Reference no: EM131165633

Accounting - ACCOUNTING MAJORS- Please respond the the written article with your opinion and cited work

"Federal social insurance taxes are imposed on employers and employees, ordinarily consisting of a tax of 12.4% of wages up to an annual wage maximum ($110,100 in 2012) for Social Security and a tax of 2.9% (half imposed on employer and half withheld from the employee's pay) of all wages for Medicare" (Wikipedia). Payroll withholdings also consist of garnishee, insurance deductions, union dues and other expenses, that influence company liabilities, since they are recorded on a/p ledgers, and increase liabilities in general unless they are paid off. "Payroll expense accounts include salaries and wages, payroll tax expense and fringe benefit expense accounts. All expense accounts are recorded as a decrease to owner's equity in the accounting equation presented. This decrease indicates that the owner's investment in the company has decreased due to the cost of payroll to the company" (Kent J.).

From my personal experience with five hundred people payroll, I can tell that a lot of organizations look into payroll record, and it is extremely important to keep accurate journal entries. For example, worker's comp. insurance premiums are calculated based on increases or decreases in payroll, as well as percentage of exempt and skilled employees. Unions are always look for number of hours worked by employees, as well as salary ranges. IRS will deep down on taxes withheld. Therefore, all of the organizations looking into company's payroll base quotes, as well as open disputes and lawsuits, depending on those numbers.

References:

Kent J. Chron. What Accounts Does Payroll Affect in the Account Equation? Retrieved from: https://smallbusiness.chron.com/accounts-payroll-affect-account-equation-65479.html

Wikipedia. Retrieved from: https://en.wikipedia.org/wiki/Payroll_tax