GROUP 4

ACCOUNTING FOR
LABOR
 GROUP4
Lê Thảo Vy - 21125288 Phạm Thủy Tiên - 21125068

Đặng Thị Minh Thư - 21125274 Phạm Hương Lan - 21125032

Trương Thị Quỳnh Thư - 21125278 Nguyễn Ngọc Băng Trinh - 21125073
 NỘI DUNG CHÍNH

Accounting for Labor Costs Payroll Accrual Special Labor Cost

and Employers’ Problems
Payroll Taxes
 01
Accounting for Labor Costs and
Employers’
Payroll Taxes
 Employers’ Payroll Taxes

Federal Insurance
Federal Unemployment Tax State Unemployment Tax
Contributions Act (FICA)
Act (FUTA) Act (SUTA)
Federal Insurance Contributions Act (FICA)

Requires employers to pay Social Security Taxes on wages and salaries equal to
the amount withheld from employees.
Federal Unemployment Tax Act (FUTA)

Requires employers to pay an established rate of tax on wages and salaries to

provide for compensation to employees if they are laid off from the regular
employment.
State Unemployment Tax Act (SUTA)

Another payroll tax expense is state unemployment tax, which the state
unemployment insurance agency administers. State unemployment tax rates
vary by state.
 Illustration of Accounting for Labor Costs

R E C O R D S M A I N TA I N E D

01
Payroll record 02
General journal 03
General ledger

04
Job cost ledger 05
Factory overhead 06
Employee earnings
ledger records
 GENERAL LEDGER ACCOUNTS MAINTAINED
Cash
Health Insurance Premiums Payable
Work in Process
Payroll
Wages Payable
Factory Overhead
FICA Tax Payable
Sales Salaries
Employees Income Tax Payable
Administrative Salaries
Federal Unemployment Tax Payable
Payroll Tax Expense—Sales Salaries
State Unemployment Tax Payable
Payroll Tax Expense—Administrative
Salaries
 General Journal Entry: Once data are verified
Payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,000
FICA Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,400
Employees Income Tax Payable . . . . . . . . . . . . . . . . . . . . . . . 14,750
Health Insurance Premiums Payable . . . . . . . . . . . . . . . . . . . 2,800
Wages Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . .
102,050
 To record the payment of the net earnings to employees

Wages Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,050

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,050
Distribution Recording
Work in Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000
Factory Overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Sales Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Administrative Salaries . . . … . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
130,000
 Employers Payroll Taxes Recording

Factory Overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,000

Payroll Tax Expense—Sales Salaries . . . . . . . . . . . . . . . . . . . . . . 2,600
Payroll Tax Expense—Administrative Salaries . . . . . . . . . . . . . . 1,300
FICA Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,400
Federal Unemployment Tax Payable . . . . . . . . . . . . . . . . . . . . . 1,300
State Unemployment Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . 5,200
Payment or Employee Federal Income Tax Withholding:

FICA tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,800

Employee Income Tax Payable . . . . . . . . . . . . . . . . . . . . . . . 31,250
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,05
02 Payroll Accrual
The accrued wages are recorded as follows:

Payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45,000
Wages Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,050

The Entries to distribute the accrued wages:

Work In Process . . . . . . . . . . . . . . . . . . 30,000

Factory Overhead . . . . . . . . . . . . . . . . 6,000
Sales Salaries . . . . . . . . . . . . . . . . . . . . . 6,000
Administrative Salaries . . . . . . . . . . . . 3,000
Payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000
Factory Overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,680
Payroll Tax Expense - Sales Salaries . . . . . . . . . . . . . . . . . . . . . . 80
Payroll Tax Expense - Administrative Salaries . . . . . . . . . . . . . 390
FICA Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,600
Federal Unemployment Tax Payable . . . . . . . . . . . . . . . . . . . . . . 450
State Unemployment Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . 1,800
Before June transactions are recorded, the entry for
the accruing payroll should be reversed:
Wages Payable . . . . . . . . . . . . . . . . . . . . . .45,050
Payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$45,000
03 Special Labor Cost
Problem
 Special Labor Cost Problem
Shift Premium

Employee Pension Costs

Bonuses

Vacation and Holiday pay

Shift Premium
A work shift is defined as a regularly
scheduled work period for a designated
number of hours.
This is designed to attract workers to work on
less desirable shifts.
This is usually charged to Factory Overhead
and allocated to jobs worked on during the
period.
 Employee Pension Costs

Defined benefit plan - based on past level of earnings and length of

service with the company

Definite Contribution plan - maximum amount of contribution made by

both the employer and the employee. benefit is normally based
on performance of the company, rather than a fixed amount.

Noncontributory plans - completely funded by the company

Contributory - common type of pension with requires partial

contribution from the employee
Bonuses
Bonus pay, other achievement that the
company feels merits additional pay
(e.g.exceeding company quotas). Charged
to Factory Overhead and Sales and Admin
employees bonuses are charged to Selling
and Admin Expense.
 Vacation and Holiday pay

The vacation pay is earned by the

employee for daily service on the job
over the course of the year.
Therefore, the vacation cost is
accrued throughout the year and
assigned to the employee’s
department
 Vacation and Holiday pay

Holiday pay is based on an agreement

between management and company
employees. The agreement stipulates that
certain holidays during the year will be
paid for by the company, but they are
nonworking days for the employees
To Illustrate Accounting for bonuses, Vacations,
and Holiday pays.

Assume that a factory worker, who is classified as direct labor, earns

$700 each week. In addition, the worker will receive a $1,000 bonus at
year-end, a 2-week paid vacation, and 10 paid holidays. The following
entry records the weekly payroll and the costs and liabilities related to
the bonus, vacation, and holiday pay as an expense of the 50 weeks (52
weeks – 2 weeks vacation) that the employee actually worked:
Work in Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .700
Factory Overhead (Bonus). . . . . . . . . . . . . . . . . . . . . . . . . . .20
Factory Overhead (Vacation). . . . . . . . . . . . . . . . . . . . . . . . .28
Factory Overhead (Holiday) . . . . . . . . . . . . . . . . . . . . . . . ..28
Payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700
Bonus Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Vacation Pay Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Holiday Pay Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
 THANKS!
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