Unformatted text preview: Chapter 3 Chapter
Accounting for Labor Learning Objectives Learning Distinguish between features of hourly rate and Distinguish piece-rate plans. piece-rate Specify procedures for controlling labor costs. Account for labor costs and payroll taxes. Prepare accruals for payroll earnings and Prepare taxes. taxes. Account for special problems in labor costing. Payroll Accounting System for a Manufacturer Manufacturer Must record the hours worked or quantity of Must output by employees in total and by job, process, or department. process, Must analyze the hours worked by employees Must to determine how labor time is to be charged. to Must charge payroll time to jobs, processes, Must departments, and factory overhead. departments, Must prepare the payroll. Direct Labor Direct Represents payroll Represents costs that are traceable to individual jobs worked on during the period. period. Direct labor costs are Direct debited to the work in process account. process Indirect Labor Indirect Costs are incurred for a Costs variety of jobs that are related to the production process, but are not readily identifiable with the individual jobs worked on during the period. period. Indirect labor costs are Indirect charged to factory overhead. overhead. Recording Payroll Costs Recording Record hours worked or output quantity by Record employees by job, process, or department. employees Analyze hours worked to determine how to Analyze charge time. charge Charge payroll costs to jobs, departments, and Charge factory overhead accounts. factory Prepare payroll. Hourly-Rate Plan Hourly-Rate The employee’s wages are calculated by The multiplying the established rate per hour by the number of hours worked. by This plan does not provide an incentive This for the employee to achieve a high level of productivity. of Piece-Rate Plan Piece-Rate Employee’s wages based on the Employee’s employer’s quantity of production. employer’s Number of units produced is multiplied by Number a predetermined rate. predetermined May be referred to as incentive wage May plan or piece-rate plan. plan Quality may be sacrificed in order to Quality maximize quantity. maximize Modified Wage Plan Modified Minimum hourly wage is set even if an established Minimum quota is not attained. quota If quota is exceeded, a bonus is added to the If minimum wage level. minimum On days when quota is not met, the difference On (make-up guarantee) would be charged to factory overhead. overhead. When production work teams are utilized, a single When incentive for the group would be appropriate. incentive Labor Time Records Labor Given the magnetic card reading Given technology available today, the time record typically takes the form of a computer file. computer The labor hours recorded should be The reviewed by a production supervisor for accuracy. accuracy. Payroll Function Payroll Primary responsibility is to compute the wages Primary and salaries earned by the employees. and Forms should include a payroll record and Forms employees’ earnings records. employees’ A summary of the payroll is sent to accounting summary for recording the payroll in the accounting records. records. The payroll record is sent to the treasurer’s The department for making payments to employees. department Payroll Records Payroll Forms used by companies will vary, but all Forms forms possess some common characteristics. forms Entry to record payroll.
Payroll FICA Tax Payable Employees Income Tax Payable Health Insurance Payable Employee Receivable Wages Payable XX XX XX XX XX XX Employee Earnings Records Employee Company maintains a record of the Company earnings for each employee. earnings The cumulative record of earnings is The needed to compute earnings subject to many types of taxes. many Information is also used to prepare Form Information W-2 and Form W-3. W-2 Payment of Net Earnings Payment Accounting department sends the payroll Accounting record to the treasurer’s office. record The treasurer’s office is responsible for making The the payments to employees. the
Wages Payable Cash Entry to pay employees. XX XX Recording Salaries and Wages Recording Labor-time records are sent to the payroll Labor-time department on a daily basis. department The labor costs are charged to the appropriate The jobs or departments and factory overhead. jobs This analysis is recorded on a labor cost summary, This in the job cost ledger, and in the factory overhead ledger. ledger. Earnings of salaried employees are recorded in Earnings the factory overhead ledger accounts and on the labor cost summary. labor Labor Cost Summary Labor Hourly workers should be recording their time Hourly on a labor time record. on Labor costs are recorded on a labor cost Labor summary. summary. This summarizes the direct labor and indirect This labor charges to a department for the period. labor Salaried employees are often not required to Salaried prepare labor time records. prepare Flow of Costs from Subsidiary Records to General Ledger Records
Labor – Time Records Job Cost Sheets (Direct Labor) Factory Overhead Sheets (Indirect Labor) Labor Cost Summary (Direct and Indirect Labor) General Journal and General Ledger (WIP-Direct Labor FOH-Indirect Labor) Employer’s Payroll Taxes Employer’s Federal Insurance Federal Contributions Act (FICA) (FICA) Federal Federal Unemployment Tax Act (FUTA) Act State Unemployment State Tax Act (SUTA) Tax Payroll Accrual Payroll When the end of the period does not coincide When with the ending date for a payroll period, an accrual for payroll earnings and payroll tax expense should be made. expense
Payroll Wages Payable Entry to record accrual of payroll. XX XX Special Labor Cost Problems Special Shift Premiums Employee Pension Employee Costs Costs Bonuses Vacation and Holiday Vacation Pay Pay Accounting for Bonuses, Vacations, and Holiday Pay and
Work in Process Factory Overhead (Bonus) Factory Overhead (Vacation) Factory Overhead (Holiday) Payroll Bonus Liability Vacation Pay Liability Holiday Pay Liability XX XX XX XX XX XX XX XX Incurred payroll and bonus, vacation, and holiday pay. ...
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- Spring '11
- Taxes, Treasurer, xx xx xx, Payroll Taxes Employer