Fundamental Payroll Certification Fundamental Payroll Payroll Accounting Principles 4

Question 1

Which statement best describes the difference between wages payable and wages expense?

Accepted Answer

Wages expense is an income statement account; wages payable is a balance sheet liability

Answer

Wages expense flows through the income statement reducing net income, while wages payable is a balance sheet liability representing amounts owed but not yet paid.

Question 2

When a payroll tax deposit is remitted via EFTPS, the journal entry includes a credit to:

Accepted Answer

Cash

Answer

Remitting a tax deposit reduces the company's cash and eliminates the related payroll tax liability.

Question 3

Which account is credited when recording an employee's voluntary 401(k) deferral deduction from gross pay?

Accepted Answer

401(k) Contributions Payable

Answer

The employee's 401(k) deferral is withheld from gross pay and held as a liability (401(k) Contributions Payable) until remitted to the plan.

Question 4

A payroll department discovers that an employee was overpaid $300 in the prior period. Which entry corrects the balance sheet if repayment is received in cash?

Accepted Answer

Debit Cash $300 and credit Wages Expense $300

Answer

Receiving repayment of an overpayment increases Cash and reduces (credits) the Wages Expense originally overstated.

Question 5

Paid time off (PTO) accruals should be recorded when:

Accepted Answer

Employees earn the PTO, regardless of whether they take it

Answer

Under the accrual method, PTO is expensed as employees earn it to match the cost with the period the benefit was earned.

Fundamental Payroll Certification Practice Test

Fundamental Payroll Certification Practice Test

Fundamental Payroll Certification Fundamental Payroll Payroll Accounting Principles 4