CPP CPP Payroll Accounting & Reporting 1 — Questions and Answers
Question 1: Which journal entry correctly records the employer's share of Social Security tax?
- Debit Cash, Credit Payroll Tax Expense
- Debit Wages Payable, Credit FICA Tax Payable
- Debit Payroll Tax Expense, Credit FICA Taxes Payable (Correct answer)
- Debit FICA Taxes Payable, Credit Wages Expense
Correct answer: Debit Payroll Tax Expense, Credit FICA Taxes Payable
The employer's share of Social Security tax is recorded by debiting Payroll Tax Expense and crediting FICA Taxes Payable.
Question 2: What is the primary purpose of a payroll register?
- To calculate employee net pay only
- To document employee personal information
- To serve as the source document for payroll journal entries (Correct answer)
- To track employee PTO balances
Correct answer: To serve as the source document for payroll journal entries
The payroll register summarizes all payroll data for a pay period and serves as the primary source for recording journal entries.
Question 3: When recording gross wages, the offsetting credits typically go to:
- Wages Expense
- Cash and various withholding liability accounts (Correct answer)
- Payroll Tax Expense
- Accounts Receivable
Correct answer: Cash and various withholding liability accounts
Gross wages are debited to Wages Expense while credits go to cash (net pay) and various withholding liability accounts.
Question 4: Form W-3 is submitted to which agency along with Copy A of all W-2 forms?
- The IRS along with Form 940
- Each individual employee
- The Social Security Administration (Correct answer)
- The state tax agency
Correct answer: The Social Security Administration
Form W-3 transmits all Copy A W-2 forms to the Social Security Administration by January 31.
Question 5: A payroll bank account reconciliation primarily verifies that:
- All employees are classified correctly as exempt or non-exempt
- Overtime calculations comply with FLSA
- All garnishments are properly deducted
- Checks issued match the bank statement debits (Correct answer)
Correct answer: Checks issued match the bank statement debits
Payroll bank reconciliation matches issued payroll checks against bank statement debits to detect errors or fraud.
Question 6: Which document is used to reconcile total wages on quarterly Form 941 filings to annual W-2 wages?
- Form W-3 (Correct answer)
- Form 940
- The employee handbook
- Form SS-4
Correct answer: Form W-3
Form W-3 annual totals should tie to the sum of four quarterly Form 941 filings, ensuring wage reporting consistency.
CPP CPP Payroll Accounting & Reporting 1
Which journal entry correctly records the employer's share of Social Security tax?