Accounting II - Chapter 11: Current Liabilities and Payroll Accounting

current liabilities

liabilities due within 1 year

long-term liabilities

liabilities due after 1 year

known liabilities

measurable obligations arising from agreements, contracts, or laws

short-term note payable

a written promise to pay a specified amount on a stated future data within one year

net pay

or take-home pay, gross pay minus all deductions

payroll deductions

or withholdings, amounts withheld from an employee’s gross pay, either required or voluntary

merit rating

a number assigned by a state to a company based on their stability in employing workers

current portion of long-term debt

that part of the long-term debt due within one year

estimated liability

a known obligation of an uncertain amount that can be reasonable estimated

contingent liability

a potential obligation that depends on a future event arising from a past transaction or event

times interest earned ratio

income before interest expense and income taxes / interest expense

Form 941

the Employer’s Quarterly Federal Tax Return form, FICA requires employers to fill one out within one month after the end of each calendar quarter

federal depository banks

authorized to accept deposits of amounts payable to the federal government

Form 940

the Annual Federal Unemployment Tax Return form, an employer’s federal unemployment taxes (FUTA) are reported on an annual basis by filing this form

Form W-2

the Wage and Tax Statement form, employers are required to give each employee an annual report of their wages subject to FICA and federal income taxes along with the amounts of these taxes withheld

payroll register

usually shows the pay period dates, hours worked, gross pay, deductions, and net pay of each employee for each pay period

employee earnings report

a cumulative record of an employee’s hours worked, gross earnings, deductions, and net pay

Form W-4

each employee records the number of withholding allowances claimed on a withholding allowance certificate filed with the employer

wage bracket withholding table

used by employers to compute the federal income taxes withheld from each employee’s gross pay

payroll bank account

an account used by companies with many employees as means of paying them. when this account is used, a company:

1. draws one check for total payroll on the regular bank account and deposits it in the payroll bank account, or

   1. executers an electronic funds transfer to the payroll bank account

deffered income tax liability

when the income taxes expense reported in in the income statement is different from the amount of income taxes payable to the government

gross pay

the total compensation an employee earns including wages, salaries, commissions, bonuses, and any compensation earned before deductions such as taxes

Federal Insurance Contribution Act (FICA) Taxes

withheld from employee’s pay by employers, separated into two groups:

1. Social Security taxes - withholdings to cover retirement, disability, and survivorship; 6.2% of the first $137,700 earned

   1. Medicare taxes - withholdings to cover medical benefits 1.45% of gross pay

Federal Unemployment Tax Act (FUTA)

employers must may federal unemployment tax on wages and salaries earned by their employees; 6% of the first $7,000 earned

State Unemployment Tax Act (SUTA)

all states fund their unemployment insurance programs by placing a payroll tax on employers; 5.4% of the first $7,000 earned

employee benefits

when an employer pays all or part of medical, dental, life, and disability insurance; many employers also contribute towards pension plans and provide medical care and insurance benefits to their retirees

warranty

a seller’s obligation to replace or fix a product or service that fails to perform as expected within a specified period

federal income taxes withheld

money the government removes from employee’s paychecks