Questions and Answers
What is an employee earnings record?
What is the medicare tax used for?
What is net pay?
The total earnings paid to an employee after payroll taxes and other deductions
What does pay period refer to?
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What is payroll?
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What is a payroll register?
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What are payroll taxes?
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How is salary defined?
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What is social security tax used for?
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What is a tax base?
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What are total earnings?
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What is a withholding allowance?
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How many hours were worked by an employee who arrived at 8:10 AM and departed at 12:10 PM?
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How many hours were worked by an employee who arrived at 7:05 AM and departed at 6:05 PM with one hour off for lunch?
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How are employee regular earnings calculated?
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How is social security tax calculated?
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What is the primary purpose of a separate payroll checking account?
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A business may decide to pay employees salaries every week, once a week, twice a week, or once a month.
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Payroll time cards can be used as the basic source of information to prepare a payroll.
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Total earnings are sometimes referred to as net pay or net earnings.
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Employee total earnings are calculated as regular hours X regular hours plus overtime hours X overtime rate.
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Payroll taxes withheld represent a liability for an employer until payment is made to the government.
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Employers in many states are required to withhold state, city, or county income tax from employee earnings.
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Employers are required to have a current Form W-4 employee's withholding allowance certificate for all employees.
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The amount of income tax withheld from each employee's total earnings is determined from the number of withholding allowances and by the employee's marital status.
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A single person will have less income tax withheld than a married employee.
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The larger the number of withholding allowances claimed, the larger amount of income tax withheld.
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An employee can be exempt from having federal income tax withheld under certain conditions.
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Social security tax is paid by the employer only.
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An act of Congress can change the social security tax base and tax rate at any time.
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When an employee's earnings exceed the tax base, no more social security tax is deducted.
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All deductions from employee wages are recorded in a payroll register.
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The columns of the employee earnings record consist of the amount columns in a payroll register and an accumulated earnings column.
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A new earnings record is prepared for each employee each year.
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A check for the total net pay is written and deposited in the payroll checking account.
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When EFT is used, the employee does not receive an individual check.
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Study Notes
Employee Earnings and Payments
- An employee earnings record tracks details influencing payments to employees.
- Total earnings are what employees earn for a pay period before any deductions.
- Net pay refers to the total earnings after payroll taxes and deductions.
Payroll and Taxes
- Payroll encompasses the total earnings of all employees in a pay period.
- Payroll taxes are based on a business's overall payroll.
- Medicare tax is a federal tax for hospital insurance.
- Social Security tax funds old-age survivors and disability insurance and is assessed on employee earnings.
Pay Period and Salary
- The pay period defines the time frame for salary payments, which can vary (weekly, bi-weekly, monthly).
- Salary is the compensation received for employee services.
Employee Work Hours
- Work hours can be calculated based on arrival and departure times; e.g., 8:10 AM to 12:10 PM results in 4 hours worked.
- Overtime can be factored in; for instance, a 10-hour workday includes 1 hour for lunch deduction.
Withholding Allowances and Income Tax
- Withholding allowances reduce total earnings for the number of dependents claimed.
- The number of withholding allowances impacts the amount of income tax withheld – more allowances result in less tax withheld.
Payroll Management
- Payroll registers document all payroll-related information.
- A separate payroll checking account enhances control and security over payroll payments.
- Payroll time cards serve as vital sources for preparing payroll.
Reporting and Compliance
- Employers must maintain a current Form W-4 for all employees.
- Employers are liable for payroll taxes until remitted to the government.
- The tax base is the maximum earning amount subject to tax and can be altered by legislative changes.
Exceptions and Notes
- An employee may be exempt from federal income tax withholding under specific conditions.
- Social Security taxes are jointly paid by both employee and employer, and they cease once earnings exceed the established tax base.
- All deductions from wages appear in the payroll register, and each employee carries a singular earnings record through the years.
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Description
Test your knowledge with these flashcards covering key terms from Accounting Chapter 12. From employee earnings records to Medicare tax, this quiz will help reinforce your understanding of payroll concepts and calculations. Perfect for reviewing before exams.
