301 – IMK
CHAPTER 15
EMPLOYEES, PAYROLL AND ACCOUNT RECONCILIATION
Employees and employers are required to pay local, state, and federal
payroll taxes. Employers must withhold taxes from each employee’s
paycheck. The amount of federal taxes withheld is determined from tax
tables published by the Internal Revenue Service (IRS) in a booklet called
Circular E, Employer’s Tax Guide. It shows the applicable tax tables and
forms that are necessary for filing employee payroll information.
In accounting, students learn that employees and employers are required
to pay local, state, and federal payroll taxes. Employers must withhold
taxes from each employee’s paycheck. The amount withheld for federal
taxes is determined from tax tables published by the Internal Revenue
Service (IRS). Circular E, Employer’s Tax Guide, is available from the IRS.
It shows the applicable tax tables and forms that are necessary for filing
employee payroll information. Sage 50 has payroll tax tables built into the
software. In this chapter students learn how to access and use the payroll
tax tables.
dependent.
Also deducted from employees’ paychecks are FICA taxes or social
security taxes. This deduction from wages provides qualified workers who
retire at age 62 or older with monthly payments from the federal
government. The retiree also receives medical benefits called Medicare
after reaching age 65. In addition to these retirement benefits, social
security also provides payments to the surviving family of a qualified
deceased worker.
By January 31 of each year employers are required to issue W-2
FormsError! Bookmark not defined. to employees and to the Internal
Revenue Service. The W-2 Form is an annual report of the employee’s
wages subject to FICA and federal income tax and shows the amounts
that were withheld.
Using the year 2019 as an example, Social Security is funded by a 12.4%
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State Income Tax, Social Security, and Medicare withheld. In 2019, yearly
income up to $132,900 is subject to the social security portion of the FICA
tax. FICA is two taxes — the Social Security portion and the Medicare
portion. Refer to this website
https://www.imercer.com/content/social_security_figures.aspx.
This table compares 2018 and 2019 FICA tax rates and maximum social
security earnings for tax contributions. For purposes of comparison, in
2018 the social security portion of the FICA tax was based on income up
to $128,400; in 2019 that amount is $132,900.
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Students establish the following default information for processing payroll.
1. The cash account to credit when disbursing paychecks. Sharon’s
3. The accounts that comprise the employer’s fields.
5. The employee-paid taxes.
6. The employer-paid taxes.
2. Information about employee pay: hourly, salaried, and amount.
3. The tax filing status of the employee for federal, state, and local
purposes, including withholding allowances.
The diagram on the next page shows the steps for setting up and using
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Default and Setup Information
Deductions: Cash Account:
FICA, Federal Payroll Tax, 10300, Payroll Checking
State Payroll Tax Account
↓
Maintain Employees
Rate of Pay: Frequency:
$12.50 per hour, regular rate Weekly
$18.75 per hour, overtime rate
↓
Payroll Journal
Paycheck, net pay: $438.15
Wages Expense 500.00
FICA: Soc. Sec.
FICA: Medicare
Federal Payroll Tax
State Payroll Tax
Payroll Checking Account
31.00
7.25
18.56
5.04
438.15
LEARNING OBJECTIVES
1. Restore data from Chapter 14. This backup was made on textbook
2. Complete the Payroll Setup Wizard, enter employee and employer
default information.
4. Reconcile the Interstate Bank account and the Payroll Checking
account.
5. Compare the vendor ledgers, customer ledgers, and inventory
7. Make four backups, save two Excel files, and save nine PDF files.
SAGE 50 TIPS, CHAPTER 15
550-562.
➢ When your students use the payroll tables included with the student or
educational versions of Sage 50, the payroll tax withholdings are
1. Establishing the Payroll Account, page 550
C. Payroll Setup Wizard, pages 550-553
D. Entering Employee and Employer Default Information, pages 553–
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I. Printing the Payroll Journal, pages 569-571
J. Account Reconciliation, page 572
1. Interstate Bank statement, page 573
2. Payroll Checking Account Bank Statement, page 574
3. Printing Reports: Account Reconciliation, Accounts Receivable,
Accounts Payable, and Inventory, pages 574-580
K. Printing the General Ledger Trial Balance, page 581
L. Printing the Financial Statements, pages 582-585
M. Backing Up Chapter 15 Data, page 586
N. Export Reports to Excel, page 586
O. Online Learning Center, page 586-587
Complete end-of-chapter activities at www.mhhe.com/yacht2019 >
Student Edition > Chapter 15.
1. Quizzes: Multiple Choice and True False questions. Interactive
2. More Resources:
a. QA Templates: Answer 10 multiple-choice questions and one
Analysis Question.
b. Narrated PowerPoints: Listen to the narrated PowerPoints.
c. Going to the Net Exercises: Access Social Security websites.
Payroll, Employees and Account Reconciliation 307 – IMK
The OLC also includes links to the Appendixes:
• Information Center: Troubleshooting Tips is Appendix A in textbook.
• Student Edition: Appendix C, Review of Accounting Principles
• Student Edition: Appendix D, Glossary (words that are boldfaced
and italicized in chapter)
P. Exercise 15-1, pages 587-591
Q. Exercise 15-2, page 591-594
R. Chapter 15 index, page 595
Solution to Exercise 15-1 (4)
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Solution to Exercise 15-1 (10)
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Solution to Exercise 15-2 (6)
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Solution to Exercise 15-2 (6) (Continued)
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Solution to Exercise 15-2 (6) (Concluded)
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Solution to Exercise 15-2 (9) – Boulevard Bank, Account No. 10200
Payroll, Employees and Account Reconciliation 313 – IMK
Solution to Exercise 15-2 (9) (Concluded) – Payroll Checking
Account, Account No. 10300