Payroll Accounting & Other

Selected Transaction
What is payroll accounting?

 Involves maintaining records of its employees & worker

where personal data and personal experience among
others are noted.
 Payroll represents compensation paid to employees and
workers.
 Firms are required by law to act as government’s
collection agent, filing & paying tax (BIR) and remit
collected premiums (SSS, Phil-health & Pag IBIG).
Deductions from Gross pay

. .
Social security Union dues
Health insurance  Advances
 Pag-ibig (HDMF) Withholding Tax
SSS Premium
13% of monthly salary credit (8.50% ER’s
share & 4.50% EE’s share)
 Salary credit not exceeding P20,000, but
with additional Provident fund credit for
employee with salaries above P20k to increase
benefits, thus with additional premium to be
shared by ER & EE as per above rate.
Health Insurance (Philhealth
Premium)
3.0% of monthly basic salary
 With a floor of P10,000 and
a ceiling of P60,000
 Shared by ER & EE equally
Philhealth contribution- 2020

Year Salary credit range Rate Premium

10,000 P 300
2020 10,000.01 - 59,999.99 3% P300 - P1,800

60,000 P1,800
HDMF (Pag IBIG Premium)
1.0% EE & 2.0% ER on P1,500 or
less
 2.0% EE share & 2.0% ER share
on over P1,500 to P5,000
 Maximum monthly
compensation set at P5,000
HDMF Premium
 Witholding tax

Taxable amount is after deduction of SSS,

Phil health & Pag–IBIG contribution.
The following are tax exempt:
• 13th month pay . Night shift differential
• Holiday pay . Hazard pay
• Overtime pay . Other benefits provided by law
Witholding tax table
Income tax table
 Illustration:
A company has the following employees:
Additional information:
Employees Position Gross •Jasmin Quintos & John Lucas has a cash advance
Name   Pay
of P500 each that needs to be deduction from their
Jasmin Quintos General Manager 65,000.00
pay.
Wanda Timbol Senior Accountant 25,000.00

Millenny Pongco Cashier 15,000.00

Requirement:
John Marlo Pineda Sales Rep 13,000.00 Prepare a payroll (monthly & semi-monthly)
Christian Carlo Pasamonte Sales Rep 9,000.00
showing amount to be deducted from all employees
Mirconson Gamboa Junior Accountant 9,000.00 & their net pay.
John Lucas Tayag Sales Rep 8,500.00
Journalize the a) Payroll entry b) Employer’s
Joshua Gonzales Driver 8,500.00
Ira Diocson General Support 7,500.00
contribution c) Remittance to gov’t agencies.
    160,500.00
 Solution: Payroll (Monthly)

Employees Position Gross SSS Provident Philhealth Pag-IBIG WHTax Cash Net
Name   Pay   Fund       Advances Pay
General .
Jasmin Quintos 65,000.00 900.00 225.00 900.00 100.00 9,885.50 52,489.50
Manager 500.00
Senior
Wanda Timbol 25,000.00 900.00 225.00 375.00 100.00 513.40   22,886.60
Accountant
-
Millenny Pongco Cashier 15,000.00 675.00   225.00 100.00   14,000.00
-
John Marlo Pineda Sales Rep 13,000.00 585.00   195.00 100.00   12,120.00
-
Christian Carlo Pasamonte Sales Rep 9,000.00 405.00   150.00 100.00   8,345.00
Junior -
Mirconson Gamboa 9,000.00 405.00   150.00 100.00   8,345.00
Accountant
-
John Lucas Tayag Sales Rep 8,500.00 382.50   150.00 100.00 500.00 7,367.50
-
Joshua Gonzales Driver 8,500.00 382.50   150.00 100.00   7,867.50
General -
Ira Diocson 7,500.00 337.50   150.00 100.00   0 6,912.50
Support
  Total   160,500.00 4,972.50 450.00 2,445.00 900.00 10,398.90 1,000.00 140,333.60
Payroll (Semi-Monthly)
Employees Position Gross SSS Provident Philhealth Pag-IBIG WHTax Cash Net

Name   Pay   Fund       Advances Pay

General
Jasmin Quintos 32,500.00
Manager 450.00 112.50 450.00 50.00 4,942.63 250.00 26,244.88
Senior
Wanda Timbol 12,500.00  
Accountant 450.00 112.50 187.50 50.00 256.60 11,443.40

Millenny Pongco Cashier 7,500.00    

337.50 112.50 50.00 - 7,000.00
John Marlo Pineda Sales Rep 6,500.00    
292.50 97.50 50.00 - 6,060.00
Christian Carlo Pasamonte Sales Rep 4,500.00    
202.50 75.00 50.00 - 4,172.50
Junior
Mirconson Gamboa 4,500.00    
Accountant 202.50 75.00 50.00 - 4,172.50

John Lucas Tayag Sales Rep 4,250.00  

191.25 75.00 50.00 - 250.00 3,683.75
Joshua Gonzales Driver 4,250.00    
191.25 75.00 50.00 - 3,933.75
General
Ira Diocson  
Support 3,750.00 168.75 75.00 50.00 - 0 3,456.25
 
 
Total 80,250.00 2,486.25 225.00 1,222.50 450.00 5,199.23 500.00 70,167.03
Note: In practice even if payroll is semi-monthly, payroll deductions (SSS, Pag-IBIG, are deducted at one go only (i.e. first 1-15 or second 16-30)
Calculation of taxable income

Jasmin Quintos Millany Pongco 7,500.00

65,000.00
Gross Pay Gross Pay

Less: SSS/PF Less: SSS/PF 675.00

1,125.00
Phil-health 225.00
Phil-health
900.00
Pag-IBIG 100.00 1,000.00
Pag-IBIG
100.00 2,125.00 Taxable income 6,500.00
Taxable income
….62,875.00
Joshua Gonzales
Wanda Timbol Gross Pay 8,500.00
Gross Pay Less: SSS/PF
25,000.00 382.50
Less: SSS/PF Phil-health 150.00
1,125.00
Pag-IBIG 100.00 632.50
Phil-health
375.00
Taxable income 7,867.50
Pag-IBIG
100.00 1,600.00 * Above & the rest are exempt as their monthly net pay
Taxable income are below P20,833
….23,400.00
 WHT computation

Monthly Semi-monthly
Jasmin Quintos Jasmin Quintos
1st P16,667
1st P33,333` 1,250 .00
…
2,500 .00 Balance (31,437.5-16,667) x 25%
3,692.63

Balance (62,875-33333) x 25% WHT due

… 4,942.63
7,385.50
Wanda Timbol
WHT due 1st P 10,417 0
…
9,885.50 Balance (11,700-10,417) x 20% 256.60
WHT due 256.60
Wanda Timbol
1st P 20,833 0
Balance (23,400-20,833) x 20% 513.40
WHT due 513.40
Journal entry (Payroll recording)

Salaries Expense 160,500.00

SSS Premium payable 4,972.50
Provident fund premium payable 450.00
Phil-health Premium payable 2,445.00
HDMF Premium payable 900.00
Withholding Taxes Payable 10,398.90
Advance to officers & Employee 1,000.00
Cash in Bank or Salaries
Payable 140,333.60
Schedule of combined contribution
Employees SSS Provident fund EC Philhealth Pag-IBIG
Name EE ER EE ER ER EE ER EE ER
Jasmin Quintos
900.00 1,700.00 225.00 425.00 30 900.00 900.00 100.00 100.00
Wanda Timbol
900.00 1,700.00 225.00 425.00 30 375.00 375.00 100.00 100.00
Millenny Pongco
675.00 1,275.00     30 225.00 225.00 100.00 100.00
John Marlo Pineda
585.00 1,105.00     10 195.00 195.00 100.00 100.00
Christian Carlo
Pasamonte 405.00 765.00     10 150.00 150.00 100.00 100.00
Mirconson Gamboa
405.00 765.00     10 150.00 150.00 100.00 100.00
John Lucas Tayag
382.50 722.50     10 150.00 150.00 100.00 100.00
Joshua Gonzales
382.50 722.50     10 150.00 150.00 100.00 100.00
Ira Diocson
337.50 637.50     10 150.00 150.00 100.00 100.00
……
TOTAL
4,972.50 9,392.50 450.00 850.00 150.00 2,445.00 2,445.00 900.00 900.00
Total (EE & ER)
15,665 150.00 4,890.00 1,800.00
Journal entry (Company contribution)

SSS Premium expense (9,342.5+850) 10,242.50

Phil-health Premium expense 2,445.00
HDMF Premium Expense
…………………….. 900.00
EC Premium expense
………..150.00
SSS Premium payable 10,242.50
EC Premium Payable
……….150.00
………
Philhealth Premium payable
2,445.00
HDMF Premium payable
…………900.00
 Journal entry (Remittance)

SSS Premium payable 15,665.00

EC Premium Payable 150.00
Cash in bank 15,815.00

Phil-health Premium payable 4,890.00

Cash in bank 4,890.00

HDMF Premium payable 1,800.00

Cash in bank 1,800.00
Other Terms
Cash On Hand and Cash In Bank
Illustration :
X Company collected 10,000 for service rendered & deposit it after a week.
Entry:
On collection:
Cash on hand 10,000
Service income 10,000
On deposit:
Cash in bank 10,000
Cash on hand 10,000
Other Terms
Investment of Owner
Investment in Property with an attached liability

Illustration:
Mr X invested a building to his business costing 1M, with a loan
balance of 300,000:
Entry:
Building 1,000,000
Loan Payable 300,000
Manio, Capital 700,000
Other Terms

Drawing of Owner
Withdrawal of property (cost less accumulated depreciation= carrying
amount/book value)

Illustration:
Mr Manio the owner of Co A-131, withdrew a computer with a cost of
10,000 & accu. Depr’rn of 2,000
Entry
Manio, Drawings 8,000
Acc Depreciation 2,000
Equipment 10,000
 Other Terms
Sale of Properties
• Close the asset at its cost price & the related accumulated depreciation
• Compare cash proceeds with carrying amount.
• Record gain or loss on sale

Illustration:
Co A-131 sold equipment with a cost of 10,000 & Accum. Depr’n of 7,000 for:
Case A) 4,000 B) 2,000
Case A Case B
Cash 4,000 Cash 2,000
Acc. Depr’n 7,000 Acc. Depr’n 7,000
Equipment 10,000 Loss on sale of eqmt(3k-2k) 1,000
Gain on sale of eqmt (4k-3K) 1,000 Equipment 10,000
Other term
• Promissory notes
• Non-interest bearing note (done in early exercises:
• Interest bearing note
Illustration: Received note of 10,000, 60 days, 10% interest.
Entry:
Nov 2 . Notes Receivable 10,000
Service inc/fees 10,000

Dec 31 Interest Receivable (10k x 10%x 59/365) 161.64

Interest Income 161.64
Note: Refer next slide for computation of 59 days.
Determining Due Date & Computation of
interest
No. of days for November
30
Less: Issue Date
2
Remaining days for November
28
No. of days for December
31
No. of days for January 1
1
To make it a total of 60

•Computation of interest:
• Face of the Note - Interest (Principal x r x # of days/360 or 365)
Discounting the note
Interest is immediately deducted on the borrowed money.
Illustration: A-131 Co. Took a loan for 100,000, with 10% Interest. The
bank discounted the note.
Entry:
Cash 90,000
Interest Exp (100k x 10%) 10,000
Notes Payable 100,000
Percentage Tax Vs Value Added Tax
Percentage tax (3%)
Applicable to companies
whose annual gross receipt/sales
does not exceed P3 million.
 Companies whose annual
gross receipt does not exceed
P250K are exempt
Value Added tax (12%)
Applicable to companies
whose annual gross receipt/sales
does exceed P3 million.
 Further discussion on Chapter
9