Payroll refers to the employees you pay along with employee information. Or A payroll or wage is a set of employees whose pay you process with a single frequency for example weekly or monthly. You can define as many payrolls as you require to meet the pay policies of your enterprise. You put an employee on a payroll by assigning him or her to the payroll.
What is Gratuity?
Gratuity is a cash benefit provided by an employer to an employee for the services rendered to the organization. It is paid at the time of retirement resignation layoff or termination provided the employee has completed five years of continuous services before leaving the organization.
Gratuity = (Basic salary + DA) x 15/26 x number of years.
What are the different types of payroll accounting journal entries?
There are three types of payroll accounting entries:
Can you define Withholding Tax?
Withholding Tax is an obligation on the payer to withhold tax at the time of making payment under specified head such as rent commission salary professional services contract etc. at the rates specified in tax regime.
What is a Payroll Correction?
A payroll correction is required when adjustments need to be made to amounts paid. Poor payroll organization like forgetting to account for vacation days can cause the need for money to be added or subtracted from the original amount.
What is Payroll Accounting?
It is simply recording the payroll expenses of a business into the general ledger. Payroll accounting involves both expense and liabilities accounts such as FICA Taxes Payable Federal and State Income Tax Payable Health Insurance Premiums Payable etc.
What are payroll source documents?
These documents are the employee time sheet or other equaling documents that record when the employee worked and generally what they did. these records are subject to audit by the labor department. EEOC and probably others that I haven t encountered. These should be bound into a Payroll Source Document folder.
Pay in slips
Weekly Tip Reports for all tipped employees.
Production / Piece Rate Report for production / piece rate employees.
Bonus Report Calculation for employees entitled to a bonus.
Commission Report Calculations for employees paid based on a commission.
What is Form W-2?
Form W-2 means Wage and Tax Statement. A W-2 tax form reports the amount of taxes withheld from your pay check for the year. The W-2 form is the form you receive at the beginning of the calendar year that you use to file your federal and state taxes for the prior tax year. Therefore you should only receive a W-2 if you are an employee. If you’re a freelancer independent contractor or self-employed you will receive an earnings statement on tax form 1099 instead of a W-2.
What is Form W-4?
IRS (Internal Revenue Service) Form W-4 Employee’s Withholding Certificate is an IRS form new employee must fill out.
On Form W-4 employees can enter information you’ll use to determine how much federal income tax to withhold from their wages.
What is the Form W-9?
Form W-9 is an Internal Revenue Service form. It is used to determine the employees’ payroll. This information is used to determine pay checks and the number of withholdings on the employees’ taxes. The employee will send this form to their employer for them to determine how much to take out. The W9 form contains information like an individual name whether or not they are operating a business and their tax classification.
What is the difference between Accounts payable and Payroll?
Accounts Payable: It is recorded in the Accounts Payable sub-ledger when an invoice is approved for transactions where the company must pay money to vendors for the purchase services or goods. It is a current liability account in your chart of accounts that accounts for invoices that your business owes and pays.
Payroll: It is defined as the cost that your small business accrues as part of paying your employees. It is a current liability account too but is recorded separately from accounts payable entries.
What are the common Payroll Errors?
Here are the Payroll Errors or Mistakes:
Missing Payroll deadlines
Neglecting to Send out tax forms (1099s)
Poor Record keeping (Bookkeeping) and Data entry details of employees
Running Payroll data Too Late
Ignoring taxable items
Not Maintaining Confidentiality and security
Pay check security issues
Not properly handling garnishments levies or child support.
Not Having Adequate Backup
How to Avoid Payroll Errors?
Employees need to be reimbursed on their expenses in their payroll
Every time the timesheets needs to be sent to payroll a manager needs to collect it and send it out
Can you explain Vouching?
Vouching in general is a term used for agreeing and siding with someone over a matter. Vouching is the examination of the underlying evidence which is in support of the accuracy of the transaction. The process of vouching is intended to substantiate an entry by providing authority ownership existence and accuracy.
Can you define Computerized Payroll Systems?
Computerized payroll systems include complete employee information including loans pay structures reimbursements salary slip generation and income tax management. Since everything is computerized it is easy to handle calculations and manage printing activities.
What kinds of payroll reporting you are aware about?
This will include the making of various reports like deduction reports wage type leave or absentee reports new hire reports LWAP reports and many others.
What is a payroll system?
A payroll system is software you can use to run payroll. The system can be desktop software you install on your computer or cloud payroll software you can access anywhere with an internet connection.
What can a payroll system do?
A payroll system can help you complete most or all of your payroll tasks including:
Calculate payroll taxes and wages
Print payroll checks
Track employee time
Use direct deposit
Print Form W-2 and File Forms W-2 W-3
Deposit File for federal state and local taxes
Store payroll records
Manage multiple money types like tips and commissions
Subtract additional deductions
Can you define CTC?
Cost to the company (CTC) is the amount that the company will have to incur on an employee for a specific year. It means total salary package benefits received by employee in a year their portion of the medical aid contribution travel allowance cell allowance pension fund etc.
Cost To Company = Gross Salary+ Benefits
What is Non-taxable income?
It is referring to income that is received but that is not subject to taxation. However even if such forms of compensation cannot be taxed they still need to be reflected in the tax return.
Here are some examples of non-taxable income:
Cash rebates from items bought
Child support payments.
Hotels and restaurants
Health or retirement benefits
Can you define retropay?
Retropay : It is a process that recalculates the amount to pay an employees in the current period to account for retrospective changes that occurred in previous payroll periods.
Can you define Payroll transaction?
Payroll transaction: It is nothing but the calculation of salary for a month / week / day of an individual / group of employees depends upon the attendance / variable inputs / other benefits / salary component and generate the reports for IT / Statutory / PT payments.
Can you explain Internal Audit?
Internal audit is an independent appraisal function which is established by the management of an organization for the review of its internal control system as a service to the organization.
Can you explain what work involves in payroll clerk?
Payroll managers compile payroll data verify time and attendance and process periodic transfers of pays to different accounts.
Can you define gross pay?
It is the total amount of money an employee receives before taxes and deductions are taken out.
What is the difference between Pay Check and Pays lip?
Pay check is the method by which the Employee is paid (A Bank Check/Cheque or Direct Deposit to Bank)
Payslip is a slip that contains all details of the employees like total wages deduction details tax cuttings and the like.
What are some Payroll software’s?
Here is a list of best payroll software for small medium and large businesses
RUN Powered by ADP
Kronos Workforce Ready
Arcoro HR Management System
APS Payroll Solution
What are Pay Codes in Payroll software?
HOUR – Hourly
SALY – Salary
VACN – Vacation
SICK – Sick time
PCWK – Piecework
COMM – Commission
OVER – Overtime
How to calculate deduction?
By using below calculation methods
Percent of Gross Wages
Percent of Net Wages
Amount per unit
What are Payroll Deductions?
Payroll deductions include many different items including:
State income taxes
Local tax withholdings
Federal income taxes
Social security taxes
Health insurance and Dental insurance