Fundamental Payroll Payroll Accounting Principles Flashcards

When recording the employer's share of FICA taxes, which account is debited?

Answer: Payroll Tax Expense

The employer's share of FICA taxes is recorded as a debit to Payroll Tax Expense and a credit to FICA Taxes Payable.

A payroll accrual entry is typically necessary when:

Answer: The pay period ends before the accounting period closes

An accrual is needed when a pay period straddles two accounting periods so that wages earned but unpaid are recognized in the correct period.

Which of the following is classified as a current liability on the balance sheet?

Answer: Accrued wages payable

Accrued wages payable are obligations expected to be paid within 12 months and are therefore current liabilities.

When an employee's garnishment payment is remitted to the creditor, the journal entry includes a:

Answer: Debit to Garnishments Payable and credit to Cash

Remitting a garnishment reduces the liability (Garnishments Payable) and reduces the asset Cash.

Which payroll register column is used to verify the accuracy of the general ledger payroll entry?

Answer: Total gross wages column

The total gross wages column in the payroll register should agree with the Wages Expense debit in the general ledger journal entry.

Employer contributions to a 401(k) plan are recorded as a:

Answer: Debit to Employee Benefits Expense and credit to 401(k) Contributions Payable

Employer 401(k) contributions increase benefits expense and create a liability until the funds are remitted to the plan.

What is the purpose of a payroll clearing account?

Answer: To temporarily hold payroll transactions before distributing costs to expense accounts

A payroll clearing account serves as a temporary holding account that is zeroed out once payroll costs are allocated to the appropriate expense departments.