3 350

995 1 036 1 230 1 005

99 105 123 101

172 172 172 172

2 034 2 177 2 575 2 072

Required: From the table above, for the periods ending 4.9.20X4, 11.9.20X4, 18.9.20X4 and 25.9.20X4: (a) record in the general journal the payroll expense and deductions from employees earnings; (b) record in the cash payments journal the payment of net earnings to the employees; (c) record in the cash payments journal the payment to each organisation of the amounts deducted from employees earnings during the month of September 20X4; and (d) post all journals to the general ledger.

Self-test Question 16D


Payroll records of Gem Products Employees S Pitlochry M Dyson O Jaffa S Toger Hourly rate
$

(answer Chapter 18)

Hours worked 42 45 40 43

Super
$

Medical insurance
$

Life insurance
$

11.20 9.50 13.00 15.50

23.00 19.00 26.00 31.00

25.00 15.00 15.00 30.00

9.00 7.00 12.00 17.00

Employees of Gem Products work a 40 hour week. Any overtime is paid at 1.5 times the ordinary rate. PAYG withholding income tax is withheld from all employees at the rate of 20c in the dollar. Round all tax calculations to the nearest 5c. Required: Prepare: (a) the payroll register for Gem Products; (b) the general journal entry to record the payroll expense and deductions from employees earnings; and (c) the journal entry to record the payment of the payroll to the employees.

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Accounting a practical approach

Comprehensive questions (16.19)


16.19
Payroll records of Zanco Zoo for the week ended 7.7.20X9 Employees Earnings Ordinary Hours M Doohan B Donohue J Ruthven R Starkey 35 20 38 38 Rate
$

Deductions Overtime Hours 2 10 4 3 PAYG withholding income tax


$

Medical Fund
$

Motor vehicle contribution


$

24.70 10.50 20.20 20.20

276.60 59.15 254.35 240.55

23.00 11.50 23.00 25.00

Payroll records of Zanco Zoo for the week ended 14.7.20X9 Employees Earnings Ordinary Hours M Doohan B Donohue J Ruthven R Starkey 35 20 38 38 Rate
$

Deductions Overtime Hours 2 8 5 1 PAYG withholding income tax


$

Medical Fund
$

Motor vehicle contribution


$

24.70 10.50 20.20 20.20

276.60 52.25 267.70 213.85

23.00 11.50 23.00 25.00

Payroll records of Zanco Zoo for the week ended 21.7.20X9 Employees Earnings Ordinary Overtime Hours M Doohan B Donohue J Ruthven R Starkey 35 20 38 38 Rate
$

Deductions PAYG withholding income tax


$

Hours 2 5 1 0

Medical Fund
$

Motor vehicle contribution


$

24.70 10.50 20.20 20.20

276.60 42.15 213.85 200.50

23.00 11.50 23.00 25.00

Payroll records of Zanco Zoo for the week ended 28.7.20X9 Employees Earnings Ordinary Overtime Hours M Doohan B Donohue J Ruthven R Starkey 35 20 38 38 Rate
$

Deductions PAYG withholding income tax


$

Hours 2 9 3 2

Medical Fund
$

Motor vehicle contribution


$

24.70 10.50 20.20 20.20

276.60 55.70 240.55 227.20

23.00 11.50 23.00 25.00

Required: From the tables above, for the weeks ending 7.7.20X9, 14.7.20X9, 21.7.20X9 and 28.7.20X9: (a) calculate the net pay for each employee (overtime is calculated at time and a half of the ordinary rate); (b) prepare the payroll register; (c) prepare the journal entries to record the payroll expense and deductions from employees earnings and the payment of net earnings to the employees; (d) record in the cash payments journal the payment to each organisation of the amounts deducted from employees earnings during the month of July 20X9; and (e) post all journals to the general ledger.

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Self-test Question 16E


Payroll records of R J Transport for week ended 7.10.20X7 Hours worked 40 40 40 40 Gross weekly earnings
$

(answer Chapter 18)

Employee R Adair D Campbell M Hapgood Y Jibbon

PAYG withholding income tax


$

Super
$

Medical insurance
$

Union fees
$

985 895 700 750

295.50 268.50 210.00 225.00

49.25 44.75 35.00 37.50

62.50 50.00 25.00 15.25

7.50 7.50 7.50 7.50

Payroll records of R J Transport for week ended 14.10.20X7 Hours worked 40 42 38 45 Gross weekly earnings
$

Employee R Adair D Campbell M Hapgood Y Jibbon

PAYG withholding income tax


$

Super
$

Medical insurance
$

Union fees
$

985 940 665 844

295.50 282.00 199.50 253.25

49.25 44.75 35.00 37.50

62.50 50.00 25.00 15.25

7.50 7.50 7.50 7.50

Payroll records of R J Transport for week ended 21.10.20X7 Hours worked 41 40 45 39 Gross weekly earnings
$

Employee R Adair D Campbell M Hapgood Y Jibbon

PAYG withholding income tax


$

Super
$

Medical insurance
$

Union fees
$

1009 895 788 731

302.75 268.50 236.40 219.30

49.25 44.75 35.00 37.50

62.50 50.00 25.00 15.25

7.50 7.50 7.50 7.50

Required: From the tables above, for the weeks ending 7.10.20X7, 14.10.20X7 and 21.10.20X7: (a) calculate the net pay for each employee; (b) prepare the payroll register; (c) prepare the journal entries to record the payroll expense and deductions from employees earnings and the payment of net earnings to the employees; and (d) post all journals to the general ledger.

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