Accounting and Finance Foundations

Unit 8

Accounting and Finance Foundations Unit 8: Payroll 668

Payroll Student Guide

Chapter 20

Key TermsLesson 20.3

Salary: stated amount of earnings; does not change from pay period to pay period

Wages: amount of pay based on hours, days, or weeks worked

Pay Period: period in which amount of time worked is calculated; usually weekly, biweekly, semi monthly,

or monthly

Payroll: business’s record of amount earned by all employees

Regular Rate: amount paid to employee for one hour worked

Overtime: amount paid to employees when hours worked per week exceed 40 hours; regulated by the

Federal Wage Standards Act; calculated by multiplying the regular rate times 1.5 (time and a half)

Commission: amount of pay based on a percentage of sales

Total Earnings: amount of regular and overtime earnings (before deductions)

Gross Pay: amount of total earnings before deductions

Net Pay: amount of paycheck after deductions are taken

Payroll Taxes: taxes calculated using earned income; withheld from employees’ paychecks

Employee Income Taxes: federal taxes that must be withheld from all employees’ total earnings

Withholding Allowance: the number of legal dependents (including the employee himself/herself) that can

be claimed as deductions from total earnings

W-4 Form: required tax document used to determine the number of withholding allowances per employee

FICA: Federal Insurance Contribution Act; provides for a federal system of old-age, survivors’, disability,

and hospital insurance; includes Social Security (old-age, survivors’, and disability insurance) and Medi-

care (hospital insurance)