Financial Accounting Chapter 11 Notes
Financial Accounting Chapter 11 Notes ACC-142
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This 4 page Class Notes was uploaded by bauer47 Notetaker on Wednesday March 2, 2016. The Class Notes belongs to ACC-142 at Iowa Central Community College taught by DawnA. Humburg in Fall 2015. Since its upload, it has received 16 views. For similar materials see Financial Accounting in Accounting at Iowa Central Community College.
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Date Created: 03/02/16
Chapter 11 Outline Name ________________ Please make a good faith effort to complete this for Wednesday’s class (11/19/15). CL and Payroll 1) CL > current liabilities are debts that are due within one year of the date of the BS (end of fiscal period); must be paid with cash or goods or services a. A/P > classified as a CL with a normal balance of CR b. ST/P > classified as a CL with a normal balance of CR; what is the difference between A/P and ST/P? sales tax payable is the percentage of the amount of the sale; sales tax payable is a flowthrough account (the customer pays it and we remit it to the state government) i. When is a sale taxed? When the sale happens; not everything is taxed; c. Unearned Revenues > classified as a CL with a normal balance of CR; these are also called deferred revenues; recorded when we receive cash before we earn the revenue d. ST N/P > these are actually a promissory note or contract between the debtor (maker) and the creditor (payee); may also contain an interest provision e. Current portion of LTN/P > if a N/P is paid in installments, some of the N/P will be current and the remainder will be longterm 2) LTL > these are debts that are due longer than one year a. Examples include: N/P, Mortgage Payable, Bonds Payable 3) Payroll (PR) > what is the definition of PR? Employees compensation; a. PR terms: i. Takehome pay is also called net pay ii. Gross pay (before deductions) is what we wish we were paid iii. When is overtime paid to employees? Over 40 hours per week; OT mostly applies to a full time employee/ waged employee; at what rate? 1.5 x the hours over 40 x rate per hour iv. What is the difference between a wage and a salary? Wage = hourly, salary = set payment regardless of the number of hours v. As an employer (ER), we are required by law (mandatory) to withhold from employees (EEs), for which deductions? 1. Federal Income Tax (FIT) > what is the source document for this? Federal W4, withholding allowance certificate; 2. State Income Tax (SIT) > what is the source document for this? State W4 3. Social Security (Old Age Survivor and Disability Insurance or OASDI); tax rate is 4.2% for the EEs of the first $110,100 of gross pay 4. Medicare (Hospital Insurance or HI); tax rate is 1.45% of all gross pay vi. As an ER, we may also withhold for optional deductions (for the convenience of the EE) such as: retirement, savings, gifts, charities, insurance vii. Which document looks like a spreadsheet? Payroll register viii. What is the source document to journalize or record payroll? Payroll register; give the journal entry for this: DR Salaries Exp. (gross pay) X CR SS Payable x CR Medicare Payable x CR FIT Payable x CR SIT Payable x CR Salaries Payable (net pay) x (recording payroll) b. PR taxes that the ER is responsible for paying: i. FICA (SS (6.2%) and Medicare (1.45%)) ii. FUTA (Federal Unemployment) iii. SUTA (State Unemployment) The ER pays FICA, FUTA, SUTA 4) Estimations for PR: (items that we must accrue as the Ee’s earn them a. Bonuses: formula is: Page 654 in book i. Journalize: DR EE Bonus Exp. X CR EE Bonus Payable X b. Vacation, health, pension benefits: i. Why do we need to accrue these? Because the EEs have earned them c. Contingent liabilities > whether we need to record these depends upon what? If they are remote, you don’t have to; if they are reasonably possible, don’t have to but should disclose a note to the F/S; probable and estimable> record it; (ex: law suit) 5) TIE ratio; page 660
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