Copyright 2006 Pearson Education Canada Inc. 8-1

Copyright 2006 Pearson Education Canada Inc. 8-1


Outline Payroll Accounting Deductions From Pay and Voluntary Payroll

Deductions Recording Payroll Employer’s Payroll Taxes Adjusting Entry - Accrual for Employer’s Share

of Taxes Independent Contractors Controlling Salaries and Wages Expense The Tip Credit


Payroll Accounting

GROSS SALARIES - Salaries and wages earned by employees

DEDUCTIONS FROM PAY - Includes withheld taxes and voluntary deductions

NET PAY – The amount received by an employee after all deductions have been made

EMPLOYER’S PAYROLL TAXES – Payroll-related federal and provincial taxes and insurance payments which constitute an additional expense


Deductions from pay

Federal withholding taxes

Provincial and local withholding taxes (Quebec has some municipal income taxes)

Canada Pension Plan, employee’s share

Employment Insurance, employee’s share

Voluntary deductions


Voluntary Payroll Deductions

Supplemental medical insurance

Savings plans

Loan repayments

Charitable contributions


RECORDING PAYROLL


PAYROLL JOURNAL ENTRY


EMPLOYER’S PAYROLL EXPENSES JOURNAL ENTRY

Employer must send each month’s money to Ottawa by the 15th of the next month.


Payroll Taxes – Employer’s Share

Canada Pension Plan or Quebec Pension Plan

Workplace Insurance Employment Insurance Employer Health Tax


Adjusting Entry - Accrual for Employer’s Share of Taxes


Independent Contractors

Persons working for several business entities without becoming the exclusive employee of any of them

Employer is not responsible for deducting employee payroll taxes

Examples include musicians or entertainers, temporary helpers, cleaners, consultants


Controlling Salaries and Wages Expense

Separation of responsibilities for the following payroll functions:

Control of personnel filesPreparation of payrollPaying employeesRecording payroll informationReconciling the payroll bank account


The Tip Credit

Great impact on the hospitality industry

Allows employers to consider tips as part of the employee’s minimum wage

Separate records of wages, tips deemed wages, and other tips must be maintained

Documents

Copyright 2006 Pearson Education Canada Inc. 8-1