Payroll Preparation

Accounting – A Practical Approach 1st Ed FINAL PAGE PROOFS Puddingburn Publishing Services

CHAPTER 16 PAYROLL PREPARATION

Introduction The purpose of this chapter is to provide the student with practical skills in the calculation and preparation of payroll records and the accounting entries necessary to record payroll in the books of the business.

The chapter has been designed for learners to read the introductory material and then work through the questions relating to each section. The questions are graded. Self-test questions enable learners to check their understanding at relevant points throughout the chapter.

This material is divided into the following sections:

1. Employment records 2. Calculation of the payroll (16.1 – 16.8) 3. Payroll records (i) Payroll register (16.9 – 16.11) (ii) Employee earnings record (16.12) 4. Accounting entries to record payroll (16.13 – 16.18) 5. Comprehensive questions (16.19)

Self-test questions (solutions in Chapter 18) appear after questions 16.8, 16.11, 16.18 and 16.19.

Chapter 16: Payroll preparation

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1. Employment records Payroll preparation affects almost every business. Some of the information used to calculate the payroll comes from within the business, such as hours worked by the employees. Other information is obtained from sources outside the business, for example, PAYG withholding income tax rates come from the Australian Taxation Office, pay rates and conditions are contained in an employment consent agreement or Federal or State awards.

Once the necessary information is collected and recorded, the payroll can then be calculated. The payroll function in a business involves the following areas:

(a) creation and maintenance of the required employment records; (b) calculation of the payroll; (c) payment of the payroll to employees; and (d) accounting entries to record the payroll.

Creation and maintenance of employment records When an employee starts working with a business an employee record is prepared. This record contains data and information about the employee, date commenced working, rates of pay and leave due and taken.

The record is continuously adjusted for any changes and acts as an employment history for that employee. A separate record is required for every employee. The record can be kept in different formats. It may be kept on computer, in paper files or on cards.

In addition to the records kept by the business, the Australian Taxation Office (ATO) has a number of documents employees are asked to complete when commencing employment. One of these is a Tax File Number declaration. All new employees who will be paid any earnings are asked to complete this form. It is not compulsory for employees to complete the tax file number declaration, however if the employer does not receive the completed form they must deduct tax at the highest rate, which is currently 48.5%, from all earnings. Any completed tax file declarations are forwarded to the ATO and tax can then be deducted or withheld as per the ATO’s PAYG withholding tax tables.

Tax deducted from salaries and wages of employees up until June 2000 was a PAYE (pay as you earn) system. From 1 July 2000, with the introduction of GST, the taxation of earnings also changed to a PAYG (pay as you go) system. The system has two components, PAYG instalments and PAYG withholding.

PAYG instalments replaced provisional tax and requires the payment of expected tax liability quarterly in advance and mainly affects primary producers and those receiving income from a business or investments. PAYG withholding replaced PAYE and affects most salaries and wages earners. The employer withholds the calculated amount (according to the tables) from employee earnings each pay period. The PAYG tax withheld is forwarded to the ATO weekly, monthly or quarterly depending on the size of the business.

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An employment history record could contain the following details:

Name: Noel Causley Employee no: 46789 Address: 3 Smith Street Date commenced: 31.12.20X2 Newtown Date terminated: Telephone: 9935 6243 Reason: Date of birth: 7.12.1960 Marital status: Single Dependants: Nil

Classification Weekly wage

Minimum hours

Hourly rate

Date of increase

Reason for increase

$ $ Welder 410.00 40 10.25 426.40 40 10.66 1.12.20X4 National Wage 4% 439.20 40 10.98 1.12.20X6 Consent agreement 3% 12.X6 and 447.98 40 11.20 1.12.20X7 2% 12.X7

DEDUCTIONS PAYG Withholding Income Tax Health Insurance Superannuation Other

Date Declaration

Lodged Dependant

Rebate Insurer Amount Fund Amount Union Subs $ $ $

2.1.20X3 Nil MBF 15.00 MPA 32.00 3.00

Leave Record Sick Leave Annual Leave

Date from To Days Balance Date due To Days Balance 31.12.X2 Entitlement 15 1.12.X3 Entitlement 20 1.6.X3 3.6.X3 (3) 12 5.12.X3 14.12.X3 10 10 31.12.X3 Entitlement 15 27 1.12.X4 Entitlement 20 30 1.07.X4 14.07.X5 (10) 17 2.01.X5 31.01.X5 20 10 31.12.X4 Entitlement 15 32 1.12.X5 Entitlement 20 30 15.03.X5 20.03.X5 (5) 27 1.09.X5 14.09.X5 10 20 31.12.X5 Entitlement 15 42 1.12.X6 Entitlement 20 40


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2. Calculation of payroll (16.1 – 16.8) Payrolls can be calculated weekly, fortnightly or monthly. When preparing the payroll wages/salary for each employee the gross and net wages for the period need to be calculated.

Gross wages is the amount earned by the employee in that payroll period. It will include overtime if worked.

Gross wages = hours worked x rate of pay

Overtime is hours worked above the standard or normal hours for the payroll period and is calculated as a multiple of the ordinary rate. The overtime rate is usually 1.5, 2 or 2.5 times the ordinary rate.

If overtime has been worked then:

(ordinary ordinary) (overtime overtime ordinary) Gross wages = (hours x rate of ) + (hours x loading x rate of ) (worked pay ) (worked pay )

Net wages is the amount received by the employee after all the authorised deductions have been deducted from the gross wages.

Net wages = Gross wages – PAYG withholding income tax – other deductions

Other deductions can include superannuation, medical fund premiums, union fees, insurance premiums, loan and HECS repayments.

PAYG withholding income tax rates are determined by the Australian Taxation Office. An extract of rates appears on pages 512–519.

ILLUSTRATIVE EXAMPLE 1

Below are the records for Claires Chairs. You are required to calculate the net pay for each employee.

Payroll records of Claires Chairs Hours worked

Ordinary Overtime Employees Hourly rate 1.5 2.0

PAYG withholding income tax Superannuation

$ $ $ O Claire 36.50 35 4 392.00 115.00 S Peters 16.50 20 82.50 29.50 H Martha 24.00 35 4 3 282.00 75.00 F Davids 30.00 35 7 341.50 14.50 D Gregson 26.00 35 2 253.50 82.00


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Solution (a) Calculate gross wages

Payroll records of Claires Chairs Hours worked Overtime

Employees Hourly

rate Ord Overtime Ordinary wages 1.5 2.0 Gross wages

$ 1.5 2.0 $ $ $ $

O Claire 36.50 35 4 1 277.50 292.00 1 569.50 S Peters 16.50 20 330.00 330.00 H Martha 24.00 35 4 3 840.00 144.00 144.00 1 128.00 F Davids 30.00 35 7 1 050.00 315.00 1 365.00 D Gregson 26.00 35 2 910.00 104.00 1 014.00

(b) Calculate net wages

Payroll records of Claires Chairs

Employees Gross wages

PAYG withholding income tax Superannuation

Total deductions Net wages

$ $ $ $ $ O Claire 1 569.50 392.00 115.00 507.00 1 062.50 S Peters 330.00 82.50 29.50 112.00 218.00 H Martha 1 128.00 282.00 75.00 357.00 771.00 F Davids 1 365.00 341.50 94.50 436.00 929.00 D Gregson 1 014.00 253.00 82.00 335.00 679.00

Questions 16.1 to 16.8 and self-test questions 16A and 16B relate to illustrative example 1.

3. Payroll records There are two main payroll records which must be prepared or updated every pay period. They are:

(i) payroll register; and (ii) employees earnings record.

(i) Payroll register (16.9 – 16.11) The payroll register is prepared every pay period. It records the total amount of wages/salaries earned and paid for all employees for that period (see sample document 1). As with the other payroll records the payroll register can be prepared manually or on computer. A payroll register can also be called a pay sheet, wages sheet or wages book.

When the payroll register is prepared, a pay advice is also prepared for each employee. This shows employees how their earnings for that pay period were calculated.

Payment of payroll to employees When the payroll has been calculated and the payroll records prepared, the employees are then paid the amount of their net wages.


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This amount can be paid in cash, by cheque or by electronic transfer into a nominated bank account. The method used to pay employees is often chosen by the employer after consulting the employees.

ILLUSTRATIVE EXAMPLE 2 Preparation of the payroll register

Payroll records of Daniel’s Motors

Employee

Actual hours

worked Ordinary rate

PAYG withholding income tax HECS Super

$ $ $ P Ford 37 15.25 149.50 Yes J Toyota 39 22.00 255.00 77.00 Yes D Holden 45 18.00 250.50 No M Mazda 35 27.50 289.00 96.00 Yes V Waggon 40 16.50 204.00 No

All employees are paid weekly at rates set out in the enterprise agreement. For all employees the standard working week is 35 hours. Any hours worked in excess of the standard 35 hours per week is paid at an excess hours rate of $20.50 per hour. PAYG withholding income tax is deducted as indicated. Employees who pay superannuation do so at a rate of 5% of their standard gross earnings (that is, not including overtime).

Required: Calculate the net wages of each employee and prepare the payroll register.

Solution Payroll register of Daniel’s Motors

Employee

Actual hours

worked Ordinary

rate Overtime

rate Ordinarywages

Overtime wages

Total gross wages

$ $ $ $ $ P Ford 37 15.25 20.50 457.50 41.00 498.50 J Toyota 39 22.00 20.50 770.00 82.00 852.00 D Holden 45 18.00 20.50 630.00 205.00 835.00 M Mazda 35 27.50 20.50 962.50 962.50 V Waggon 40 16.50 20.50 577.50 102.50 680.00 3 397.50 430.50 3 828.00

Payroll register of Daniel’s Motors

Employee

Total gross

PAYG withholding income tax HECS Super

Total deductions

Net wages

$ $ $ $ $ $ P Ford 498.50 149.50 23.00 172.50 326.00 J Toyota 852.00 255.00 77.00 39.00 371.00 481.00 D Holden 835.00 250.50 250.50 584.50 M Mazda 962.50 289.00 96.00 48.00 433.00 529.50 V Waggon 680.00 204.00 204.00 476.00 3 828.00 1 148.00 173.00 110.00 1 431.00 2 397.00

Questions 16.9 to 16.11 and self-test question 16C relate to illustrative example 2.


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Sample document 1 Payroll register


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(ii) Employees earnings record (16.12) The employer must record every employee’s earnings. The employer must keep an individual earnings record for every employee. This record is cumulative and is kept for the taxation year, 1 July to 30 June each year. The earnings record is updated every pay period, so that it shows the year to date amounts earned (that is, calculated from 1 July to current pay period) for each employee. Employee earnings can be kept manually (see sample document 2) or on computer.

At 30 June each year, these records are used to prepare a PAYG payment summary for each employee. The payment summary shows total gross earnings, allowances and PAYG withheld during that taxation year (see sample document 3). The PAYG payment summary is required by the Australian Taxation Office to be included with the employee’s income tax return for that year.


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Sample document 2 Employee earnings record


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In this PAYG payment summary the details of the employee earnings record in sample document 2 have been used.

PAYG Payment Summary – Individual Non Business

Payment Summary for the year ending 30 June 20X3 Payee’s Income Tax File Number 242 176 492 Payer’s ABN number 78 644 237 026 Payee’s date of birth Payer’s name

Marin Motors Pty Ltd 30.09.1954

Payee’s name WILSON Joseph Henry

Payee’s Address 6 Prince Street Normanville 2091

Gross Salary, Wages, Bonus, etc. $29 888.70

Period during which payments were made: 01.07.20X2 to 30.06.20X3 Allowances (give details) Signature of Authorised Person Date W Worland 01 .07.20X3

Union Fees, etc. Name of Organisation Amount Lump Sum Payments TWU $312 A B C Tax withheld – whole dollars only in words Thousands Hundreds Tens Units Cents Tax withheld (whole dollars) Five Six Six Three 05 $5 663.05

Sample document 3 PAYG payment summary

Question 16.12 relates to sample documents 2 and 3.


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4. Accounting entries to record payroll (16.13 – 16.18) The accounting entries are entered into the journals from the payroll register. The amount of gross wages/salaries is the wages/salaries expense for the pay period. The payroll payable for the pay period is the amount of net wages/salaries. The entry to record the gross pay, deductions and net pay for the period looks like this:


Note: For the following entries the details of the payroll register in sample document 1 have been used.

General Journal of ACE Plumbing Date Particulars Debit Credit 20X5

Nov 13 Wages/salaries expense (gross) 2 293.80 PAYG withholding tax payable 458.25 Health Insurance Funds payable 30.00 Superannuation Fund payable 59.00 Plumbers Union fees payable 19.00 Payroll payable (net) 1 727.55 Being gross payroll payable for the week ending 13 Nov 20X5

Nov 13 * Payroll payable (net) 1 727.55 Cash at bank 1 727.55 Payment of net wages to employees

At the end of the month the total of all the weekly deductions must be paid to the various bodies and institutions entitled to receive those amounts. For example, if the total of Health Insurance deducted from all employees’ earnings for the month was $120 an entry would be made:

Nov 30 * Health Insurance Funds 120.00

Cash at bank 120.00 Being payment of amounts collected for month of Nov 20X5

* These entries could be recorded in the cash payments journal instead of the general journal.

In addition to the payroll expense, the employer may have obligations to pay such things as payroll tax and compulsory superannuation. A business may decide to pay benefits for employees such as health insurance or motor vehicle lease costs from its own funds. These are all obligations of the business and are not deducted from employees’ pay. These amounts are calculated separately from payroll amounts (generally once a month) and then paid in the following month.


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A business owes $6 000 in payroll tax and $4 000 in compulsory superannuation for the month of December. The following entries would be made:

Date Particulars Debit Credit

Dec 31 Payroll tax expense 6 000 Payroll tax payable 6 000 Superannuation expense 4 000 Superannuation payable 4 000 Being amounts owing at 31 Dec Jan 6 * Payroll tax payable 6 000 Superannuation payable 4 000 Cash at bank 10 000 Payment of amounts owing at 31 Dec

* This entry could be recorded in the cash payments journal instead of the general journal.

Questions 16.13 to 16.18 and self-test question 16D relate to illustrative examples 3 and 4.

Questions

Calculation of payroll (16.1 – 16.8) Illustrative example 1 relates to questions 16.1 to 16.8 and self-test questions 16A and 16B.

16.1 Payroll records of Beryl’s Brownies

Employee Hours worked Rate per hour $

K Campbell 40 8.00 R Kelly 42 9.75 M Dwyer 25 15.25 K Mullins 38 10.50 A Sivier 35 12.50

Required: Calculate the gross wages for each employee.

16.2 Payroll records of Agar’s Advertising

Employee Hours worked Rate per hour Ordinary Overtime $

S Abbey 35 4 8.50 R Cabban 35 – 10.25 B Ellim 35 2 14.00 M Galga 35 6 11.00 A Lambert 35 – 9.25

All overtime worked is paid at 1.5 times the ordinary hourly rate.



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16.3 Payroll records of Barossa Wines

Hours worked Ordinary Overtime

Employee 1.5 2.0 Hourly rate

$ B Bainton 40 2 1 13.50 P Darius 40 2 11.50 G Fantome 20 10.75 F Jurd 40 4 14.50 T Nguyen 40 3 1 12.00


16.4 Using the extract of the current ‘weekly rates of PAYG withholding income tax’ provided by the Australian Taxation Office on pages 512–519, calculate for each of the following persons the amount of PAYG withholding income tax to be deducted from their pay: (a) B Blue earns $185 per week, has completed an employment declaration and claims tax free threshold no

leave loading; (b) S Weiss earns $400 per week, has completed an employment declaration form but does not claim the

tax free threshold; (c) M See earns $370 per week, has completed an employment declaration but does not have a tax file

number and did not complete that section of the declaration. He has applied for a tax file number and expects to receive it shortly;

(d) A Able earns $100 per week at a second job. She has completed an employment declaration but claims the general exemption at her first job; and

(e) H Quirk earns $500 per week, has completed an employment declaration and claims the tax free threshold with leave loading.

16.5 Phil Smith is a sales representative for Western Hardware Suppliers. He earns a base salary of $1 100 per month plus a 16% commission on sales. The payroll department deducts $40 per month for union subscriptions and $30 for his contributions to the Medicare health fund. The PAYG withholding tax rate on his earnings is 20%. Calculate Phil’s gross pay and net pay for the month assuming his sales for the month are $70 000.

16.6 Kerry Melon works for Flares Jeans Company earning $9 per hour with a compensation for working in excess of 40 hours of one and half times the ordinary hourly rate. Her payroll deductions include PAYG withholding income tax of 15% of gross earnings and a weekly charitable contribution of $5. Kerry works 44 hours during the week. Required: Calculate her gross pay and net pay for the week.

16.7 Payroll records of Chan’s Carpet Company

Hours worked Ordinary Overtime

Employees Hourly

rate 1.25 1.5

PAYG withholding

income tax Superannuation

$ $ $ R Parr 9.50 38 3 70.00 18.00 V Sartor 8.25 25 22.25 10.00 W Viret 12.00 38 7 125.75 22.25 L Abbot 15.50 38 2 152.00 29.50 M Chen 13.00 38 3 3 140.25 24.00

Required: Calculate the net pay for each employee.


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16.8 Payroll records of Chris’s Coffee Shop

Employee Gross

earnings

PAYG withholding income tax Super

Medical fund

Life insurance Union fees

$ $ $ $ $ $ J Hall 650 157.35 39.00 30.00 20.65 L Morris 510 107.65 30.10 22.25 N Albrecht 420 75.70 21.00 6.05 5.75 R Laverty 420 75.70 21.00 15.55 5.75 H Ravel 250 31.25 12.50 5.75

Required: Calculate the net earnings for each employee.

Self-test Question 16A (answer Chapter 18) (i) Bob Burns has a weekly pay of $480 for a 40 hour week, and time and a half for overtime. His PAYG

withholding tax rate is 20%. Calculate Bob’s net take home pay for a 45 hour working week. (ii)

Payroll records of No Fuss Printing for the week ending 6 June

Employee Hours worked Rate PAYG withholding

income tax Medical fund Union fees $ $ $ $

M Aliberti 37 19.00 178.90 20.00 6.00 R Gilham 38 12.00 91.20 20.00 6.00 S Lee 35 16.00 125.60 10.00 6.00 T Zadros 38 13.00 105.55 10.00 6.00

Employees work a 35 hour week. Any overtime hours are paid at 1.25 times the ordinary rate. All employees contribute 4% of their ordinary gross wages to the superannuation fund. Required: Calculate the net wages for each employee. Self-test Question 16B (answer Chapter 18)

Payroll records of Belinda’s Birds

Employees Hours worked Rate per

hour Superannuation M Tu W Th F Sa Su $ $

K Hockley 7 7 7 7 7 21.50 42.25 B Borg 7 7 7 8 5 12.60 21.40 L Jasek 7 7 8 7 7 16.50 27.30 G Anderson 7 7 5 11.25 4.55 R Kelly 7 10 7 7 5 9.00 11.25

Belinda’s Birds is a retail store. Employees are paid: (i) time and a half for hours worked in excess of 7 on week days and the first 4 hours worked on Saturday;

and (ii) double time is paid for hours worked in excess of 4 on Saturday and for all hours worked on Sunday. The PAYG withholding income tax rate for all employees is 30%. Round all tax calculations to the nearest 5c.

Required: Calculate the net pay for each employee.


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Payroll register Questions 16.9 – 16.11 and self-test question 16C relate to illustrative example 2.

16.9 Prepare a payroll register from the following information:

Employee Hours

worked Weekly

earnings

PAYG withholding income tax

Union subs

Charity contributions

$ $ $ $ S Barney 43 480 104 10 5 T Owl 46 400 135 5 2 B Corn 41 920 204 5 – M Pone 40 250 40 5 2

Other information 1. The weekly earnings column only shows earnings for a 40 hour week. Overtime amounts must be

calculated and added. 2. All employees are paid time and a half for hours worked in excess of 40 per week.

16.10 Payroll records of Duncan’s Dairy Delights

PAYG withholding taxation

Employees

Actual hours worked

Normal weekly wages

$

Tax file number

Tax free threshold claimed

Super

Medical $

Union fees

$ S Pellatt 35 423.00 Yes Yes Yes 33.00 6.00 L Vulcan 37 406.00 Yes Yes Yes 6.00 F Bassett 45 290.50 Yes Yes No 6.00 K Jellicoe 40 406.00 Yes No Yes 15.00 6.00 N Lauder 40 323.75 Yes Yes No 22.00 6.00

All employees are paid weekly at rates set out in the enterprise agreement. For all employees the standard working week is 35 hours. Any hours worked in excess of the standard 35 hours per week is paid at an excess hours rate of $12.90 per hour. PAYG withholding income tax is deducted as per the tax tables on pages 512–519. All employees pay superannuation at a rate of 5% of their standard gross earnings (that is, not including overtime).

Required: Calculate the net wages of each employee and prepare the payroll register.


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16.11 Payroll records of Jenni’s Jazzy Jewellery

Hours worked Employees Hourly rate Ordinary Overtime

Meal allowance

Motor vehicle contribution

$ 1.15 1.50 $ $

G McCabe 14.20 35 6 18.50 L Dujon 25.40 35 2 3 18.50 25.00 M Gehrig 15.00 35 5 25.00 A Fewtrell 10.00 35 4 4 18.50 A Louie 13.00 35

Employees work a standard 35 hour week. Overtime worked after 5.30 pm on weekdays and on weekends is paid at 1.5 times the ordinary rate. Any other overtime is paid at 1.15 times the ordinary rate. Where employees work evening overtime they are paid a meal allowance. The company provides a fully serviced motor vehicle to some employees. These employees contribute $25 per week towards the cost of the motor vehicle. PAYG withholding income tax is calculated from the tax schedule on pages 512–519. All employees have provided their tax file number and are claiming the tax free threshold with leave loading.

Required: Calculate the net wages for each of the employees and prepare the payroll register.

Self-test Question 16C (answer Chapter 18)

Payroll records of R J Strauss

Employees Base monthly

salary Commission Sales made for the

month Medical insurance $ % $ $

V Carew 1 000 5 2 000 120 S Millen 1 300 5 1 500 95 C Lourey 1 200 5 3 000 60 E Burman 900 5 4 500 G Lloyd 800 5 5 500

Employees are paid a base monthly salary and a 5% commission on sales made during the month. PAYG withholding income tax is deducted at a rate of 20c in the dollar. Superannuation is deducted from every employee at the rate of 6% of their base monthly salary.

Required: Calculate the net salary of each employee and prepare the payroll register.


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Employee earnings record Question 16.12 relates to sample documents 2 and 3. 16.12


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PAYG Payment Summary – Individual Non Business Payment Summary for the year ending 30 June 20X3 Payee’s Income Tax File Number

Payer’s ABN number Payee’s date of birth

Payer’s name

Payee’s name

Payee’s Address Gross Salary, Wages, Bonus, etc.

Period during which payments were made: Allowances (give details)

Signature of Authorised Person Date

Union Fees, etc. Name of Organisation Amount Lump Sum Payments A B

Tax withheld – whole dollars only in words Thousands Hundreds Tens Units Cents Tax withheld (whole dollars)



Payer’s name

Payee’s name







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Payer’s name

Payee’s name








Payer’s name

Payee’s name







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Payer’s name

Payee’s name








Payer’s name

Payee’s name







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Payer’s name

Payee’s name








Payer’s name

Payee’s name







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Accounting entries to record payroll (16.13 – 16.18) Questions 16.13 to 16.18 and self-test question 16D relate to illustrative examples 3 and 4.

16.13 Employees from Peter’s Party Productions are paid a standard wage per fortnight. They also earn 10% commission for sales made during the period.

Payroll records of Peter’s Party Productions for fortnight ended 14.10.20X1

Employee

Standard ordinary

wage Commission

earned

PAYG withholding income tax Super Medical Fund

$ $ $ $ $ N Clayton 900 200 243.70 63.00 D Newry 550 950 390.40 38.50 65.20 V Tang 550 370 179.80 38.50 K Warby 550 720 304.00 38.50 75.00

Required: Prepare: (a) the payroll register for Peter’s Party Productions; and (b) the general journal entry to record the payroll expense and deductions from employees.

16.14 Using the information from the payroll register prepared in question 16.10, prepare: (a) the general journal entry to record the payroll expense and the deductions from employee earnings; and (b) the cash payments journal entry to record the payment of the payroll to the employees.

16.15 Using the information from the payroll register prepared in question 16.11, prepare: (a) the general journal entry to record the payroll expense and the deductions from employee earnings; and (b) the cash payments journal entry to record the payment of the payroll to the employees.

16.16 Crazy Bob’s Bargain Store pays their employees once a month. The payroll register shows a salary expense of $40 000 for the month of June. PAYG amounts withheld total $6 000 and health fund contributions to be deducted from employees’ pay total $1 500. The store is liable for payroll tax of 6%, and compulsory superannuation for employees of 5% of the total salary expense. Make a general journal entry to record and pay the store’s monthly payroll expense and other amounts due on 30 June and an entry on 6 July to pay all payroll deductions withheld and any other amounts owing.

16.17 The payroll records for Tom’s Transport for June 20X9 are as follows:

Employee Gross wages

Ordinary Gross

Overtime


Super contribution

Union subs

Social Club contribution

$ $ $ $ $ $ B Robbo 720 54 153 – 6 5 S Stan 320 84 56 30 4 4 R Curly 440 – 72 32 – 4 Y Ying 640 24 137 26 6 8


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Required: (a) enter the above information into a payroll register; (b) using the information summarised in the payroll register prepare the general journal entries to record the

monthly payroll and pay the wages; (c) the monthly payroll tax is 6% of gross monthly wages – prepare the general journal entry to record the

payroll tax liability for the month of June; and (d) prepare the general journal entry to record the payment of the payroll tax on 6 July 20X9.

16.18 Information taken from the payroll records of Terry’s Tents for the month of September 20X4 shows the following:

Payroll period ended

Gross earnings


Medical insurance Net pay

$ $ $ $ $ 04.9.20X4 3 300 995 99 172 2 034 11.9.20X4 3 490 1 036 105 172 2 177 18.9.20X4 4 100 1 230 123 172 2 575 25.9.20X4 3 350 1 005 101 172 2 072

Required: From the table above, for the periods ending 4.9.20X4, 11.9.20X4, 18.9.20X4 and 25.9.20X4: (a) record in the general journal the payroll expense and deductions from employees’ earnings; (b) record in the cash payments journal the payment of net earnings to the employees; (c) record in the cash payments journal the payment to each organisation of the amounts deducted from

employees earnings during the month of September 20X4; and (d) post all journals to the general ledger.

Self-test Question 16D (answer Chapter 18)

Payroll records of Gem Products

Employees Hourly

rate Hours

worked Super Medical

insurance Life

insurance $ $ $ $

S Pitlochry 11.20 42 23.00 25.00 9.00 M Dyson 9.50 45 19.00 15.00 7.00 O Jaffa 13.00 40 26.00 15.00 12.00 S Toger 15.50 43 31.00 30.00 17.00

Employees of Gem Products work a 40 hour week. Any overtime is paid at 1.5 times the ordinary rate. PAYG withholding income tax is withheld from all employees at the rate of 20c in the dollar. Round all tax calculations to the nearest 5c.

Required: Prepare: (a) the payroll register for Gem Products; (b) the general journal entry to record the payroll expense and deductions from employees’ earnings; and (c) the journal entry to record the payment of the payroll to the employees.


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Comprehensive questions (16.19)

16.19 Payroll records of Zanco Zoo for the week ended 7.7.20X9

Employees Earnings Deductions Ordinary Overtime

Hours Rate Hours


Medical Fund


$ $ $ $ M Doohan 35 24.70 2 276.60 23.00 B Donohue 20 10.50 10 59.15 11.50 J Ruthven 38 20.20 4 254.35 23.00 R Starkey 38 20.20 3 240.55 25.00

Payroll records of Zanco Zoo for the week ended 14.7.20X9 Employees Earnings Deductions

Ordinary Overtime

Hours Rate Hours


Medical Fund




Ordinary Overtime

Hours Rate Hours


Medical Fund




Ordinary Overtime

Hours Rate Hours


Medical Fund



Required: From the tables above, for the weeks ending 7.7.20X9, 14.7.20X9, 21.7.20X9 and 28.7.20X9: (a) calculate the net pay for each employee (overtime is calculated at time and a half of the ordinary rate); (b) prepare the payroll register; (c) prepare the journal entries to record the payroll expense and deductions from employees’ earnings and

the payment of net earnings to the employees; (d) record in the cash payments journal the payment to each organisation of the amounts deducted from

employees earnings during the month of July 20X9; and (e) post all journals to the general ledger.


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Self-test Question 16E (answer Chapter 18)

Payroll records of R J Transport for week ended 7.10.20X7

Employee Hours

worked

Gross weekly

earnings


Medical insurance Union fees

$ $ $ $ $ R Adair 40 985 295.50 49.25 62.50 7.50 D Campbell 40 895 268.50 44.75 50.00 7.50 M Hapgood 40 700 210.00 35.00 25.00 7.50 Y Jibbon 40 750 225.00 37.50 15.25 7.50


Employee Hours

worked

Gross weekly

earnings





Employee Hours

worked

Gross weekly

earnings




Required: From the tables above, for the weeks ending 7.10.20X7, 14.10.20X7 and 21.10.20X7: (a) calculate the net pay for each employee; (b) prepare the payroll register; (c) prepare the journal entries to record the payroll expense and deductions from employees’ earnings and

the payment of net earnings to the employees; and (d) post all journals to the general ledger.

Payroll Preparation

Documents

puddingburn publishing services

final page proofs

motor vehicle contribution

australian taxation office

tax free threshold

peters party productions

tax file number

general journal entry