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2. Determination how the labor hours were spent so that distribution can be made
in the cost records.
TIME CARDS
Use to gather data on how many hours have been
worked by each hourly rate employee.
GENERAL JOURNAL
Month _______________
Account Amount
Date JEV No. Particulars P
Code Debit Credit
To record payroll.
At the end of the period, the total gross earnings and the totals of each of the various
deductions are posted directly from the payroll register to the general ledger accounts.
RECORDING PAYROLL FROM THE PAYROLL
REGISTER
GENERAL JOURNAL
Month _______________
Account Amount
Date JEV No. Particulars P
Code Debit Credit
To record payroll.
PAYING THE PAYROLL
GENERAL JOURNAL
Month _______________
Account Amount
Date JEV No. Particulars P
Code Debit Credit
Payroll Payable xx
Vouchers Payable xx
Vouchers Payable xx
Cash in Bank xx
Required:
1. An entry to record the weekly payroll.
2. An entry to record the issuance of a voucher to pay the net payroll.
3. An entry to record payment of the voucher.
Computation of Employer’s Contribution
A summary of taxable factory wages of the ETG Corporation for the month of March 2018 is shown below.
Wages Subject to:
SSS (6.2%); Phil. Health (1.5%) Income Taxes
Department Pag-Ibig (1.5%) and ECC (1%) 4.10%_____________
Factory Supply 52,800 20,130
Factory administration 53.,260 12,110
Cutting 72,380 28,640
Assembly 79,910 33,750
Finishing 84,620 30,970
Required:
1. Compute the employer’s contributions to be charged to each department.
2. Prepare an entry in general journal form to record the taxes.
Computation of Employer’s Contribution
CERTIFICATE OF COMPENSATION (BIR FORM 2316)
At the end of the year, the employer computes the
gross wages and the related tax withheld for each
employee, which are taken from the payroll
register.
LABOR
COSTS
Work in process XX
Manufacturing Overhead Control XX
Factory Payroll XX
To charge labor costs to production for the month.
Employer Contributions
Fringe benefits – sick pay, vacation and holiday pay, health insurance,
pension payments, and hospitalization benefits.
Required. The journal entry to record and distribute the labor cost of the production for the
month.
Accounting for fringe benefits
LABOR Related Deductions
Gross earnings of employees are divided into two parts, earnings at regular rate,
and overtime premium. Earnings at regular rate are computed by multiplying the
total hours (usually 8 hours) by the regular pay rate. The overtime premium is
calculated by multiplying the overtime hours by the overtime pay rate as
determined by the Labor Code.
Work in Process xx
Manufacturing Overhead Control xx
Factory Payroll xx
Computation of gross earnings (regular and overtime)
From the following data, compute the regular earnings (for regular and overtime hours),
overtime premium earnings and gross earnings of each employee at Highland Flooring, for the
week ended May 7, 2018. All employees are paid at the regular hourly rate for the first 40 hours
worked during the week. The rate for hours worked in excess of 40 is one and half times
the regular rate. The rate for hours worked on Sunday is twice the regular rate.
Hours Worked
Employee Su M Tu W Th F Sa Hourly rate
J. Sy 0 8 8 7 9 8 0 46.8
F. Lim 4 8 8 8 8 10 0 37
H. Ong 0 8 8 10 8 8 4 31.6
W. Tao 0 8 8 8 8 9 4 26.4
Computation of gross earnings
Accounting for overtime premium
Pablo Sy, an employee of the Pool Company is paid P200 per hour for a regular
week for 40 hours. During the week ended November 14, the employee worked
for 48 hours and earned a half (0.5) for overtime hours.
Required: Prepare
1. Journal entry to record the labor cost if the overtime premium is charged to
the jobs worked on during the overtime hours.
2. Journal entry to record the labor cost if the overtime premium is not charged
to specific jobs.
Accounting for Payroll
The general ledger of the JG manufacturing company showed these balances at the end of July; Factory
labor of P480,000 which includes P288,000 of direct labor; P66,000 of indirect labor; sales salaries of
P72,000 and office salaries of P54,000.
Withholding Tax 1%
SSS Contribution 10% (40% employee and 60% Employer)
Employees Compensation
Contribution 2% (employer only)
Phil. Health Contribution 2% (50% employee and 50% employer)
PAG-IBIG Contributions 3% (50% employee and 50% employer)
Required: Prepare
1. The journal entry to record labor incurrence.
2. The journal entry to record labor distribution and the related employer’s contribution
Accounting for Incurrence and Distribution of Payroll
end
ROLDAN P. CARBONEL, CPA, MBA
Problem 2 Accounting for incurrence and distribution
of Payroll
MD Company is preparing its monthly payroll for October. The following data apply to Jean Go, the chief
accountant:
a. Year to date, through September
Gross payroll P144,000
SSS premium withheld 9,360
Income tax withheld 19,200
Take home pay 115,440
b. Jean’s October earnings were P18,000. Income tax to be withheld is P2,400.