Gross pay to net pay
Objective: Compute gross and net pay from hours and stated rates.
Recommended first: Your first journal entries
Gross pay is what an employee earns: hours × rate, plus overtime. Withholdings are amounts the employer deducts and pays to authorities on the employee's behalf. Net pay is what the employee receives.
Payroll records start with hours and rates. Overtime is often paid at a premium (this course states the multiplier in each task). Withholdings are calculated from gross pay using the stated rates and rounding rule. Accurate payroll records protect both employees and the business.
Check your work
- Is overtime calculated at the stated multiplier?
- Is withholding computed from gross pay using the stated rate and rounding?
- Does net pay equal gross minus withholdings?
Gross $2,000; fictional 15% withholding $300; net $1,700.
| Account | Debit | Credit |
|---|---|---|
| Wages Expense | $2,000.00 | |
| Payroll Taxes Payable | $300.00 | |
| Cash | $1,700.00 |
Common mistakes
✗ Recording wages expense at net pay.
✓ Expense is gross; withholdings are liabilities.
Guided practice
Use hints freely here.
Item 1 of 1
Gross and net pay
An employee worked 32 regular hours at $22.00 per hour and 3 overtime hours at 1.5× the regular rate. Using this exercise's fictional 12% total withholding rate (round to the nearest cent, half up), compute gross pay and net pay.
Independent practice
Try these without hints. Completing the lesson needs at least one independent item solved without revealing the answer.
Item 1 of 2
Record payroll with withholdings
On Mar 15, 2026, Corner Bean Café pays gross wages of $7,900.00. Using this exercise's fictional combined withholding rate of 15%, it withholds $1,185.00 and pays employees the net amount in cash.
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Key terms
- Gross pay
- Total earnings before deductions.
- Net pay
- Pay after withholdings.
- Withholding
- Amounts deducted from pay and owed to authorities.
References and provenance
- OpenStax, Principles of Accounting, Volume 1: Financial Accounting (accessed 2026-10-29)
- IRS Publication 583, Starting a Business and Keeping Records (accessed 2026-10-29)
Original lesson written for Bookkeeping Exercises (AI-assisted drafting). Calculations are verified by the platform's automated accounting tests. Not yet reviewed by a credentialed accountant. Updated 2026-10-29.