Page 382 - Accounting Principles (A Business Perspective)

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Federal Excise Tax Payable 200
To record the sale of a diamond ring.
The company records the remittance of the taxes to the federal taxing agency by debiting Federal Excise Tax

Payable and crediting Cash.
Current portions of long-term debt Accountants move any portion of long-term debt that becomes due
within the next year to the current liability section of the balance sheet. For instance, assume a company signed a
series of 10 individual notes payable for USD 10,000 each; beginning in the 6th year, one comes due each year
through the 15 year. Beginning in the 5th year, an accountant would move a USD 10,000 note from the long-term
th
liability category to the current liability category on the balance sheet. The current portion would then be paid
within one year.

An accounting perspective:

Uses of technology

Many companies use service bureaus to process their payrolls because these bureaus keep up to
date on rates, bases, and changes in the laws affecting payroll. Companies can either send their

data over the Internet or have the service bureaus pick up time sheets and other data. Managers
instruct service bureaus either to print the payroll checks or to transfer data back to the company
over the Internet so it can print the checks.

Payroll liabilities In most business organizations, accounting for payroll is particularly important because (1)
payrolls often are the largest expense that a company incurs, (2) both federal and state governments require
maintaining detailed payroll records, and (3) companies must file regular payroll reports with state and federal
governments and remit amounts withheld or otherwise due. Payroll liabilities include taxes and other amounts
withheld from employees' paychecks and taxes paid by employers.

Employers normally withhold amounts from employees' paychecks for federal income taxes; state income taxes;
FICA (social security) taxes; and other items such as union dues, medical insurance premiums, life insurance
premiums, pension plans, and pledges to charities. Assume that a company had a payroll of USD 35,000 for the
month of April 2010. The company withheld the following amounts from the employees' pay: federal income taxes,
USD 4,100; state income taxes, USD 360; FICA taxes, USD 2,678; and medical insurance premiums, USD 940. This
entry records the payroll:
2010
April 30 Salaries Expense (-SE) 35,000
Employees' Federal Income Taxes Payable (+L) 4,100
Employees' State Income Taxes Payable (+L) 360
FICA Taxes Payable (+L) 2,678
Employees' Medical Insurance Premiums Payable 940
(+L)
Salaries Payable (+L) 26,922
To record the payroll for the month ending April 30.
All accounts credited in the entry are current liabilities and will be reported on the balance sheet if not paid prior
to the preparation of financial statements. When these liabilities are paid, the employer debits each one and credits
Cash.

Accounting Principles: A Business Perspective 383 A Global Text