Fisher School Of Accounting

In simple terms, payroll may be understood as a document showing for each worker his gross earning, any deductions (statutory and otherwise) made from his gross earning and the net amount payable to him in a particular pay period. In this chapter you will learn how to calculate the salary or pay of employees and the various deductions that are made from the gross pay before calculating the income tax. Business organisations are required by law to send returns on their payroll including the amount of income tax deducted at source to the tax authorities. For the financial year 2006-07 the basic package for non vat registered business is available at just £9.99 and the standard accounting software for vat registered small business is £12.99. Wages refer to the type of employee remuneration package that is time based. You will also learn how to use the progressive personal income tax schedule to calculate the income tax of an employee. The PAYE tax is a monthly phenomenon which is seen as an estimate and as such may result in overpayment or underpayment of an employee‟s income tax liability. This is a form of withholding tax system where the employer is legally required to deduct at source the income tax and social security contributions from the wages or salaries of employees and pay the same to the tax authorities.

Finally you will learn what types of reliefs are available to employees and how they are adjusted before the employees‟ net pay is calculated. In this system of remuneration, employees are paid according to number of hours actually worked multiplied by a fixed amount or rate. In this situation the rate of pay is given as a fixed amount per hour for number of hours actually worked or of those who reported for duty. The Simple ABC approach, however, causes the cost driver rate to fluctuate each period with anticipated activity levels. Payroll may be defined as a record showing the names of employees, rates of pay, hours worked, bonuses, allowances, gross earning (salaries), statutory deductions and other contributions withheld during a given pay period. The cash float is reimbursed by the amount spent at the end of a specific period. Skilled professional indemnity coverage is crucial to any organization delivering a service nonetheless it’s a bit more critical to specific industries of enterprise.

At the end of specific periods the columns are added and posted to the debit side of the ledger accounts to which they relate. The double column cash book has two columns on both sides of the accounts namely; cash and bank columns. In this chapter we shall consider the double column and three column cash book. We also explained how to prepare double column cash book and three column cash book. The three column cash book has three main columns for discount, cash and bank. The cash book may be analyzed to columns according to the nature of transactions. Another thing is to note that cash book is a book of original entry as well as a ledger account for cash transactions. When cash was withdrawn from the bank for office use, it was also a contra entry. Discount received is recorded on the credit side, the same side in which payments for cash purchases are recorded in the cash book. The only additional column is the discount column. The bank column records cash transactions that involve cash in bank.

Supporting documents for these bank transactions are mainly cheques and pay-in-slips. The function of approving payment must be separated from the function of signing cheques. The petty cash voucher shows the date, the amount paid, the purpose of the expenditure, the signature of the person who approved the payment and the signature of the person receiving the money. Voucher System: A voucher system involves a written authorization called a voucher that is prepared for every cash payment transaction. The Balanced Scorecard is a relatively new management accounting system that includes financial and non-financial performance measures. At the same time, the performance also counts to a large extent. Discount allowed is recorded in a column on the debit side of the cash book, the same side in which receipts from cash sales are recorded. We shall illustrate the treatment for cash discount later in this chapter. Cash discounts are recorded in a memorandum column in the cash book. It always makes sense to know a little about the different aspects of your business, when you are an entrepreneur. At any moment you start a business, it has to be registered.

Now, we can start to inspect and use our data in more depth. Start with your immediate friends and family, whomever you didn’t use to build your portfolio. However, if you primarily use cheques, you should look for low charges for paper transactions. Don’t use your business general contact information. The cash book will normally show a debit balance but the bank column may show a credit balance when the business enjoys overdraft facility from the bank, otherwise a person cannot spend more than what he has. The value of the debtors in the balance sheet should be adjusted accordingly so as to show only the valid debtors. The net book values are the historical costs less the accumulated depreciation while the net realizable values are the estimated current market value of an item. The sales and purchases would be recorded in the books at their invoice value less trade discount.

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