sales journal

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College Accounting First Canadian
Edition Price Haddock Brock Hahn
Reed
McGraw-Hill Ryerson
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CHAPTER 12
PAYROLL COMPUTATIONS, RECORDS, AND PAYMENT
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WHO IS AN EMPLOYEE?

• One who is hired by the employer
• Under the control and direction of the employer
• Usually provided the tools or equipment by the
  employer
• Generally controlled by the employer as to the
  number of hours worked and approach to the job

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Federal and Provincial Laws have a crucial
impact on relationships between employers and
employees.
TAXES
EARNINGS
EMPLOYEE BENEFITS
WORKING CONDITIONS
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OBJECTIVE 1 Explain the major federal and
provincial laws relating to employee earnings
and withholding.
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THE LABOUR STANDARDS ACT

• Sets a minimum hourly rate of pay and also sets a
  maximum number of hours of work per week to be
  performed at the regular rate of pay.
• Hours worked over 44 in any week to be paid at
  time and a half rate.

In Ontario 6.85 an hour for 44 hours.
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CANADA PENSION PLAN(CPP)

• Levies a tax that is shared equally by employer
  and employee.
• Provides three major categories of benefits
• 1. Retirement benefit, or pension, when a worker
  
  
  
  
• reaches age 62.
  
  
  
• 2. Benefits for the dependents of a retired
  worker.
• 3. Benefits for the worker and the workers
  dependents when the worker is disabled.

Presently 4.3 on the first 38,300
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INCOME TAX

• Employers are required to withhold an estimated
  amount of income tax from the employees earnings.

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EMPLOYERS PAYROLL TAXES AND INSURANCECOSTS
Employers must also pay taxes on their employees
earnings.
1. Canada or Quebec pension plans
2. Employment insurance benefits
3. Workers Compensation Insurance
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CANADA OR QUEBEC PENSION PLAN

• Employer required to pay amount equal to CPP tax
  withheld from employees base earnings.
• Employers share of tax sent to federal
  government along with amounts withheld from
  employees paycheque.

Currently 4.3 on the first 38,300
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EMPLOYMENT INSURANCE TAX

• Employers are required to pay a tax based on
  earnings to a maximum of 39,000.

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CPP Contributions for 2001

Maximum pensionable earnings 38,300.00 Annual
basic exemption 3,500.00 Maximum contributory
earnings 34,800.00 Contribution rate
(4.3) 0.043 Maximum employee
contribution 1,496.40 Maximum employer
contribution 1,496.40 Deduction for CPP stops
when the employee reaches the maximum
contribution for the year.
EI Premiums for 2001
Maximum annual insurance earnings
39,000.00 Premium rate (2.25) 0.0225 Maximum
annual employee premium 877.50
Employer EI Premiums
Employer EI premium is 1.4 times employees
premium for the pay period
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INSURANCE PREMIUM

• Rate for employment insurance premium is 2.25
  percent of employees gross wage.
• Employer must pay 1.4 times amount the employee
  contributes.

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WORKERS COMPENSATION INSURANCE
Some provinces have laws requiring employers to
pay for insurance that will

• Reimburse employees for losses suffered from
  job-related injuries

• Compensate their families if death occurs in the
  course of their employment

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REQUIRED PAYROLL RECORDS

• THE MOST IMPORTANT RECORDS REQUIRED ARE

• The name, address, social insurance number, and
  date of birth of each employee.

• Hours worked each day and week, wages paid at the
  regular rate, and overtime premium wages.

• Cumulative amount of taxable wages paid
  throughout the year.

• Amount of income tax, Canada or Quebec pension
  plan contributions, and employment insurance
  premiums withheld from each employees earnings
  for each pay period.

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OBJECTIVE 2 Compute gross earnings of employees.
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GROSS WAGE/SALARY EARNEDBY EACH EMPLOYEE
Hourly-Rate Basis Hours Worked X Rate
Per Hour
Salary Basis Agreed Amount For Each Week,
Month Or Other Period
Commission Basis Percentage Of Net Sales
Piece-Rate Basis Wages Based On Number Of
Units Produced
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Computing Gross Pay
Example 1
Cass Collins worked 44 hrs. _at_ 8.00 per hr.
44 hrs. X 8.00 352.00 Gross Pay
Example 2
Enos Echols worked 48 hrs. 40 hrs. _at_ regular
hourly rate of 7.00 and 8 hrs _at_ overtime rate of
10.50
7.00 ? 2 3.50 7.00 10.50
Regular time earnings 40 hrs. _at_ 7.00
280.00 Overtime earnings 8 hrs. X 10.50
84.00 Gross Pay
364.00
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OBJECTIVE 3 Determine employee deductions
for CPP contributions.
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DETERMINING CPP CONTRIBUTIONS

• Both employee and employer pay an equal amount.

• Multiply 4.3 (rate) times the first 38,300
  (base) of gross wages for each employee, after
  3,500 basic personal exemption has been
  subtracted.

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OBJECTIVE 4 Determine employee deductions
for employment insurance premiums.
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DETERMINING DEDUCTIONS FOR EMPLOYMENT INSURANCE

• Both employee and employer pay.

• A rate of 2.25 is levied to a maximum of
  39,000.

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OBJECTIVE 5 Determine employee deductions
for income taxes.
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INCOME TAX

• The amount of income tax to be withheld from an
  employees earnings generally depends on the
  following

• Income earned during the pay period

• Length of pay period

• Number of exemption allowances

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OTHER DEDUCTIONS REQUIRED BY LAW

• Provinces require that provincial income tax be
  withheld from earnings of employees.

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WITHHOLDINGS NOT REQUIRED BY LAW
Many kinds of deductions that are not required
by law are made by agreement between the employee
and the employer.
Examples are

• Life insurance
• Group medical insurance covering the employees
  family
• Employees share of company retirement plans
• Union dues that will be deposited in a bank or a
  company credit union
• Canada savings bonds, shares of stock, or other
  investment

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SALARIED EMPLOYEES

• Salaried employees earn a specific sum of money
  for each payroll period, whether it is weekly,
  biweekly, semimonthly, or monthly.

• Salaried workers who do not hold supervisory jobs
  are generally covered by the provisions of the
  Labour Standards Act that deal with maximum hours
  and overtime premium pay.

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OBJECTIVE 6 Enter gross earnings, deductions,
and net pay in the payroll register.
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PAYROLL REGISTER WEEK BEGINNING
January 1, 2001
FED.
NO. EARNINGS
NAME
CLAIM CUMULATIVE OF RATE REG.
O/T GROSS CUMUL.
CODE EARNINGS HRS.
PREM AMT. EARNS. Collins, Cass
0 40 8.00 320.00
320.00 320.00 Echols, Enos
0 48 7.00 308.00 14.00
322.00 322.00 Johansen, Carol 3
40 6.85 274.00
274.00 274.00 Sanchez, Rita 6
40 10.00 400.00
400.00 400.00 Yamoah, Mill 1
40 300.00 300.00
300.00 300.00 1,602.00
14.00 1,616.00 1,616.00 (A)
(B) (C) (D) (E)
(F) (G) (H) (I)
AND ENDING January 6, 20X5 PAID
January 8, 20X5 TAXABLE WAGES DEDUCTIONS DISTR
IBUTION CPP EI INC.
HLTH NET CHQ. OFFICE SHPG.
TAX INS. AMT. NO. SALS.
WAGES 320.00 10.87 7.20
66.80 235.13 4725 320.00 322.00
10.95 7.25 67.65 236.15
4726 322.00 274.00 274.00 8.89
6.17 13.90 10.00 245.04
4727 274.00 400.00 400.00
14.31 9.00 48.30 10.00
328.39 4728 400.00 300.00 300.00
10.01 6.75 31.05 252.19 4729
300.00 1,616.00 1,616.00 55.03 36.37
227.70 20.00 1,296.90 300.00
1,316.00 (J) (K) (M)
(N) (O) (P) (Q) (R)
(S) (T)
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OBJECTIVE 7 Journalize payroll transactions in
the general journal.
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JOURNALIZE DATA FROM THE PAYROLL REGISTER
IN THE GENERAL JOURNAL
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20x5 Jan. 8 Salaries and Wages Payable
1,276.90 Cash

1,276.90 Record cheque
to payroll bank account.
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The major benefit of using a separate payroll
account, if there are many employees, is it
simplifies the bank reconciliation at the end of
the month.
A special payroll account makes it easier to
quickly determine each month if there are
outstanding payroll cheques.
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Direct Deposit Method
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OBJECTIVE 8 Maintain an earnings record for
each individual employee.
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Individual Employees Earnings Record
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Deduction Section of the Individual Earnings
Record
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AND ENDING January 6, 20X5
PAID January 8, 20X5


DISTRIBUTION EMPLOY.
HEALTH NET CHEQUE
OFFICE SHIPPING
INS. INS. AMOUNT
NO. SALARIES
WAGES
320.00 4725
320.00
322.00 4726
322.00
274.00 10.00 4727
274.00 400.00
10.00 4728
400.00 300.00
4729 300.00
1,616.00 20.00
300.00 1,316.00
(K) (P)
(R) (S)
(T)
GENERAL JOURNAL
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GENERAL JOURNAL
Office Salaries Expense 1/8 300.00 1/15
300.00 1/22 300.00 1/29 300.00
EI Payable 1/8 36.37 1/15
36.37 1/22 36.37 1/29 36.37
Shipping Wages Payable 1/8 1,316.00 1/15
1,316.00 1/22 1,316.00 1/29 1,316.00
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GENERAL JOURNAL
Employee Income Tax Pay. 1/8
227.20 1/15 227.20
1/22 227.20 1/29 227.20
Health Insurance Premiums Pay. 1/8
20.00 1/15 20.00
1/22 20.00 1/29 20.00
Shipping Wages Expense 1/8 1,316.00 1/15
1,316.00 1/22 1,316.00 1/29 1,316.00
CPP Pay. 1/8 55.03
1/15 55.03 1/22 55.03
1/29 55.03
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