UNIT 7.

PAYROLL ACCOUNTING

Contents
7.0 Aim and Objectives
7.1 Introduction
7.2 Completing Payroll Setup Wizard
7.3 Maintaining Payroll Tax Tables
7.4 Entering Employee Default Information
7.5 Maintaining Employee Personal Records
7.6 Completing Payroll Tasks
7.7 Summary
7.8 Glossary
7.9 Answers to Check Your Progress

7.0 AIMS AND OBJECTIVES

After studying this unit, you will be able to

 complete Payroll Setup Wizard
 maintain Payroll Tax Tables
 enter Employee Default Information
 maintain employee personal records
 Complete Payroll Tasks

7.1 INTRODUCTION

The concept payroll is used to refer to the total amount paid to employees of a firm as a
compensation for the service rendered to the firm in a given period of time. The payroll
accounting of a firm has to be given emphasis of significance for the following reasons:
 Employees are sensitive to payroll errors and irregularities, and maintaining good
employees moral requires that the payroll be paid on a timely and accurate basis.

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  Payroll expenditures are subject to various government regulations.
 The payment for payroll and related taxes has significant effect on the net income
of most business enterprises.
For the above reasons, the need for accurate system of handling the payroll of a business is
unquestionable.

Peachtree automates your payroll process. Once you set up payroll tax tables, employee defaults
and employee records, you only have to select each employee using the payroll tasks, and
Peachtree automatically computes the paycheck. Then, you can print a batch of checks for all
employees or print a single paycheck, if you like.

The payroll process in Peachtree Accounting involves the following five steps:
1. Completing Payroll Setup Wizard
2. Maintaining Payroll Tax Tables
3. Entering Employee Default Information
4. Maintaining Employee Personal Records
5. Completing Payroll Tasks

7.2 COMPLETING PAYROLL SETUP WIZARD

Completing the payroll setup wizard process helps you to establish standard payroll fields,
default general ledger accounts and other optional payroll fields such as employee vacation time
tracking. Note, however, that all the procedures in the payroll setup wizard may not necessarily
have impact on the Ethiopian Payroll System (EPS).
(EPS). Nevertheless, it is not possible to handle
transactions and data related to the EPS using payroll facilities of Peachtree Accounting
Complete Software Packages (PACSP) without passing through or completing all the procedures
making up the Payroll Setup Wizard.

The following steps help you to complete the Payroll Setup Wizard.
Step 1. Initial Payroll Setup

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i. From the Maintain main menu, select Default Information, and then choose Payroll Setup
Wizard.
Wizard.
ii. In the Payroll Setup Wizard window, select the next button or select the Initial Payroll Setup
option, and in the Initial Payroll Setup folder
 Enter or select from the drop-down list a state abbreviation for the state where in
majority of your employees work.
 Enter or select a locality and locality tax rate if the fields are available and
applicable.
 Enter the unemployment percentage the state government requires your company
to pay
 Select Yes to create payroll fields for employee tips and meals, otherwise select
No.
Although the aforementioned procedures do not affect the EPS,
EPS, you cannot pass to the next steps
particularly without selecting any one of the states from the state drop-down list and specifying
general ledger accounts to be used by Peachtree in setting up basic payroll fields. Therefore, it is a
must to select one from the available states and enter the appropriate GL accounts in the boxes
available as given in step-iii below and after that you may escape the remaining procedures.

Figure 7.1 Payroll Setup Wizard

All procedures in the payroll setup

wizard do not necessarily affect the
EPS. However, handling data related
to EPS using Peachtree Payroll
accounting requires you completing
the procedures particularly in the
“Initial Payroll Setup” (Figure 7.2)
and “Payroll GL Accounts” (Figure
7.3) folders.

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 Figure 7.2 Initial Payroll Setup

Select a state from the available states list Leave empty these fields

iii. Select the next button and enter payroll default general ledger accounts to be used in relation
to standard payroll fields. Later you can establish accounts for specific pay rates and payroll
fields, if you want.
 Gross Pay Account. Typically, this is the Salaries Expense or Wages Expense account
which will be used to record all kinds of payments to employees including basic salary,
allowances, overtime, etc. Later you can set up individual expense accounts for each pay
or salary type, if you want.

 Tax Liability Account.

Account. This account will be used to record obligations of the employee
for its share of contributions in to employees’ pension/provident fund plan. This could be
Pension or Provident Fund Payable account.

 Tax Expense Account. This account may be used to record expenses related to
contributions by the employer in to the employees’ pension/provident fund plan. This is
commonly the Payroll Expenses Account.

Figure 7.3 Payroll GL Accounts

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 Enter or select the appropriate GL accounts.

These procedures do not affect the EPS. Thus to escape them all click the next
button until the finish button is enabled to help you end the Payroll Setup Wizard
iv. The next steps in the Payroll Setup Wizard are not that much relevant to the EPS.
EPS. Thus,
unless otherwise you want to know something about these steps, select the next button until
the finish button is enabled which helps you to finish the Payroll Setup Wizard.
Wizard. Note,
however, that the steps related to Vacation Time Tracking may be helpful to your company if
it wants to track employee vacation time.

Check Your Progress I

1. What is payroll?
…………………………………………………………………………………………………
…………………………………………………………………………………………………
………………………………………………………………………………………………….

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2. “All the procedures in the Initial Payroll Setup option affect the Ethiopian Payroll System.”
Comment
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………

7.3 MAINTAINING PAYROLL TAX TABLES

The maintain company payroll tax tables window enables you to create a new tax table or
modify an exiting one which will be used to determine amounts related to particular payroll field
such as employee income tax and employee/employer pension/provident fund contribution.
PACSP provides tax tables that affect payroll transactions of companies operating under the
USA tax and business laws. These tables can be accessed through the Edit global sub-option of
the Payroll tax table option in the file main menu.

Global payroll tax tables do not affect payroll transactions of companies operating under the
Ethiopian tax and business laws. As a result, it is not necessary to edit these global tax tables. For
companies operating under the Ethiopian tax and business laws, the Edit company sub-option of
the Payroll tax table option in the file main menu will help them to create payroll tax tables
appropriate to handle their payroll transactions in the Ethiopian context.

Creating tax tables for a certain deduction or addition is advisable if the deduction or addition is
variable (requires calculation) and/or is applicable to all or majority of your company
employees. For a fixed sum of deduction and/or addition affecting only a particular employee, it
is advisable to insert the related amount in the personal records of each employee using the
Maintain Employees/Sales Reps window.
window. A certain fixed sum of deduction and/or addition
affecting all or majority of your company employees may be inserted through the Employee
Defaults window.
window. For additional information, read the topics on Entering Employee Default
Information and Maintaining Employee Personal Records.

Creating payroll tax tables involves the following steps:

Step I. From the File main menu, select Payroll tax tables, and then choose Edit Company.

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Step II. If you wish to modify an existing tax table, scroll through the list at the top of the
window or click the Find button and type text to search for a tax table in the list and make
the necessary changes and click Save to save the changes you made. To create a new tax
table, go to step "iii" below.

Step III. In the Maintain Company Payroll Tax Tables window complete the following
procedures.

 Tax ID.. Enter an ID that is not already in the Tax Table list. Tax ID may take any number
and/or alphabet - not more than eight characters. For instance, INTax or ITAX2004 for
employee income tax, PenEE or PENSION4 for employee pension fund contribution,
ProvER or PENSION6 for employer provident fund contribution, and UNIONdue, Miazia
23 or LABOUR for employee labor union contribution, etc.

 Tax Name. The name of a payroll tax table is very important; because it shows the way the
computer identifies which tax table to use for calculating an amount related to particular
payroll field. Tax Name must be entered according to strict rules. The name consists of two
parts, separated by a single space.
space.

Tax name consists of not more than thirty numeric and/or alphabetic characters. You may
also enter two or more words separated by a single space. For instance, Income Tax for
employee income tax, Pension EE for employee pension fund contribution, Provident ER
for employer provident fund contribution, and UnionDue EE or Labour Union for employee
labor union contribution, etc.

Including the suffix particularly ER in payroll tax names will help you and Peachtree to
identify whether the tax table relates to the employer. For instance, Pension ER indicates
that this tax table will be used to calculate the sum to be contributed by the employer to the
employee pension fund plan maintained by the organization. Therefore, names of payroll
tax tables affecting the employer must include the suffix ER. However, including the suffix
EE to tax names for employee related payroll tax tables is not mandatory.

 Payroll Tax Year.. This is represented by the last two digits of the calendar year to which
the tax table applies. If the current calendar year, for instance, is 2005, the payroll tax year
will be 05; if it is 1998, then the payroll tax year will be 98.

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 During Payroll Entry (or any other time the program must calculate payroll deductions or
additions), Peachtree looks for the tax name associated with a payroll field, adds a space
and the last two digits of the current calendar year to it, and then searches for that
combined name in the payroll tax tables. For example, suppose the calendar year is 2003
and there is a payroll field (created during entering employees default information in the
employee defaults window) called Pension.
Pension On the same line as the Pension, “Pension
EE” was entered in the “Tax Name” column of the EmployEE fields of the employee
defaults window. Any time the program needs to calculate the amount related to the
Pension payroll field, it will combine the name and the year to form “Pension EE 03” and
search for that name in the payroll tax tables. If it finds it, it will calculate the value for the
Pension payroll field during payroll entry tasks. If it does not find it, the program will give
you feedback consisting of a "beep" sound followed by a written message indicating that it
could not find the tax table which the program is required to use in calculating a certain
amount. Such feedback is usually available while you are handling tasks related to payroll
entry.
entry. So, whenever you face with such feedback, you have to make sure that you properly
entered the payroll tax name i.e. check for the "single space" rule and entering payroll tax
year.

 Filing Status. Filing status determines the way deductions especially income tax is
calculated. Filing status of an employee may entitle or prohibit her/him to or from getting
tax exemption based on the employee’s family status or number of dependents. It,
however, does not affect the EPS because in Ethiopia each and every employee is required
to pay tax on all her/his earnings regardless of whether s/he is married or has dependents.
But, for selecting one of the available options is a must, select the “All Filing Statuses”
option from the filling status drop-down list.
list.

 Appears on Payroll Tax Report Menus .For

For this option does not affect the EPS in any
ways, better you leave it. If you put check make on the box corresponding to this option,
however, writing formulae in the formula box (that will be discussed shortly) will
somehow be complicated.

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 Government. This identifies which government authority is collecting the amount
calculated based on payroll tax table identified in the previous procedures. It also
determines which filing status will be looked at when calculating deductions. You may
choose any one of the available options: Federal, State or Local. Note, however, that, if
you select a State or Local, you have to make sure that you wrote the name of a state or
locality in all spaces in any window (e.g. in the employee defaults and maintain
employees/sales reps windows) requiring you to write state and/or local names or specify
for which state or locality the tax applies. If you select, on the other hand, the Federal
option, you have to make sure that you did not write or you have deleted anything written
in all spaces in any window (e.g. in the maintain payroll tax tables, employee defaults and
maintain employees/sales reps windows) requiring you to write name of a state and/or
locality. For convenience, select the Federal option and leave empty all boxes requiring
you to write state/locality name.

 Type. Specifies the treatment of an amount calculated using a tax table identified in the
previous procedures. Select Deduction, Addition, or Exception as a type for a certain
amount to tell Peachtree if it should add/deduct this amount to/from employee paychecks
or it is an exception (for example, vacation/sick time). If an amount is set as a deduction
(e.g. income tax or union due) and returns a positive number, then its value is set to zero. If
an amount is set as an addition (e.g. overtime or allowance) and returns a negative number,
then its amount is set to zero. If you want to use positive and negative numbers in the
payroll calculation, however, select the Exception option. The Exception option should
only be used for vacation/sick time or other items where it makes sense to have either a
negative or positive number as the result of particular calculation.

 Formula. This box helps you to write a formula telling Peachtree how to calculate payroll
deductions, additions or any other item you want the program to calculate. The formula is
entered in the form of one or more equations, in a manner similar to that used in “BASIC”
programming. For a single equation, a variable (“variable” refers to particular item to be
calculated using this formula, for instance, pension, income tax or overtime) is put at the
beginning of the equation, followed by an equal sign (=), followed by an expression.
During a calculation, the expression is evaluated and the result is stored in the variable. If

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 there are multiple equations, they are separated from each other by a semicolon (;).
Equations do not have to begin on separate lines, but they are easier to read if you type
them that way. You are free to use either upper or lower case letters, since the program
ignores case. Besides, for the program ignores spaces, you are free to use spaces as you
wish to make the equations easier to read. However, you should correctly spell such
words/phrases as “answer”, “table” and “adjusted_gross” which are commonly used in
formulae required to calculate such deductions as income tax and pension. Following are
some of the words/phrases which we commonly write instead of the aforementioned
words/phrases; anser, answers, anwer, tabl, teble, adgusted-gross, adjusted-gross, adjusted-
gros, ajusted-gross, agusted_gross, etc. If you misspell any of the words/phrases “answer”,
“table” and “adjusted_gross”, the program will give you feedback consisting of a "beep"
sound followed by a written message indicating that the word/phrase you wrote is not
valid. Such feedback is provided when you try to save incorrectly written formula related
to a specific payroll tax table.

In addition to equations, a formula can have one or more explanatory comments. A comment is
entered by typing in a quotation mark (“), followed by the desired text, which can be as long as
you wish up to 1,000 characters, followed by another quotation mark (”). During a calculation,
the computer ignores anything that appears between quotation marks.

Below are sample formulae for some payroll deductions/additions.

 Employee Income Tax
Tax ID ETHTAX
Tax Name ETHTAX 02
Formula ANSWER=-TABLE (ADJUSTED_GROSS)
R=ADJUSTED_GROSS/176;ANSWER=R*((OT1*1.25)+(OT2*1.5)+(OT3*2)+
(OT4*2.5));ANSWER=-TABLE(ADJUSTED_GROSS+ANSWER+T.ALL)

Note that you can write any Tax ID and Tax Name for a deduction or addition given that you do
not use such characters as *, /,?, and +. You should correctly spell the words/phrases answer,
table and adjusted_gross.
adjusted_gross. You should write the word table as part of an expression when the
deduction and/or addition are to be calculated using tables such as the Schedule-A of the

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Ethiopian Income Tax Proclamation No. 286 of 2002. Refer Table 7.1 below to refresh your
memory for the Ethiopian tax rate applicable for each salary category including amount to be
withheld.

Gross more than Withhold Plus%

150 0 10
650 50 15
1,400 162.50 20
2,350 352.50 25
3,550 653.50 30
5,000 1,088.50 35

Table 7.1 Ethiopian Income Tax Proclamation

 Employee Pension/Provident Fund (4%)

Tax ID PENS4
Tax Name PENS4 02
Formula ANSWER=-0.04*(ADJUSTED_GROSS)
Note that the word table is not included in the above and the next three formulae because
there are no specific tables to be used in calculating such items as pension, union due
and bonus.

 Employer Pension/Provident Fund (8%)

Tax ID PENS6
Tax Name PENS6 ER 02
Formula ANSWER=-0.08*(ADJUSTED_GROSS)
Note that the above tax name includes the suffix ER to indicate that the provident fund
contribution relates to the employer.

 1% Contribution to Labor Union/Idir/Iqub/Social Club/Disaster Prevention and

Preparedness Commission (DPPC)
Tax ID LUNION

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 Tax Name LUNION 02
Formula ANSWER=-0.01*(ADJUSTED_GROSS)

 Bonus (Birr 500 plus 1%)

Tax ID BONUS
Tax Name BONUS 02
Formula ANSWER= 500 + (0.01*(ADJUSTED_GROSS))

Peachtree defines the phrase adjusted_gross (which is represented by the word Gross in the
tabs/folders of the Employee Defaults & Maintain Employees/Sales Reps windows) to be the
sum of all employee compensations such as basic salary, overtime, bonus, allowance,
commission, etc. Thus, by default, adjusted_gross means gross earnings. For calculating
deductions and/or additions, however, you can redefine the phrase “adjusted_gross” to mean
anything you want it to be such as basic salary, taxable income, etc. This is done in the calculate
adjusted gross window accessible through the employee defaults window if the redefined
adjusted_gross is to be used for calculating deductions/additions affecting all or majority of
your company employees or in the calculate adjusted gross window accessible through the
maintain employees/sales reps window if the redefined adjusted_gross is to be used for
calculating deductions/additions affecting a specific employee. For additional information on
redefining adjusted_gross, read the topic on “entering employee fields information in the
EmployEE Fields Tab/Folder”.

 Table - If your tax formula uses the Table function, then click the Table button in the
main menu of the Maintain Company Payroll Tax Tables window and set up the
withholding tax percentage table used for that function. If your formula does not use the
Table function, then you can still set up the table by activating this button, but it will not
affect tax calculations.

If you want to install Schedule-A of the Ethiopian Income Tax Proclamation No. 286 of 2002
to be used in calculating employee income taxes using Peachtree, do the following:
 Gross More Than - Refers to the taxable earnings floor/base in excess of which a certain
income tax rate is applicable in a progressive income tax system. For example, 150, 650
and 1400 are the taxable income bases for the first (10%), second (15%) and third (20%)
income tax rates, respectively, in Schedule-A of the Ethiopian Income Tax Proclamation

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 No. 286 of 2002. The amounts entered in this column must be entered in each row in
increasing order, for instance, 150; 650; 1400; etc. Any rows that are beyond the last
amount (e.g. 5000) of the table must have a zero entered in the related column under the
Gross More Than heading. During calculations, Peachtree matches the Gross More Than
column to the employee's taxable gross and uses the information in the row to calculate the
related income tax.

 Withhold - Refers to a fixed amount of tax an employee is required to pay when her/his
taxable earnings is more than a certain taxable base but less than the next upper base. Enter
the withholding amount that corresponds to a certain taxable base in the Gross More Than
column; for instance, enter “0” in the row under this column corresponding to the Gross
More Than 150, because there is no fixed amount of tax payable on taxable earnings more
than 150 but less than the next higher base, rather the employee must pay 10% when
her/his taxable income exceeds Birr 150 up to the next higher base. Enter 50 and 162.5, in
the rows corresponding to the Gross More Than 650 and 1400, respectively, because if an
employee’s taxable income is more than 650, s/he has to pay Birr 50 (10% of 650 minus
150) and then 15% on amounts in excess of 650 up to 1400. If an employee’s taxable
income is more than 1400, s/he has to pay in total Birr 162 (10% of 650 minus 150, plus
15% of 1400 minus 650) and then 20% on amounts in excess of 1400 up to 2350. The
amounts entered in this column must be cumulative and entered in each row in increasing
order. Any rows that are beyond the last amount (e.g. 1087.5 corresponding to gross more
than 5000) of the table must have a zero entered into the related column under the
withhold header.

 Plus % - Refers the amount of tax, expressed in terms of percentage of the taxable
income, an employee is required to pay when her/his taxable earnings exceed a certain
taxable base. For instance, 10% and 15% are additional taxes an employee is required to
pay when her/his taxable earnings exceed Birr 150 and Birr 650, respectively. Enter the
percentage that helps the computer to determine the amount to be added to the sum in the
withhold column based on the amount in the Gross More Than column. For instance enter
10%, 15% and 20%, corresponding to Gross More Than 150, 650 and 1400, respectively.
The amounts entered in this column must be entered in each row in increasing order. Any

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 rows which are beyond the last figure (e.g. 35% corresponding to Gross More Than 5000)
of the table must have a zero entered in the column under the plus % header.

 Then, click Ok in the Withholding Tax Percentage Table Entry window to go back to
the Maintain Company Payroll Tax Tables window.

Finally, click the Save button in the Maintain Company Payroll Tax Tables window to save the
information related to the payroll tax table you just entered. If you want to continue entering
additional payroll tax table, enter a new Tax ID by writing it over the existing Tax ID. However,
if you want to finish the process of entering payroll tax tables, click the Close button in the
Maintain Company Payroll Tax Tables window.
Figure 7.4 Create Payroll Tax Tables

Words and tax year that makeup payroll tax names should be separated by a single space. And all payroll
tax tables affecting all or majority of your company employees should be inserted in this window.

Leave empty boxes that require you to enter state and/or local names especially if you select the
federal option for the authority that collects taxes and other employee deductions

This is where tables included in payroll tax formulae are recorded.

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Check Your Progress II
1. What is the function of Maintain Company Payroll Tax tables?
tables
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………
2. Why it is not necessary to edit Global Payroll Tax tables for companies operating under the
Ethiopian tax and business laws?
…………………………………………………………………………………………………
…………………………………………………………………………………………………
………………………………………………………………………………………………….

7.4 ENTERING EMPLOYEE DEFAULT INFORMATION

Once you have completed the Payroll Setup Wizard (or copied employee defaults from an
existing company in the New Company Setup wizard), you can modify payroll setup to match
your business’s specific payroll needs. The information on the Employee Defaults window
displays standard employee information that will be considered during payroll entry. You can
also modify individual employee records for unique setup, if necessary, while maintaining
employee personal records in the Maintain Employees/Sales Reps window.
The following steps, broken up by tabs/folders help you to setup employee default information.
Step I. From the Maintain menu, select Default Information, and then choose Employees…
StepII.. Entering general information in the General Tab/Folder
 This step helps you to record information concerning the location where in majority of
your employees work and setup custom fields that help you to record additional
information about your employees such as birthday, emergency contact person’s name,
etc.
 State/locality - If you completed the Payroll Setup wizard, these values are displayed for
you. If not displayed, enter the appropriate state/locality. If you select the Federal option
for the government collecting taxes in the maintain payroll tax tables window while

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 maintaining payroll tax tables, however, you should make sure that you did not write or
you have deleted anything in the boxes requiring you to write state/locality name.
 Custom Fields - Place check marks in all or some of the available boxes to enable the
custom fields and enter your own field labels to keep track of specific information
associated with employees. For example, you may enable the first custom field and enter
“Birthday” as a field label so that you will be able to maintain employee birthday
information in the Maintain Employees/Sales Reps window. If custom fields are not
enabled, you will not be able to enter custom field data in the Maintain Employees/Sales
Reps window. Note that, if you enabled a given custom field, you should assign a field
label to it.
 Assign Payroll Fields for - These fields are not necessary for the EPS, thus, you may
escape them and move to the next steps.

Figure 7.5 Creating Custom Fields

Delete anything written in or leave empty boxes that require you to enter state and/or local names
especially if you select the federal option for the authority that collects taxes and other employee
deductions in the Maintain Company Payroll Taxes window (Figure7.4).
Escape these fields because they do not affect the EPS in any ways or make sure that boxes within each field are at
none status. .

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Filed labels are entered here after enabling each custom field by placing a check mark in the corresponding box.
Enabled custom fields will be available to you in picture-10 for recording customized employee information.

StepIII. Entering pay level information in the Pay Levels Tab/Folder

 This step helps you to set up a maximum of 20 different pay level field names for hourly
pay types and other 20 for salary pay types. This means that you can track basic salary,
overtime, bonus, or any other special types of pays for salaried employees.

 Enter name of each compensation you offer to your employees in the "field
"field name" box
(e.g. basic salary, taxable/non-taxable allowance, overtime, etc) and select the GL
account to which you debt the payments (e.g. salary expenses) from the GL Account
drop-down list. For example, you may write basic salary as a field name and select 516 as
an account number for, say, salary expenses, which will be debited for the basic salary of
each employee. You should set up all pay level field names here whether they apply to
specific employee, to all or majority of your company employees.

Figure 7.6 Creating Pay Levels

All pay levels for salaried employees should be recorded here whether they
affect one, all or majority of your company employees. Pay levels should be
created in this window so that they will be available to you in Figure 7.11 for
recording employee compensations.

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StepIV. Entering employee fields information in the EmployEE Fields Tab/Folder
The EmployEE payroll fields serve the following basic functions:
(a) Enter payroll deductions and/or additions, such as employee income tax, labor union
due, pension/provident fund contribution, and/or overtime compensation that will be
combined with employee gross earnings to compute taxable earnings and ultimately
net pay, and

(b) Memo amounts, such as basic salary (on which to calculate pension/provident fund
contributions) and non-taxable allowances that are tracked for calculating such items
as taxable income. Memo amounts/items, however, are not posted to the general
ledger.

You should set up all payroll deductions, additions and/or memo items here whether
they apply to specific employee, to all or majority of your company employees so
that such items will be available to you when maintaining employee personal
records in subsequent procedures.

Field Name - Identifies the payroll fields/items (e.g. income tax and employee pension
contribution) that appear on employee paychecks and reports and memo items (e.g. basic salary
and non-taxable allowances) which do not appear on employee paychecks and reports (see
"memo" below). In addition to the existing Gross payroll field, you can set up a maximum of 29
other payroll fields. Common payroll fields you should set up in this step include such fields
related to employee deductions as income tax, pension, bank loan, union due, and other
contributions; such fields related to employee additions as overtime and bonus as well as memo
items such as basic salary and non-taxable allowances. You can enter a new name on any blank
line that describes the employee related deduction, addition or memo. When entering payroll
field names, you must use a single space or the underscore character (shift plus the minus sign)
to separate words that make up a field name, for instance, Income Tax or Income_Tax for
employee income tax deductions.
deductions. Note the difference between the following two characters; "-"
(minus) and "_" (underscore). Also, payroll fields must begin with an alpha character.

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G/L Account - Identifies the general ledger account to which the amounts related to the payroll
field entered in the payroll field name column should be posted. For example, the Employee
Income Tax Payable and Employee Pension/Provident Fund Contribution Payable accounts can
be used to record amounts related to employee income tax and pension/provident fund
contribution, respectively. Since memo amounts are not meant to be posted, they do not require
specifying related general ledger accounts.

Calc (Calculate) - A check mark placed in any of the boxes under the Calc heading
corresponding to a certain field name indicates that Peachtree, using a certain payroll tax table,
should automatically calculate the payroll field amount. If check mark is placed in any box, then
you must specify which payroll tax table to be used in calculating the amount corresponding to
the payroll field. This is done by selecting a tax table from the Tax Name drop-down list. If a
check mark is not placed in particular box under the Calc heading corresponding to a certain
payroll field, you can manually enter amount for this field in the amount.

Tax Name - If the amount related to a particular field name is to be calculated by the program,
enter or select from the tax name drop down list the name of the tax table to be used. Press ? to
see a list of tax tables.

Amount - If amount related to particular field name is not meant to be calculated by the
program, enter a flat rate here in this window especially if the amount applies to all or majority
of your company employees (for example, Birr 200 transportation allowance to each and every
employee) or in the Maintain Employees/Sales Reps window if the amount is unique to each
employee (for example, Birr 200 allowance for one employee and Birr 500 allowance for another
employee or basic salary of each employee). Enter positive numbers for earnings and negative
numbers for deductions in the Amount field.

Memo - A check mark placed in any of the boxes under the memo heading indicates that the
corresponding field amount is for use in calculating certain figures and not to be posted to the
general ledger. For example, you may enter basic salary in the field name and put a check mark
in the box under the memo heading corresponding to the field name basic salary so that the basic
salary may be used to calculate employee/employer pension fund contribution. For memo items
you do not need to enter the GL account name because memo items are not meant to be posted to

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the GL. All non-dollar amounts should be marked as memo items (for example, vacation-time or
sick-time hours earned).

Run - A check mark placed in any of the boxes under the run heading indicates that the
corresponding field amount should accrue continuously each payroll year. Peachtree will keep a
running total of this field and not reset the amount to zero when you close payroll tax years. For
example, if you set up a field to track vacation hours, you might want the unused total to be
carried over into the following payroll tax year. In this case, put a check mark in the box under
the run heading corresponding to the appropriate vacation time field.

Adjust - This step helps you to redefine the adjusted_gross in relation to a certain amount to be
calculated by Peachtree. Remember that, the adjusted_gross identifier is used in formulae
entered in the Maintain Company Payroll Tax Tables for use in calculating certain payroll
additions and/or deductions. When you select the Adjust button corresponding to a certain field
name (e.g. income tax or pension), Peachtree displays the Calculate Adjusted Gross window.
The Adjusted_Gross identifier is used in many calculations of payroll deductions and/or
additions. In some cases you may want the entire gross pay to be used as a taxable gross (in this
case,
case, adjusted_gross=gross=sum
adjusted_gross=gross=sum of all employee earnings); in other cases you may want
employee benefits, such as non-taxable allowances, to be deducted from gross pay to determine
taxable gross for computing particularly income tax (in this case, adjusted_gross=taxable
adjusted_gross=taxable
income=gross less non-taxable allowances). To redefine the adjust_gross amount used for either
an employee or employer payroll field calculations, do the following:
 To redefine the adjusted_gross applicable to all or majority of your company employees,
select the Adjust button corresponding to the payroll field to be calculated based on this
redefined adjusted_gross on the EmployEE or EmployER tab/folder of the Employee
Defaults window.
window. The Adjust button is only accessible if you put a check mark in the
box corresponding to a certain field name under the Calc header.
 To redefine the adjusted_gross in relation to specific employee, clear the check mark in
the box corresponding to the field to be calculated under the Std (standard) header and
put a check mark under the Calc header on the EmployEE or EmployER tab/folder in the
Maintain Employees/Sales Reps window.
window. Then, the Adjust button will be activated and
select it.

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  In the Calculate Adjusted Gross window, put a check mark under the Use header in each
box corresponding to each payroll field that make up the Adjusted_Gross for the payroll
field you are calculating. For example, to calculate pension/provident fund contribution
of either the employee or employer, put a check mark in the box corresponding to basic
salary. In this case, adjusted_gross is redefined to be basic salary and
employee/employer pension/provident fund contribution will be calculated on only the
basic salary represented by the redefined adjusted_gross.
adjusted_gross. If you want to redefine the
adjusted_gross to mean taxable income to calculate income tax, put check marks in
boxes corresponding to the field names gross and non-taxable allowance (for instance,
transportation allowance) and adjusted_gross will equal to gross (which includes all
kinds of payments to employees) minus non-taxable allowance. Or else, put check
marks in boxes corresponding to the field names basic salary, taxable allowance,
overtime and bonus, and other taxable employee earnings and then adjusted_gross will
equal to the sum of basic salary, taxable allowance, overtime, bonus, and any other
taxable employee compensations. To do this all, however, you should first create the
required field names (e.g. basic salary, taxable allowance, non-taxable allowance,
bonus, etc.) and define them whether they should be treated as memos or not.
 Then, click Ok to come out of the Calculate Adjusted Gross window.
window.

Step V. Entering employer fields information in the EmployER

EmployER Fields Tab/Folder
EmployER Fields Tab/Folder.This
Tab/Folder.This tab helps you to set up default employer payroll fields.
Employer fields refer to such employer’s contribution as pension/provident. Amounts related to
employer fields do not affect employee gross/net pay and do not appear in any employee
paychecks.

Field Name - Identifies the employer payroll field that appears on business payroll reports. You
can enter a new name on any blank line that describes the employer’s share in certain
contributions for the benefits of employees. When entering payroll field names, you must use a
single space or the underscore character (shift plus the minus sign) to separate words that
makeup field name, for instance, Pension Con or Pension_Con, a field name for employer’s
share in contributions to employee pension/provident fund plan. Note the difference between the

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following two characters; "-" (minus) and "_" (underscore). Also, payroll fields must begin with
an alpha character.

Liability - Identifies the general ledger liability account to be credited each payroll period for
this employer payroll field. For instance, Pension Fund Contribution Payable account may be
credited for or used to record the employer's share of pension/provident fund contribution.

Expense - Identifies the general ledger expense account to be debited each payroll period for this
employer payroll field. For example, Payroll Expenses account may be debited for or used to
record the employer's share of pension/provident fund contribution and/or any other payment to
the advantage of employees.

Calc – A check mark placed in any of the boxes under the Calc heading corresponding to a
certain field name indicates that Peachtree, using a certain payroll tax table, should automatically
calculate the payroll field amount. If check mark is placed in any box, then you must specify
which payroll tax table to be used in calculating the amount corresponding to the payroll field.
This is done by selecting a tax table from the tax name drop-down list. Note that boxes for
entering employer related fixed sum are not available in EmpoyER Fields tab/folder of both the
Employee Defaults and Maintain Employees/Sales Reps windows.
windows.

Adjust - This step helps you to redefine the adjusted_gross when calculating certain employer
related amounts. When you select the Adjust button corresponding to a certain field name (e.g.
pension or provident fund), Peachtree displays the Calculate Adjusted Gross window. The
Adjusted_Gross identifier is used in many calculations of certain field amounts. For more
information on redefining adjusted_gross, read the topic on “Entering employee fields
information in the EmployEE Fields Tab/Folder"

Then, click Ok to come out of the Calculate Adjusted Gross window.

window Finally click Ok in the
Employee Defaults Window to finish the process of recording employee default information.

7.5 MAINTAINING EMPLOYEE PERSONAL RECORDS

The Maintain Employees/Sales Reps window helps you to store personal information associated
with each and every employee and/or sales representative (rep) of your company. You can use

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this window to add a new employee record and/or modify/delete an existing employee record.
The process involves the following steps.

Step I. Opening the Maintain Employees/Sales Reps window. To do this,

 From the Main menu options select Maintain,

Maintain, then
 Select the Employee/Sales Reps option
Employee information is broken up into six areas: Header fields, General tab, Custom
Fields tab, Pay Info tab, EmployEE Fields tab, and the EmployER Fields tab. Here below
shows the steps how to enter employee information on these six areas.

Step II. Entering information in the Header fields

In the Header fields,

fields, you can enter a new employee ID and employee name. To display or
modify an existing employee record, enter or select the employee ID from the lookup list.
Peachtree can set up three types of employee records. Information that appears in the
employee record depends on the type of employee you set up.

 Employee - Turns on all employee-specific fields and enables payroll entry.

 Sales Rep - Includes the employee’s information in all sales representative reports.
This turns off tax filing, pay rate, and deduction information. Sales representatives will
not be available for payroll entry.

 Both - Makes the individual both an employee and a sales representative. Information
will be included in sales representative reports and payroll entry.
To make the employee record inactive, select the Inactive check box in the header
fields. The employee can later be deleted at year-end processing. If you try to enter a
transaction for this employee, you will be warned of the inactive status.

Step III. Entering information in the General tab/folder.

The General tab is used to record employee address; determine employee filing statuses and
type; record employee date of hire, raise and termination; and enter employee beginning balance.
Of all these, important to the EPS are employee address, type, beginning balance and date of
hire, raise and termination. So, you should properly fill these fields. Use the Type field to group
similar employees (for example, by department or position) in reports. The Type field is case

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sensitive (FULL, Full, and full are all different codes). Enter appropriate hire date and other
applicable dates. Enter or select a date for each field as needed. The hired, last raise, and
terminated dates are for record purposes only and not used by any other area of Peachtree. Do
not select the Beginning Balances button until you have entered all the other information related
to this employee and are ready to save the record. If you are setting up all your employees from a
different system or have unpaid employee balances, click the beginning balance button to go to
the Employee Beginning Balances window where in you enter beginning balances and related
information.

Step IV. Entering information in the Custom fields tab/folder

Custom fields are used to enter customized employee information with five user-defined fields.
The customized information may include such items as employee birthday; emergency contact
person; marital, academic and administrative status, etc. You can use custom fields to sort and
group business-specific information in reports and forms. If you do not have access to a
particular custom field (the field label that appears gray), go to the Employee Defaults window to
enable it. Note that, custom fields are available here in this window if only you set them up in the
Employee Defaults window.

Step V. Entering information in the Pay Info tab/folder.

Pay Info specifies how you pay specific employees. Although the pay levels you use here are set
up in Employee Defaults window, you should set specific rates for the pay levels that apply to
each employee in this tab/folder. If you want to add more pay levels, go the pay levels tab/folder
of the employee defaults window. The information you enter here is default information; it saves
you time by appearing automatically when you are entering paycheck information for the
employee. You can still override it, if necessary, at the paycheck level. Choose one of the
following options from the Pay Method drop-down list to determine how you want to pay the
employee during payroll entry.

 Salary - This pay method is used for salaried employees i.e. those who are paid a set
amount of gross pay per payroll period. If you select the salary pay method, specify
whether the salary is payable weekly, biweekly (every two weeks), semimonthly (twice a
month) monthly, or annually in the frequency box.

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  Hourly-Hours Per Pay Period - This method is used for hourly employees who
normally work a set number of hours per pay period and accordingly paid. For hourly
employees, you will set a default number of hours per period in the Hours per Pay Period
box.
 Hourly-Time Ticket Hours - Used for hourly employees who base their hours worked
on time tickets recorded during the payroll period. When this method is selected, you are
given the option to set up an hourly billing rate that is used in Time & Billing. You must
also select the frequency of pay for this employee.
 Rate -Either the Hourly or Salary pay rates display depending on the pay method
selected for this employee. Under the Hourly or Salary Rate heading, enter pay rate
corresponding to each pay level, for instance, 5000 for basic salary and 400 for
allowance. The descriptions you see under the field name heading refer to pay levels set
up in Employee Defaults window.
window. For pay level fields to be available here, they should
be set up in the EmployEE Fields tab/folder of the Employee Defaults window.

 Std (Standard) - A check mark under the Std heading corresponding to a certain pay
level indicates that the amount corresponding to this pay level is to be posted to the G/L
account you set up in the Employee Defaults window.
window. Clear the Std check box to change
the G/L account to be used for recording amounts related to a specific pay level for this
employee.

Step VI. Entering information in the EmployEE Fields tab/folder

EmployEE Fields tab/folder.

tab/folder This tab/folder lists company-wide payroll fields set up in the
Employee Defaults window. If you have employees whose payroll deductions and/or additions
differ (in terms of amount, the adjusted_gross to be used in calculating the deduction/addition,
the GL account to be used for recording the deduction/addition, etc.) from the company-wide
deductions and/or additions, this is where you enter these differences.

 Field Name - This is the name of the payroll field set up in Employee Defaults window.
It cannot be changed here. If you want to modify or add a new payroll field name specific
to this employee, you have to go to the Employee Defaults window.

 Std - A check mark in a box under the Std heading corresponding to a specific field
indicates that Peachtree has to use the G/L account you set up in Employee Defaults

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 window to record amount related to this field and the standard calculation set up in the
Maintain Company Payroll Tax Tables and the Employee Defaults windows.
windows. Clear the
Std check mark corresponding to a certain box to change the G/L Account number, the
Calc, Tax Name, the amount, as well as the Adjust settings for a specific field name.

 G/L Account - This step helps you to specify the General Ledger account where amount
related to a field name is to be posted. This is not available or applicable if the Memo
and/or Std boxes are checked. To display a list of existing accounts, type ? in this field, or
select the Lookup button. To add a new account, type + or double-click the field.

 Calc - This field is available if the check mark in the Std field is removed. Select this
check box if the amount related to this field is to be calculated by Peachtree based on an
adjusted_gross figure and specific tax table.

 Tax Name - This field is available if a check mark in the Std field is removed and a
check mark is placed in the Calc box. If this field is to be calculated by Peachtree, enter
the name of the tax table to be used. Press ? to see a list of tax tables.

 Amount - This field is available if check marks in both the Std and Calc boxes are
removed. If you aren't using a calculation, enter a flat rate here. Positive numbers are
earnings and negative numbers are deductions. Basic salary, nontaxable allowances and
some deductions or additions related to particular employee should be entered in the
amount field of this tab.

 Memo and Run - These fields are not available in this folder. You may access them
through the Employee Defaults window. Check marks placed on boxes under these fields
indicate that the information identified as memo does not affect your company general
ledger accounts or financial statements and the amount related to the one with a
corresponding check mark under the run header is not to be set to zero when you close
payroll years. For more information on these fields, read the topic on "Entering employee
fields information in the EmployEE Fields Tab/Folder".

 Adjust - This field is available if a check mark is not placed in boxes under the Std
header. However, a check mark should be placed in the corresponding box under the
Calc header. The Adjust field helps you to redefine the adjusted_gross unique to this

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 employee for calculating certain additions and/or deductions. For more information on
the use of this field, read the topic on "Entering employee fields information in the
EmployEE Fields Tab/Folder".

 If you are in the Calculate Adjusted Gross window,

window, click Ok to get out of it and move on
to the next procedure.

Step VII. Entering information in the EmployER Fields tab/folder.

EmployER Fields tab/folder.This

tab/folder.This tab/folder helps you to enter employer payroll fields for
employees whose employer payroll fields differ from the company-wide employer fields
established in the Employee Defaults window. Employer payroll fields unique to particular
employee are inserted in this tab/folder.

 Field Name - This is the name of the payroll field set up in Employee Defaults window.
window. It
cannot be changed here. If you want to modify or add a new employer related payroll
field name specific to this employee, you have to go to the Employee Defaults window.
window.

 Std - A check mark in a box under the Std heading corresponding to a specific field
indicates that Peachtree has to use the G/L account you set up in Employee Defaults
window to record amount related to this field and the standard calculation set up in the
Maintain Company Payroll Tax Tables and the Employee Defaults windows.
windows. Clear the
Std check mark corresponding to a certain box to change the G/L Account number,
number, the
Calc, Tax Name and/or the Adjust settings for this field name.

 Liability - This field helps you to enter the number of the GL liability account you want
to use for recording amounts related to particular employer payroll field name. For
instance, Pension Fund Contribution Payable account may be credited for or used to
record the employer's share of pension/provident fund contribution for the benefit of
particular employee. To display a list of existing accounts, type ? in this field, or select
the Lookup button. To add a new account, type + or double-click the field.

 Expense - This field helps you to enter the number of the GL expense account you want
to use for recording amounts related to particular employer payroll field name. For
example, Payroll Expenses account may be debited for or used to record the employer's

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 share of pension/provident fund contribution and/or any other payment to the advantage
of particular employee. To display a list of existing accounts, type ? in this field, or select
the Lookup button. To add a new account, type + or double-click the field.

 Calc - A check mark placed in any of the boxes under the Calc heading corresponding to
a certain field name indicates that Peachtree, using a certain payroll tax table, should
automatically calculate the payroll field amount. If check mark is placed in any box, then
you must specify which payroll tax table to be used in calculating the amount
corresponding to the payroll field. This is done by selecting a tax table from the tax name
drop-down list. Note that boxes for entering employer related fixed sum are not available
in EmpoyER Fields tab/folder of both the Maintain Employees/Sales Reps and Employee
Defaults windows.

 Tax Name - This field is available if a check mark in the Std field is removed and a
check mark is placed in the Calc box. If this field can be calculated, enter the name of the
tax table to be used. Press ? to see a list of tax tables.

 Adjust - This field is available if a check mark is not placed in a box under the Std
header. However, a check mark should be placed in the corresponding box under the
Calc header. The Adjust field helps you to redefine the adjusted_gross unique to this
employee for calculating amounts payable by the employer for the benefit of the
employee. For more information on the use of this field, read the topic on "Entering
employee fields information in the EmployEE Fields Tab/Folder".

 If you are in the Calculate Adjusted Gross window,

window, click Ok to get out of it and move on
to the next procedure.

Finally, click Ok in the Maintain Employees/Sales Reps window to finish the process of
maintaining employee personal records.

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7.6 COMPLETING PAYROLL TASKS

Payroll tasks include:

 Payroll Entry - Entering and printing one paycheck at a time.
 Select for Payroll Entry - This is a pay method that helps you to filter a group of
employees you want to pay and process a batch of paychecks at one time. It is the
quickest and automatic way to process payroll each period.
 Payroll Reports and Forms - This task helps you to generate different payroll reports
and forms including payroll register which is important for the EPS.
 Closing Payroll Year - Usually there is no need to close a payroll tax year exactly at the
end of each calendar year. If you want, however, you can do it by following the
procedures in the Year-End Wizard which is accessible by selecting the system option
from the tasks main menu.
Once payroll is properly set up, you have very little work to do for paying employees.

To prepare a paycheck for an employee, do the following

i) From the tasks main menu, select Payroll Entry…
ii) In the Payroll Entry window,
 Enter or select the employee ID from the employee lookup list. Once a valid
employee ID has been entered, the rest of the information is filled in automatically.
 Specify the pay period or enter the pay date.
 Verify the information that appears (amount of hours or salary, deductions and
allowances, or any other calculated amounts). If the information is correct, proceed to
the next steps. It is in the payroll entry window that you will be prompted a feedback
consisting of a "beep" sound followed by a written message - it could not find the tax
table - which indicates that the program is unable to find payroll tax table which it is
required to use in calculating a certain amount. So, some of the amounts you see in
this window may not be correctly calculated. When you face with such feedback, go to
the Maintain Company Payroll Tax Tables window to make sure that you correctly
entered the tax table which the program is not able to find. Check for the single space
and tax year rules.

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  Click the Save button to save the event. All payroll transactions will be posted both to
the general ledger and to the employee file.
 Click the Journal button to see how the payroll amounts are to be journalized.
 Click the Print button to print the paycheck.
 Click the New button to prepare paychecks for another employee or the Close button
to finish the process of preparing paychecks.

If you want to pay a group of employees in one batch, do the following;

i) From the tasks main menu, choose the Select for Payroll Entry…
Entry… option
ii) In the Select Employees - Filter Section window
 Select the Pay Frequencies (weekly, monthly etc.) and Methods (salary or hourly)
to be included in the pay process.
 Select the employees to be treated in the pay process (e.g. all or some of them).
 If you want to prepare paychecks for some of your employees, put a check mark in
the From option and select group of employees from the drop-down list.
 Finally, click Ok to go to the Select Employees to Pay window where you can see
list of employees to be paid including employee gross and net pays related to each
employee.
 If you want to see the details of payments for an employee and check for their
accuracy, select the employee name and click the Detail button at the top row of
the Select Employees to Pay window.
 Finally, click Ok to leave the Select Employees to Pay - Detail window and go back
to the Select Employees to Pay window where in you may select the Print button to
print pay checks and click the close button to finish the process of preparing
paychecks.

To design and view Payroll Register,

Register, do the following
i) From the Reports main menu, select the Payroll… option
ii) In the Select a report window
 Select payroll from the report area and select payroll register from the report list
 To design/redesign the format of, view and print the payroll register, click the
design, preview and print buttons, respectively, available at the top of this window
and complete the necessary procedures therein.

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To close Payroll Tax Year,
Year, do the following

Peachtree refers to the payroll tax year as the calendar year in which payroll transactions take
place. Peachtree keeps two years of payroll activity open at one time. As a result, there is no
need to close a payroll tax year exactly at the end of each calendar year. For example, if 2000 is
the first of two fiscal periods, you do not need to close this payroll tax year until the end of 2001.
On the other hand, if 2000 is the second of the two payroll years, you must close the 1999
payroll tax year before you can enter 2001 payroll transactions. It is highly recommends that you
wait to close the first payroll tax year until all payroll reports and related data are finalized, may
be up to the first quarter of the second payroll tax year. If there are mistakes in employee
earnings and/or other related data, you will have the opportunity to correct them. To close
payroll tax year, follow the procedures you will be prompted by the Year-End Wizard which is
accessible by selecting the system option from the tasks main menu. The Year-End wizard
prompts you for completion of any uncompleted year-end tasks. The wizard will remind you to
print any journals, reports, payroll checks and forms you may have neglected to print. It will also
prompt you to backup your data if you have not already done so.

7.7 SUMMARY

Payroll program area in Peachtree accounting enables to compute payroll fields for each
employee. To work on payroll program area, it is necessary to undertake the following activities
(steps)
1. complete Payroll Setup Wizard
2. maintain Payroll Tax Tables in the Ethiopia context
3. enter Employee Default Information
4. maintain employee personal records
5. Complete Payroll Tasks

In indicating the ‘tax type’, the payroll year should be identified at the end as 04 for 2004 or 05
for 2005. Otherwise, the system won’t process the payroll tax computations.

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Default information can be set for employees from the ‘maintain’ menu. Each employee into the
organization should be maintained from the ‘maintain’ menu along with other specific data about
each of the employees.

After setting all the default information, payroll entries can be recorded in a separate special
journal (Payroll Entry) from the ‘task’ menu.

Different reports can be accessed in connection with payroll records from the ‘payroll’ category
of the ‘reports’ menu. Some of the reports include:
1. Check register;
2. Payroll journal;
3. Payroll register;
4. Employee list; and etc

7.8 GLOSSARY

Default The built-in or suggested variable. For example, the default data directory when you
install Peachtree is C:/PEACHW; for First Accounting, it is C:/PTFIRST. This default directory
displays in the text box for you to accept or type over. The system will automatically revert to
certain defaults if no other choices are made by the user.

Disabled A menu command, button, object, or field that is visible, but unavailable. A disabled
control is usually dimmed or gray.

Drop-down List Drop-down lists are lists of choices. You can recognize them because they
always appear next to the drop-down button.

Fiscal Periods Durations of time (usually a month) for which accounting information is tracked
and subtitled for reporting purposes.

Fiscal Year Your accounting year, defined by when you open and close the books. This may or
may not coincide with the calendar year.

Payroll.
Payroll. It is used to refer to the total amount paid to employees of a firm as a compensation for
the service rendered to the firm in a given period of time

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