Beruflich Dokumente
Kultur Dokumente
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.
509
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.
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Employee no: Date commenced: Date terminated: Reason: Marital status: Dependants: Hourly rate
$
46789 31.12.20X2
Minimum hours 40 40 40 40
Date of increase
Welder
DEDUCTIONS
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
511
512
513
514
515
516
517
518
519
520
2.
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
$
Superannuation
$
35 20 35 35 35
521
Solution
(a) Calculate gross wages
Payroll records of Claires Chairs Employees O Claire S Peters H Martha F Davids D Gregson Hourly rate
$
Ordinary wages
$
Overtime 1.5
$
2.0
$
Gross wages
$
Gross wages
$
Superannuation
$
Total deductions
$
Net wages
$
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:
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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
$
Ordinary rate
$
HECS
$
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
$
Overtime rate
$
Ordinary wages
$
Overtime wages
$
HECS
$
Super
$
Total deductions
$
Net wages
$
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
524
525
Sample document 2
526
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
Five
Six
Six
Three
05
Sample document 3
527
4.
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.
Required: 16.2
All overtime worked is paid at 1.5 times the ordinary hourly rate. Required: Calculate the gross wages for each employee.
529
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
Hourly rate
$
Required:
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
$ $
Superannuation
$
38 25 38 38 38
3 7 3 2 3
Required:
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16.8
Payroll records of Chriss Coffee Shop Gross earnings
$
Super
$
Medical fund
$
Life insurance
$
Union fees
$
Required:
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.
Medical fund
$
Union fees
$
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.
Superannuation
$
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
$
Union subs
$
Charity contributions
$
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
$
Medical
$
Union fees
$
33.00
15.00 22.00
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.
532
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
Meal allowance
$
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.
Commission
%
Medical insurance
$
5 5 5 5 5
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.
533
534
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
Date Amount
Lump Sum Payments A B
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
Date Amount
Lump Sum Payments A B
535
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
Date Amount
Lump Sum Payments A B
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
Date Amount
Lump Sum Payments A B
536
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
Date Amount
Lump Sum Payments A B
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
Date Amount
Lump Sum Payments A B
537
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
Date Amount
Lump Sum Payments A B
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
Date Amount
Lump Sum Payments A B
538
Commission earned
$
Super
$
Medical Fund
$
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
$
Gross Overtime
$
Super contribution
$
Union subs
$
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
$
Super
$
Medical insurance
$
Net pay
$
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.
Hours worked 42 45 40 43
Super
$
Medical insurance
$
Life insurance
$
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.
540
Medical Fund
$
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
$
Medical Fund
$
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
$
Hours 2 5 1 0
Medical Fund
$
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
$
Hours 2 9 3 2
Medical Fund
$
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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Super
$
Medical insurance
$
Union fees
$
Payroll records of R J Transport for week ended 14.10.20X7 Hours worked 40 42 38 45 Gross weekly earnings
$
Super
$
Medical insurance
$
Union fees
$
Payroll records of R J Transport for week ended 21.10.20X7 Hours worked 41 40 45 39 Gross weekly earnings
$
Super
$
Medical insurance
$
Union fees
$
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.