Payroll Accounting and Reporting Flashcards
7 cards from real CPM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Payroll Accounting and Reporting flashcards as text
Which financial statement line item is most directly affected when payroll liabilities remain unpaid at period-end?
Answer: Accrued liabilities on the balance sheet
Unpaid payroll obligations are recorded as accrued liabilities (a current liability) on the balance sheet until disbursed.
Which of the following is an example of a voluntary payroll deduction?
Answer: Employee contribution to a health insurance premium
Health insurance premium contributions are voluntary deductions elected by employees, unlike mandatory tax withholdings required by law.
What is the effect on the general ledger when an employer remits withheld federal income taxes and FICA taxes to the IRS?
Answer: Debit FICA Taxes Payable and Federal Income Tax Payable; Credit Cash
Remitting tax deposits eliminates the liability accounts (debit) and reduces cash (credit), reflecting the payment of previously accrued obligations.
Under the deposit rules for Form 941, a monthly depositor must remit taxes by which deadline?
Answer: The 15th of the following month
Monthly depositors must deposit employment taxes accumulated in a calendar month by the 15th day of the following month.
A company incorrectly classifies a worker as an independent contractor. What is the primary accounting consequence when the error is discovered?
Answer: The company must record back payroll taxes, penalties, and interest as a liability
Misclassification requires the employer to accrue unpaid payroll taxes, employer FICA, FUTA, and potential IRS penalties and interest as liabilities.
Which payroll tax is reported annually rather than quarterly?
Answer: Federal Unemployment Tax (FUTA) on Form 940
FUTA tax is reported annually on Form 940, although deposits may be required quarterly if the liability exceeds $500.
When reconciling year-end payroll records, Box 1 wages on Form W-2 typically differ from Box 3 Social Security wages because:
Answer: Pre-tax 401(k) deferrals reduce Box 1 but not Box 3 Social Security wages
Pre-tax 401(k) elective deferrals reduce federal taxable wages in Box 1 but are still subject to Social Security and Medicare taxes, so Box 3 remains higher.