Payroll Records & Procedures

336 Pages·2005·12.372 MB·English

by  M. David Haddock, Sherry Cohen

Payroll Records &
Procedures

Payroll Records &
Procedures
Fifth Edition
M. David Haddock, Jr.
Sherry Cohen
Boston Burr Ridge, IL Dubuque, IA Madison, WI New York San Francisco St. Louis
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PAYROLL RECORDS & PROCEDURES
Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the
Americas, New York, NY, 10020. Copyright © 2006, 2001, 1994, 1989, 1984 by The McGraw-Hill Companies,
Inc. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any
means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill
Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or
broadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers outside the
United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 0 QPD/QPD 0 9 8 7 6 5
ISBN 0-07-298243-8
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Library of Congress Cataloging-in-Publication Data
Haddock, M. David.
Payroll records & procedures / M. David Haddock, Jr., Sherry Cohen.—5th ed.
p. cm.
Rev. ed. of: Payroll records & procedures / Merle W. Wood, Sherry Cohen. ISBN 0-07-298243-8
(alk. paper) 1. Payrolls—United States. 2. Payroll deductions—Law and legislation— United States. 3.
Withholding tax—Law and legislation—United States. I. Title: Payroll records and procedures. II. Cohen,
Sherry. III. Wood, Merle W. Payroll records & procedures. IV. Title.
HG4028.P5W66 2006
658.3 21—dc22 2005041483
www.mhhe.com
This book is dedicated to the memory of
Merle Wood, a distinguished business
educator and author.
Preface
From the employees’point of view, there is no more important function of a business than
making sure that each employee is paid every payroll period. Not only do they want to
receive their pay on time, they want the amount of pay to be calculated correctly! Every
business must rely on payroll employees who know how to do their job and how to do it
accurately and on time. There are many career opportunities working in the payroll func-
tion. After all, every business must have a payroll office!
This text is written to help you understand the entire payroll function from all related
areas—human resources, payroll clerk, payroll reporting officer, and the accountant respon-
sible for general journal entries regarding payroll. Our goal in this text is to provide you
with a complete framework of the payroll function so that you can successfully understand
the purpose of payroll and carry out the related duties.
In addition to payroll, we have tried to introduce you to many business-related ideas and
concepts through the margin notes and boxes like Point of Interest, Internet Connection, and
A Case for Decision. We hope you will find this course accurate, interesting, and enlight-
ening for you as you begin your business studies.
FEATURES AND ELEMENTS OF THIS TEXTBOOK
Organization
Each of the 11 chapters follows the same format, making it easy for you to track the devel-
opment of your payroll knowledge. Each unit begins with learning objectives that state
clearly what you are about to study. At appropriate points in the text, we refer you to Learn-
ing Through Practice Exercises, which are problems designed to reinforce key concepts dis-
cussed in the preceding section. The chapter concludes with a Summary stressing the main
concepts in the unit, Study Questions, Review Exercises, Problems, and Learning Through
Practice Exercises and Alternate Exercises.
Learning Objectives
Your authors have carefully worded each unit’s learning objectives. These learning objec-
tives should be kept in mind as you study each unit; they are the most important ideas that
you should take away from each chapter.
Forms and Reports
Throughout the text you will find examples of forms and reports that are used in the
payroll function. Sample company forms like a job application and a withholding mem-
orandum are provided to demonstrate how a company documents actions taken in pay-
roll. Federal and state forms are provided for you to learn how to actually fill out and
file required reports.
A Case for Decision
Case studies focus on payroll functions and duties, many of them from a management point
of view. The cases tie together many concepts illustrated in the chapters.
Summary
The end-of-unit summaries have been written so that you may quickly scan a list of the
important concepts covered in the unit. This allows you to quickly assess if you have mas-
tered the reading material before beginning to work on the homework. The end-of-unit sum-
mary reinforces the learning objectives stated at the beginning of each unit.
vi
Preface vii
Study Questions
Each unit will pose questions that students need to think about and be able to answer. Pay-
roll functions are covered by many state and federal laws and those laws directly affect how
payroll works. The ability to speak and write is basic to success in today’s business world.
The study questions are designed to help you organize your thoughts and be able to express
them in an oral or written presentation.
Review Exercises
Payroll requires accuracy. These exercises require you to perform the basic mathematical
and procedural functions precisely so that the payroll department can issue checks to
employees on time. The emphasis is on attention to detail; this is one of the most impor-
tant characteristics of payroll. The procedural emphasis is on proper completion of forms.
The local, state, and federal governments insist that payroll information on employees be
reported meticulously and on time. We have included in your end-of-unit materials most of
the required federal forms that the payroll department must file. Upon conclusion of this
course, you should feel comfortable completing and filing these government documents.
Learning Through Practice
Additional student work is presented in these exercises. Alternate exercises have been pre-
pared in this edition, supplying the instructor with additional work, which students may
complete, or to supplement assignments during a year. Many of the exercises require writ-
ten responses to situations and the completion of forms. These are an excellent source of
training to reinforce the materials in the unit outside the classroom.
Glossary of Payroll Terms
At the end of the text a complete glossary is provided, offering students the definition of
any new and unfamiliar terms in language that is easy to understand. New terms are indi-
cated within the units in italicized print, making them a snap to identify.
Tax Tables
Current (as of the writing of the text) income tax withholding tables for the United States
and California are provided at the end of the text. Frequent reference throughout the text is
made to these tables, allowing you to become familiar with them quickly. As you will learn
in this text, most states in the United States have an income tax on wages. California has
been selected as the illustrated state in this text, but, although the rates in other states are
most likely different, the fundamental procedures described for California would apply in
all states with an income tax. We would encourage you to cover this unit in your course so
students will learn state procedures.
The Fifth Edition at a Glance
We are proud to bring to you the fifth edition of Payroll Records & Procedures.Real-world
applications are stressed in this practical text that will train students to perform many of
the payroll functions for businesses in the United States.
In this edition
• New author—David Haddock, CPA, one of the coauthors of McGraw-Hill’s highly suc-
cessful College Accounting, teams with Sherry Cohen.
• New attractive design to grab students’attention.
• New organization of material (one unit was eliminated by taking its essential compo-
nents and merging them in other units).
• Revised exercises and problems that require students to look up federal and state taxes.
• Learning Through Practice work papers moved from the back of the text to their related
units.
• New federal forms used in illustrations.
• New illustrations showing deductions allowed pre–federal income tax (like 401-k and
cafeteria plans).
• New discussions about IRAs, including the SIMPLE IRA.
• 2004 tax rates are used for federal and state calculations.
RETAINED STRENGTHS
In addition to a variety of new features, the fifth edition of Payroll Records & Procedures
continues to utilize methods proven to be beneficial.
• The text’s clear, straightforward style promotes understanding.
• Topics are logically organized for efficient learning. Related material is presented in a
single unit, rather than being scattered through many units. For example, information
about employee deductions is grouped into one unit, whether the deductions involve
federal taxes, state taxes, local taxes, or voluntary deductions. Similarly, all information
about the employer’s federal payroll taxes, tax deposits, and tax returns appears in a
single unit.
• Rather than being overwhelming, the text emphasizes the topics that students really need
to know in order to begin performing payroll work successfully.
• The text presents techniques that will help students develop efficient working procedures.
For example, the text properly explains the techniques for using tax tables. It also shows
students how to prepare a tax calendar to keep track of the dates for filing tax reports.
• Interesting payroll-related and business-related facts are discussed in brief Point of Inter-
est features that appear at various intervals in the text. These features alert students to
new developments that affect payroll work and business practices.
• A number of payroll-related case problems are presented throughout the text. The student
must determine how each problem, titled “A Case for Decision,” should be resolved.
CAREER OPPORTUNITIES
Students are exposed in this text to the many opportunities for employment within the
scope of the payroll function in a business. The role of the human resources department
is shown as critical in the effective recruitment and employment of workers for all busi-
nesses. The importance of record keeping and accuracy is emphasized throughout the text,
showing students that this is a valuable employment skill. The actual tasks that payroll
clerks and payroll accountants perform are shown so students can explore potential
employment areas. This stand-alone course could be the education needed for the busi-
ness student’s first job.
viii
Preface ix
A PAYROLL PRACTICE SET
A comprehensive practice set requires students to perform payroll functions for a month in
a small business, Ingram Heating and Cooling. This manual practice set will conclude with
the end-of-quarter and end-of-year activities that all businesses must go through. The prepa-
ration of tax reporting forms and other tax documents will demonstrate to students how
complex the payroll function is, even in a small business. This is a useful end-of-course
comprehensive problem to assess the students’understanding of payroll.
Supplements to the
Textbook
INSTRUCTOR’S RESOURCE CD-ROM (ISBN 0072982462)
Available only for instructor use, this CD employs all the teaching resources that support
the textbook in one compact medium:
• Instructor’s Manual & Key: Jointly created by text authors M. David Haddock, Jr., and
Sherry Cohen, it provides tests for each unit in addition to the corresponding answer
keys. These include the answer keys for the Study Questions, Discussion Questions,
Learning Through Practice Exercises, and Alternate Learning Through Practice Exercises.
The IM also provides an overview of the text’s special features, other supplements, and
teaching and grading suggestions.
• Test Bank: Supplies instructors with a series of unit tests, each of which utilizes a vari-
ety of questions, including true/false, multiple-choice, and short answer. Questions found
here are comparable to the unit tests supplied in the Instructor’s Manual.
• Practice Set Instructor’s Manual & Key: Compiled by author Sherry Cohen, this sup-
plement provides instructors with the answer key and tips to teaching Ingram Heating
and Cooling: A Payroll Practice Set, an endeavor that leads students through the ins and
outs of payroll preparation for a small business.
• Microsoft PowerPoint Slides: Designed for in-class usage, these presentations assist in
highlighting the central themes found in each unit of the text.
ONLINE LEARNING CENTER (URL: www.mhhe.com/haddock5e)
• Online Quizzes: Prepared by Mabel Machin of Edmonds Community College, a combi-
nation of 10 to 12 multiple-choice and true/false questions are provided for each of the
text’s 11 units. Each quiz is graded by the Web site, and provides feedback answers to
assist students in the learning process.
• Microsoft PowerPoint Slides:Can be downloaded to assist students in their study by high-
lighting the central themes found in each unit.
• Tax Tables:Updated annually so instructors can provide their students with the most cur-
rent forms available.
• Web Site Listings: Provides instructors and students with easy access to company and
organization Web sites mentioned in the text.
STUDENT SUPPLEMENT
• Ingram Heating and Cooling: A Payroll Practice Set:Developed by author Sherry Cohen
as a course culminating activity. It places students in charge of the company’s payroll
records, requiring them to complete all the federal and state forms and reports. Students
must also monitor the weekly payroll period in addition to the end-of-quarter and end-
of-year activities.
x