liabilities cont ch 3

liabilities cont ch 3 - F Payroll liabilities 1 Employee...

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F. Payroll liabilities 1. Employee payroll deductions a) Vocabulary * Gross pay: total compensation earned including wages, salary, commissions and bonuses (hourly rate) *Net pay (take home pay): gross pay less all deductions * Withholding allowances: employee claims that reduce the amount of taxes one owes to the government * Payroll deductions (withholdings): amounts withheld from gross pay, both required and voluntary b) Recorded as current liabilities until amount is transmitted c) Employee FICA taxes: social security and medicare * Social security and medicare are computed separately * Medicare has no maximum limit d) Employee income tax * Amount depends on employee's annual earnings and number of withholding allowances * Both federal and state e) Employee voluntary deductions * Examples: union dues, pension contributions f) Recording payroll deductions * Debit salary expense for gross salary * Credit accrued payroll payable for net pay * Credit social security taxes payable, medicare taxes payable,
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