Unit 11: Payroll Accounting Flashcards
what is the process of recording transactions relating to goods or services rendered and the costs incurred to run the business (expenses)
bookkeeping
what is the process of measuring, recording, summarizing and analyzing the information recorded in the ledger?
accounting
What does accounting do?
it helps a company plan and control their business activities based on financial information gathered and communicate to their banks, auditors and shareholders
What is payroll’s responsibility for accounting?
to make sure all payroll information is recorded correctly in the general ledger.
- good controls help achieve this (efficient and safeguard company info)
What does payroll accounting deal with?
expenses and liabilities arising form compensating employees
What is the process of entering the payroll information
- the transaction is recorded in a journal entry
2. next the journal entry feeds into the business’s financial statements through the general ledger
What are the payroll benefits which must be accounted for in the GL
- Salary and wages (bonus, commission, overtime)
- Employee contributions to CPP, EI, and IT
- Employer expense for CPP and EI
- Payroll taxes such as WSIB and EHT
- Employer paid benefits include pensions plans or group insurance
- compulsory deductions such as garnishments or union dues
- voluntary deductions such as charitable donations
- accruals for future expenses (vacation or sick time banks)
what does a basic payroll accounting system consist of?
- a payroll register
- payroll bank account
- payroll cheques (dir dep)
- earnings record for each employee
What does the payroll register capture? Debits
debits for wages expense
debits for employer payroll taxes
What does the payroll register capture? Credits
liabilities for these payroll taxes (amounts owed that are not yet paid)
What are some payroll expenses (debits)
- salaries expense
What are the payroll liabilities (Credits)
1, Income tax withholding payable
- CPP payable
- EI payable
- Union dues payable
- Net wages payable (cash)
what are the two financial statements?
- Balance sheet (assets= liabilities + equity)
2. Income statement (net income = Revenues - expenses)
What financial statement will you find your payroll liabilities on ?
Balance sheet
What financial statement will you find your payroll expenses on?
income statement
What is the general ledger
used to keep an organized record, by account of the business transactions (can be few or many accounts depending on size of company)
What does the general ledger account consist of ?
assets accounts and liability accounts
What does assets - liabilities =
owner’s equity
what does it mean to have a double entry
for every debit there is a credit
Debits must = credits
If your debits do not equal credits what is this called
ledger is out of balance
What is the first step in the accounting process?
setting up accounts
What are elements of an account?
has at least 5 elements
- account name and number
- opening balance
- reference
- debit or credit entry
- a closing balance
What side are debits on?
What side are credits on?
debits are on the left side
credits are on the right side
Each journal entry to the general ledger MUST contain the following
- a journal entry reference #
- the date of the transaction
- debit or credit amount to be applied to each account
- total of the debits and credits (these must equal each other)
- a brief explanation of why you are making the entry
