 Hello. In this lecture, we will define net pay according to fundamental accounting principles. Wild 22nd edition, the definition of net pay is gross pay, less all deductions, also called take home pay. When we're thinking about net pay, we're thinking about the paycheck that an employee will receive. And we're thinking about the net pay net of those deductions, those deductions, including withholdings. Let's take a look at an example. If we had total wages or gross pay of 1200, we would then be removing some things as the employer, some things that are going to be required to be removed by government, including tax withholdings, some things that might be benefits to the employees, such as retirement plan contributions or healthcare. So we might have Medicare or we would almost definitely have Medicare that would have to be withheld, part of our payroll taxes from the employee wages. We would have social security. They would definitely have to be withheld from the wages. We would have federal income taxes that would have to be withheld by the employer from the wages. We may have state income taxes depending on the state that we are in that may need to be withheld from the wages. If we add up those deductions from the wages, the 17, the 74, the 150, the 10, that would be 251 that has been taken away from the amount has been earned from the employees of 1200, meaning that the net pay would be 949. This is what has been earned by the employee. This is what has been received by the employee. This has been taken away from the employee, not for the benefit of the employer, but to pay the employee obligations that are required to be done by the government, including these social security, Medicare, federal income tax, state income tax owed by the employee on the amount that has been earned is 1200. Now, there could be other deductions that we could have. Again, some deductions that are going to be required by the government to withhold, such as the taxes. Some could be benefits such as health insurance payments or payments to a 401k plan or some type of retirement plan might also be taken out in order to determine net pay depending on the circumstances.