payroll liabilities c h a p t e r 11 © 2007 mcgraw-hill ryerson ltd. electronic presentations in...
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Payroll Liabilities
C H A P T E R 11C H A P T E R 11
© 2007 McGraw-Hill Ryerson Ltd.
Electronic Presentations in Microsoft® PowerPoint®
1. Identify the taxes and other items frequently withheld from employees’ wages.
2. Make the calculations necessary to prepare a Payroll Register and prepare the entries to record and pay payroll liabilities.
3. Calculate the payroll costs levied on employers and prepare the entries to record the accrual and payment of these amounts.
4. Calculate and record employee fringe benefit costs.
Learning ObjectivesLearning Objectives
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Tax is deducted based on wages earned and personal tax credits.
There is no matching by the employer for this deduction.
Employees’ Income TaxEmployees’ Income Tax
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Statutory contribution requirements (as at January 1, 2006)
4.95% of eligible earnings to maximum of $1,910.70 per year (maximum pensionable earnings $42,100).
The first $3,500 of earnings are exempt from CPP.
The employer matches employee contributions 1:1.
Canada Pension Plan (CPP)Canada Pension Plan (CPP)
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Statutory contribution requirements for employees (as at January 1, 2006) 1.87% of insured earnings to a maximum of
$729.30 (maximum insurable earnings $39,000 per year).
The employer contributes 1.4 times the employees’ contributions.
Employment Insurance (EI)Employment Insurance (EI)
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Other deductions may be taken for: Donations to charitable organizations Pension plans Medical and dental plans Union dues Purchases of savings bonds …
Other Payroll DeductionsOther Payroll Deductions
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Gross Pay, deductions, and net pay are summarized by pay period in the payroll register.
Columns are provided for employee earnings, each deduction, net payment amount, cheque number, salary expense account to be debited.
See Exhibit 11.2. The design of a payroll register is dependent on
the needs of management and the requirements of various payroll-related laws.
Payroll RegisterPayroll Register
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The entry to record the payroll for textbook Exhibit 11.2 is:
Sales salaries expense 2,050.00Office salaries expense 1,514.00 EI payable 66.65 Employees’ Inc. tax payable 620.40 Employees’ Hospital Ins. payable 120.00 CPP payable 156.66 Salaries payable 2600.29
Gross pay
Deductions
Net pay
less
equals
Recording the PayrollRecording the Payroll
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The entry to record the employer’s portion of CPP and EI for textbook Exhibit 11.2 is:
EI expense (1.4 x $66.65) 133.30 CPP expense 156.66 EI payable 133.30 CPP payable 156.66
Payroll Deductions Required of Payroll Deductions Required of the Employerthe Employer
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The employees’ deductions and the employer’s portion are liabilities that must be remitted to the Receiver General.
After recording the payroll, the payroll liability balances would be:
EI Payable CPP (or QPP) Payable 66.65* 156.66* 133.30** 156.66** 199.95 313.32
Income Tax Payable Hospital Ins. Payable 620.40*
120.00*
*Employees’ contribution **Employer’s contribution
Paying the Payroll DeductionsPaying the Payroll Deductions
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The entry to record the remittance to the Receiver General would be:
EI Payable 199.95Employee Income Tax Payable 620.40 CPP (or QPP) Payable 313.32
Cash 1133.67
EI Payable CPP (or QPP) Payable 66.65 156.66 133.30 156.66 199.95 313.32
Income Tax Payable Hospital Ins. Payable 620.40 120.00
Paying the Payroll DeductionsPaying the Payroll Deductions
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The entry to record the remittance for the hospital insurance premiums deducted would be:
Employees’ Hospital Insurance Payable 120.00 Cash
120.00
Hospital Ins. Payable120.00
Paying the Payroll DeductionsPaying the Payroll Deductions
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The employer may pay for other payroll related expenses such as: Life insurance Medical/Dental insurance Disability insurance Pension plans Workers’ compensation (mandatory) Vacation pay (mandatory)
Employee (Fringe) Benefit CostsEmployee (Fringe) Benefit Costs
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Example: An employer pays $200 towards a medical insurance plan and $1,250 towards a retirement plan for its’ employees.
The entry to record this expense would be: Benefits Expense 1,450 Medical Insurance Payable 200 Retirement Program Payable 1,250
Employee (Fringe) Benefit CostsEmployee (Fringe) Benefit Costs
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Vacation Pay The expense should be accrued as the
employees are working. Deductions are not recorded until vacation
pay is taken.
Employee (Fringe) Benefit CostsEmployee (Fringe) Benefit Costs
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The Payroll Register for TC Co. showed the following information: gross wages, $800; EI deducted, $14.96; CPP deducted, $32.94; Income taxes deducted, $106.60.
Prepare the General Journal entry to record the payroll.
Mini-Quiz Mini-Quiz
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The Payroll Register for TC Co. showed the following information: gross wages, $800; EI deducted, $14.96; CPP deducted, $32.94; Income taxes deducted, $107.60.
Wages expense 800.00 EI payable 14.96 CPP payable 32.94 Income tax payable 107.60 Wages payable 644.50
Mini-Quiz Mini-Quiz
© 2007 McGraw-Hill Ryerson Ltd.
The Payroll Register for TC Co. showed the following information: gross wages, $800; EI deducted, $14.96; CPP deducted, $32.94; Income taxes deducted, $107.60.
Prepare the General Journal entry to record the employer’s payroll expenses.
Mini-Quiz Mini-Quiz
© 2007 McGraw-Hill Ryerson Ltd.
The Payroll Register for TC Co. showed the following information: gross wages, $800; EI deducted, $14.96; CPP deducted, $32.94; Income taxes deducted, $106.60.
EI expense(1.4x$14.96) 20.94CPP expense 32.94
EI payable 20.94CPP payable 32.94
Mini-Quiz Mini-Quiz
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End of chapterEnd of chapter
© 2007 McGraw-Hill Ryerson Ltd.