Fundamental Payroll Certification Fundamental Payroll Payroll Accounting Principles 3

Question 1

Under the accrual basis of accounting, when are wages recognized as an expense?

Accepted Answer

When they are earned by the employee

Answer

Accrual accounting requires expenses to be recognized in the period they are incurred, which is when the employee earns the wages.

Question 2

A company uses cost centers to allocate payroll. If an employee works 60% in sales and 40% in administration, how should their wages be split in the journal entry?

Accepted Answer

60% to Sales Wages Expense and 40% to Admin Wages Expense

Answer

Payroll costs should be allocated to expense accounts based on the actual percentage of time worked in each department.

Question 3

Which of the following would cause a payroll bank account reconciliation to show an outstanding item?

Accepted Answer

An employee's paycheck that has not yet been cashed

Answer

An uncashed paycheck creates an outstanding check that appears on the bank reconciliation until the employee cashes it.

Question 4

Workers' compensation insurance premiums paid in advance are initially recorded as a:

Accepted Answer

Prepaid expense (asset)

Answer

Premiums paid before the coverage period begins are prepaid expenses and are expensed ratably over the coverage period.

Question 5

Reversing entries related to payroll accruals are typically made on:

Accepted Answer

The first day of the new accounting period

Answer

Reversing entries are posted on the first day of the new period to automatically cancel the prior accrual once actual payroll is recorded.

Fundamental Payroll Certification Practice Test

Fundamental Payroll Certification Practice Test

Fundamental Payroll Certification Fundamental Payroll Payroll Accounting Principles 3