Accounting Payroll Deductions and Other Essay

Total Length: 522 words ( 2 double-spaced pages)

Total Sources: 2

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Many employers use a simple formula to calculate net pay. The formula is as follows:

Net Payment Calculation:

Employee's gross pay = (pay rate times number of hours worked)

minus Statutory payroll tax deductions minus Voluntary payroll deductions

= NET PAY

As mentioned above employers are also required to report payroll tax obligations in accordance with federal and state law. Below is a list of following responsibilities on the part of the employer.

Federal tax deposits

Annual federal unemployment tax return (Form 940 or 940EZ)

Employer's quarterly payroll tax return (Form 941)

Annual Return of Withheld Federal Income Tax (Form 945)

Wage and Tax Statements (Form W-2)

In regards to the accounting entry, the employer must first record the gross wages earned by the employee, which was mentioned in detail above.

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It must also include the withholdings of their pay and any addition withholdings which also is detailed above. This entry usually includes debits for the direct labor expense, salaries, and the company's portion of payroll taxes. There will also be credits to a number of accounts, each one detailing the liability for payroll taxes that have not been paid, as well as for the amount of cash already paid to employees for their net pay. Below is a sample entry,

Debit

Credit

Direct Labor Expense

XXX

Salaries Expense

XXX

Payroll Tax Expense

XXX

Cash

XXX

Federal Withholdings

XXX

Social Security Withholding

XXX

Medicare

XXX

Unemployment Taxes

XXX.....

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https://www.aceyourpaper.com/essays/accounting-payroll-deductions-69535