Payroll

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Payroll is the record of employee wages, salaries, deductions and actual pay. The record is kept following the law for pay rates such as minimum wage, overtime and holiday rate. Pay might be biweekly or semimonthly by paycheck or by automatic check deposit. Either way, the employee gets a pay slip telling gross earnings, deductions and net earnings. Compulsory deductions are fees of the government such as for unemployment insurance and social security. Voluntary deductions include money charged the employees for company health insurance and charitable donations.[1]

The employees are paid from the revenues of the company, such as the money customers pay the company for goods or services. If the company’s revenues are less than its expenses, such as payroll expense, it has a net loss. If the customer’s didn’t pay the company enough for the employees to be paid, this shortfall might be covered by borrowing. However, such borrowing would become a problem over the long-teem, since borrowed money needs to be returned to the bank, which charges the company a fee called interest for use of the money.[2]

References

  1. Trainor, T. 2003. Fundamentals of Accounting: Volume Three. Canada: Darnley Publishing Group.
  2. Trainor, T. 2003. Fundamentals of Accounting: Volume One. Canada: Darnley Publishing Group.
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