PAYROLL ACCOUNTING Chapter 11

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PAYROLL ACCOUNTINGChapter 11
          Dean H Owens, CPP Systems Consultant
ADP 847-718-2283 Dean_owens_at_adp.com   Saturday,
March 5th, 2011
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AGENDA

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•  
• Understanding Transaction/Flow
• Chart of Accounts
• Dr/Cr (Increase vs. Decrease)
• Type of Accounts
• Accruals/Reversals
• T-Accounts
• Financial Statements
• Final Exam/Review

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Payroll Accounting Review Course Temp Check
Questions

• Which of the following would not be an asset
  account?
• Wages payable
• Work-in-process
• Cash
• Employee Receivables
• The correct entry to record a payment of the
  employers share of FICA tax is
• Debit payroll tax expense, credit cash
• Debit salary expense, credit tax withheld
• Debit cash, credit payroll tax expense
• Debit tax withheld, credit salary expense
• The financial statement that is used to evaluate
  the performance of a business by matching its
  revenue and related expenses for a particular
  accounting period is a
• Trial Balance
• General Ledger
• Balance Sheet
• Income Statement

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Payroll Accounting Review Course Temp Check
Questions
4. The proper entry to record the
payment of accrued wages is Debit accrued wages,
credit cash Debit cash, credit accrued
wages Debit salary expense, credit accrued
wages Debit cash, credit salary
expense 5. Accounts Payable are Assets Liabiliti
es Balance sheet item Equity 6. Revenue can be
obtained in the form of (two answers) Cash Accou
nts Payable Equity Accounts Receivable 7. Payment
s of Expenses decrease assets and Increase
revenue Decrease revenue Increase
Liabilities Decrease owners Equity
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Debit and Credits       Debits are recorded on
the Left Side of an Account. Credits are recorded
on the Right Side of an Account.     Debit
Credit
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Transaction? Journal ? Ledger(G/L) ? Financial
Statements Activity Dr/Cr Trial Balance
Balance Sheet/PL
Transaction Flow
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• Examples of Transactions
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• Taking an order to purchase a truck
• Manufacture of the truck
• Shipping of the Truck
• Receiving payment of the truck
• Recording Depreciation of the truck

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(No Transcript)
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• Chart of Accounts
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• Asset Accounts
• Liability Accounts
• Revenue Accounts
• Expense Accounts
• Equity Accounts

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Assets and Liabilities       Asset
Accounts Debit Increase Credit
Decrease Liability Accounts Debit
Decrease Credit Increase
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Revenue and Expense       Revenue Accounts Debit
Decrease Credit Increase Expense
Accounts Debit Increase Credit Decrease
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Chart of Accounts   Balance Sheet Asset
Accounts (D) Liability Accounts (C) Equity
Accounts (C)   Assets Liab.
Equity   Profit/Loss (PL) Revenue
Accounts (C) Expense Accounts (D)   Revenue
Expense Profit/(Loss)
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Type of Accounts   Asset Accounts Anything
owned by the company.   - Computers - Payroll
Software - Equipment - Furniture - Cash in the
payroll checking account - Petty Cash
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• Type of Accounts
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• Liability Accounts Debts owed by the company.
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• - Taxes withheld but not yet paid.
• - Contributions to a company benefit plan not
  yet paid.
• A leasing contract for a payroll
• hardware/software system.
• - Accounts Payable

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Type of Accounts       Equity Accounts The net
worth of the company, or the shareholders
equity.   - Retained Earnings. - Capital
Accounts.
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Type of Accounts       Revenue Accounts Income
recognized for goods sold and services
rendered.   - Gross Revenue. - Earned Income. -
Services
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• Type of Accounts
•  
• Expense Accounts Cost of goods or services used
  in the process of obtaining revenue for the
  company.
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• - Salaries Expense - Employees
• Benefit Expense
• - Cost of employer paid benefit programs.
• - Lease Expense - payments for
  hardware/software system.
• - Depreciation Expense - equipment.
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Accruals and Reversals       Matching Principle
Expenses should always be posted against Revenues
they produced. Accruals Reversals record
items in the period that they occurred.
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At the end of the period all of the Debits and
Credits are added up and must balance.
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General Ledger   Record of business transactions
by account. Where transactions are posted. In
most businesses there are a number of subsidiary
ledgers that make up the General ledger. (A/P,
A/R, Billing, etc)
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Financial Statements       Income Statement.
(Revenue minus Expenses) For a period of time.
Balance Sheet. (Assets equals Liabilities plus
Equity) At a point in time
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Statement Operations Statement Operations Statement Operations Statement Operations Statement Operations
January 31, 2008 January 31, 2008 January 31, 2008 January 31, 2008 January 31, 2008




Revenue 5,000,000


Expenses Expenses
Salaries and Wages Salaries and Wages Salaries and Wages 1,020,000
Payroll Taxes Payroll Taxes 111,500
Travel Entertainment Travel Entertainment Travel Entertainment 30,000
Rent 20,000
Office Supplies Office Supplies Office Supplies 5,000
 
Total Salaries Benefits Total Salaries Benefits Total Salaries Benefits 1,186,500

Net Income before Taxes Net Income before Taxes Net Income before Taxes Net Income before Taxes 3,813,500

Provision for Income Taxes Provision for Income Taxes Provision for Income Taxes Provision for Income Taxes 50,000

Net Income (Loss) Net Income (Loss) Net Income (Loss) 3,763,500

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G G Consulting, Inc G G Consulting, Inc G G Consulting, Inc G G Consulting, Inc G G Consulting, Inc G G Consulting, Inc
Balance Sheet Balance Sheet Balance Sheet Balance Sheet Balance Sheet Balance Sheet
January 31, 2008 January 31, 2008 January 31, 2008 January 31, 2008 January 31, 2008 January 31, 2008



ASSETS ASSETS

Current Current
Cash 3,561,750
Accounts Receivable Accounts Receivable Accounts Receivable 5,560,000
TOTAL CURRENT ASSETS TOTAL CURRENT ASSETS TOTAL CURRENT ASSETS TOTAL CURRENT ASSETS 9,121,750


PROPERTY AND EQUIPMENT PROPERTY AND EQUIPMENT PROPERTY AND EQUIPMENT PROPERTY AND EQUIPMENT
Furniture, Fixtures, Equipment Furniture, Fixtures, Equipment Furniture, Fixtures, Equipment Furniture, Fixtures, Equipment 1,000,000
Accumulated Depreciation Accumulated Depreciation Accumulated Depreciation Accumulated Depreciation (50,000)
PROPERTY AND EQUIPMENT, NET PROPERTY AND EQUIPMENT, NET PROPERTY AND EQUIPMENT, NET PROPERTY AND EQUIPMENT, NET PROPERTY AND EQUIPMENT, NET 950,000


TOTAL ASSETS TOTAL ASSETS TOTAL ASSETS 10,071,750


LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES CURRENT LIABILITIES CURRENT LIABILITIES
Accounts Payable Accounts Payable Accounts Payable 55,000
Social Security Tax Payable Social Security Tax Payable Social Security Tax Payable Social Security Tax Payable 62,000
Medicare Tax Payable Medicare Tax Payable Medicare Tax Payable 14,500
Federal Withholding Tax Payable Federal Withholding Tax Payable Federal Withholding Tax Payable Federal Withholding Tax Payable 61,750
State Withholding Tax Payable State Withholding Tax Payable State Withholding Tax Payable State Withholding Tax Payable 20,000
Federal Unemployment Tax Payable Federal Unemployment Tax Payable Federal Unemployment Tax Payable Federal Unemployment Tax Payable 8,000
State Unemployment Tax Payable State Unemployment Tax Payable State Unemployment Tax Payable State Unemployment Tax Payable 27,000
Federal Inocme Taxes Payable Federal Inocme Taxes Payable Federal Inocme Taxes Payable Federal Inocme Taxes Payable 50,000
TOTAL CURRENT LIABILITIES TOTAL CURRENT LIABILITIES TOTAL CURRENT LIABILITIES TOTAL CURRENT LIABILITIES 298,250


STOCKHOLDER'S EQUITY STOCKHOLDER'S EQUITY STOCKHOLDER'S EQUITY STOCKHOLDER'S EQUITY
Common Stock Common Stock Common Stock 10,000
Current Earnings (Loss) Current Earnings (Loss) Current Earnings (Loss) 3,763,500
Retained Earnings Retained Earnings Retained Earnings 6,000,000
TOTAL STOCKHOLDERS' EQUITY TOTAL STOCKHOLDERS' EQUITY TOTAL STOCKHOLDERS' EQUITY TOTAL STOCKHOLDERS' EQUITY 9,773,500

TOTAL LIABILITIES STOCKHOLDERS' TOTAL LIABILITIES STOCKHOLDERS' TOTAL LIABILITIES STOCKHOLDERS' TOTAL LIABILITIES STOCKHOLDERS' TOTAL LIABILITIES STOCKHOLDERS'  
EQUITY 10,071,750

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Questions??
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Thank you . . .
Good Luck Future CPPs To Be !!