Accounting for a Payroll System: Introduction
Every organization relies on its employees to smoothly operate its business, and pays salary to the employees for their services. The salaries are paid according to guidelines issued by the government, which protect the interests of the employees.
Calculating and maintaining payroll accounts is a key aspect of an accountant’s job. To calculate the salary for each employee, accountants have to follow an accounting process. While calculating salaries, accountants also calculate deductions. There are two types of deductions – employee and employer.
In America, the Federal Insurance Contributions Act (FICA) requires all companies to withhold a portion of their employees’ earnings to contribute to Social Security and Medicare. Similarly, employers also have to pay a contribution towards Social Security and Medicare. Employees can also request to withhold additional amounts to cover insurance and other benefits.
In this unit, you will learn how a general journal entry is transferred to individual ledger accounts through posting. You will also learn how gross salary is calculated, how deductions are made to the gross salary, and how net pay is calculated.
You will learn about different types of deductions, taxes, and the forms related to payroll taxes.