# Taxes on Income

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Taxes on Income
Objective 4.01
Importance of Payroll Records
 Payroll is a major expense for most
companies and all records must be
accurately maintained.
 Inaccuracies in payroll calculations could
cost a business thousands of dollars, both
in payroll amounts and in taxes paid on
the payroll.
Key Terms:
 Payroll is a list of employees and the payments
due to each one for a specific pay period.
 Pay Period is the amount of time over which an
employee is paid; such as weekly, biweekly
(every two weeks), semimonthly (twice a month),
or monthly pay periods.
 Payroll Clerk is a person who is responsible for
preparing the payroll.
Payroll Clerk Duties
 Makes sure  employees are paid on time.
 Makes sure each employee is paid the
correct amount.
 Completes payroll records.
 Submits payroll reports.
 Pays payroll taxes.
THE PAYROLL SYSTEM
 Calculates earnings
 Calculates deductions
 Prepares payroll  checks
 Reports payroll information to government
 Records earnings and deductions in
payroll and accounting records.
   Most payroll systems have certain tasks in
common, such as the ones listed above.
Calculating Gross Earnings
Key Terms
 Gross Earnings is the total amount of money an
employee earns in a pay period. The calculation
of gross earnings depends on the basis an
employee is paid.
 An employee’s pay can be based on:
   Salary
   Hourly wage
   Commission
   Salary plus commission or bonus
   Overtime pay
Gross Earnings Calculation
 The number of  hours worked multiplied by
the hourly wage equals the gross earnings
for the pay period.
Example
 For example, Sally Smith, a delivery driver
for Roadrunner, is paid \$6.75 per hour.
During the last weekly pay period, she
worked 36 hours. Sally's gross earnings
are \$243
 36 Hours * \$6.75 = \$243
Calculating Gross Earnings
Key Terms
identification badge with a magnetic strip
that contains employee information used
to record starting and ending work hours.
 Salary is a fixed amount of money paid to
an employee for each pay period.
 Wage is an amount of money paid to an
employee at a specified rate per hour
worked.
Calculating Gross Earnings
Key Terms
   Commission is an amount paid to an employee
based on a percentage of the employee’s sales.

   For example, Sue Smith is paid a 5%
commission on all her sales. Last week Sue's
total sales were \$8,254. Sue's gross earnings
for the week are \$412.70

   \$8,254 * .05 = \$412.70
Calculating Gross Earnings
Key Terms
set by the Fair Labor
 Overtime rate,
Standards Act of 1938, is 1.5 times the
employee’s regular hourly pay rate.
Example for Overtime Rate
   For example, John Sobo, a photo-lab clerk at
Wal-Mart, worked 43 hours last week. His
rate of pay is \$6.60. His hourly overtime rate
is \$9.90 (\$6.60 x 1.5). His gross earnings for
the week are \$293.70 determined as follows:
   Regular 40 x         \$6.60=     \$264.00
   Overtime 3      x    \$9.90=        29.70
   Total                           \$293.70
                                   ======

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