Payroll Accounting and Reconciliation Flashcards

What is the matching principle and how does it apply to payroll accounting?

Answer: Payroll expenses should be recognized in the same period as the revenue they help generate, requiring accruals for unpaid wages at period-end

The matching principle requires recognizing payroll expenses in the period employees performed the work, which necessitates accruing wages and taxes for pay periods that straddle month-end.

How does ADP's General Ledger Interface handle the reversal of an off-cycle payroll run?

Answer: It generates offsetting journal entries that reverse the original GL postings when the off-cycle run is voided or reversed in ADP

When an off-cycle payroll is voided in ADP, the GL Interface creates offsetting reversing journal entries to nullify the original postings and maintain accurate general ledger balances.

A company is acquired mid-year. How does ADP handle the transfer of year-to-date payroll data for the acquired employees?

Answer: ADP can import prior-period YTD balances for wages and taxes to ensure accurate W-2 reporting and tax deposit calculations for the remainder of the year

ADP supports mid-year balance imports so that employees' prior YTD wages and tax withholding are reflected in the new system, ensuring correct W-2s and remaining tax calculations.

What is the purpose of the 'earned income credit advance' (now discontinued) and what replaced it for payroll purposes?

Answer: It allowed eligible employees to receive part of the EIC in each paycheck; it was discontinued in 2011 and replaced by requiring taxpayers to claim the full credit on their annual return

The advance EIC payment was a pre-2011 provision allowing eligible employees to receive partial EIC via payroll; Congress eliminated it and payroll specialists now play no role in EIC distribution.

In payroll reconciliation, what does 'gross-to-net reconciliation' verify?

Answer: That gross wages minus all deductions and withholdings equal the net pay distributed to employees

Gross-to-net reconciliation confirms that the mathematical relationship between gross wages, all deductions, tax withholdings, and net pay is correct and complete for each employee.

Which ADP feature allows payroll data to be exported directly to accounting software such as QuickBooks or SAP?

Answer: ADP General Ledger Interface with configurable file export formats

ADP's General Ledger Interface supports configurable export formats compatible with accounting platforms like QuickBooks, SAP, and Oracle, automating the transfer of payroll journal entries.