Chapter 11 - Payroll Accounting

Front 1

Who would be interested in the financial records of a business?

Back 1

management, stockholders, investors, ee's and auditors

Front 2

What are subsidiary ledgers?

Back 2

used for a single account/subordinate of a general ledger account
i.e. entries documenting payroll expenses and liabilities may be contained in a subsidiary acct known as the Payroll Register

Front 3

What is the chart of accounts?

Back 3

Listing of each account by name and number, with the number being used to identify the account in the system

Front 4

Name the five types of accounts that are generally used by businesses to classify transactions.

Back 4

Asset, Liability, Expense, Revenue, and Equity

Front 5

Payroll expenses may be recorded in one of two ways, functionally or by type of pay. Explain.

Back 5

functionally means the entries are based on the processes supported by the expenses (eg manufacturing, sales, admin)
by pay type - breaks down ee's wages into regular and overtime pay

Front 6

Within a payroll system there are checks and balances to ensure the accuracy of a company's financial records and the security of its assets. What are they called?

Back 6

internal controls

Front 7

Explain accrual accounting as it applies to payroll.

Back 7

revenue is recognized and recorded when earned
expenses are recognized and recorded when earned
accrual entries are made to estimate payroll exp and liabilities incurred between the end of the last payroll period and the accounting period end

Front 8

What are reversals, and how do they affect accounting?

Back 8

accruals are estimates, so they must be corrected by a reversing entry during the next accounting period when the expenses will be recorded.

Front 9

What reconciliations steps should be taken before filing quarterly and year end returns?

Back 9

in filing quarterly form 941 and annual form 940:
futa, ssc, medicare tax equal the current tax rate x taxable wages
the total form 941 tax deposit and cobra premium assistance payments equal the liability section for form 941
total futa tax deposits equal part 4, line 13 and part 5, line 17 of form 940

Front 10

What are earning per share?

Back 10

show the company's new income divided by the weighted average number of outstanding shares of stock

Front 11

What is the purpose of an external audit?

Back 11

accuracy of financial statements
depict the financial condition and determine whether the notes to financial statements accurately summarize the company's accounting policies and procedures
guard against conflict of interest
safeguard the company's assets
provide an objective opinion as to the fairness of the financial statements

Front 12

What is the role of an internal auditor?

Back 12

review the efficiency of the org's internal control procedures and to identify weaknesses in the controls

Front 13

What is a balance sheet?

Back 13

statement of the financial position of a business at a specific period of time. itemized list showing the business's assets, liability's, and owners equity

Front 14

What effect does revenue have on owner's equity?

Back 14

revenue increases owner's equity

Front 15

What effect do expenses have on owner's equity?

Back 15

decreases owner's equity

Front 16

What is the purpose of the journal?

Back 16

list all the necessary information about a transaction in one place
first accounting record of business transactions and is therefore referred to as a record of original entry

Front 17

TF1
Under generally accepted accounting principles, the realization principle governs the recording of revenue.

Back 17

true

Front 18

TF2
After entries have been recorded in the journal, they are posed to the general ledger.

Back 18

true

Front 19

TF3
Regardless of the accounting periods or fiscal year that a company uses, payroll taxes do not have to be reported on a calendar year basis.

Back 19

false

Front 20

TF4
The income statement summarizes an organizations revenues, expenses, and earnings for the current year only.

Back 20

false
for the preceding year as well

Front 21

TF5
The balance sheet is financial statement that shows the financial position of a business on a certain date.

Back 21

true

Front 22

TF6
Accounts payable are assets.

Back 22

false.
liability

Front 23

TF7
In a business, the assets must always be equal to the liabilities minus the owner's equity.

Back 23

false
assets = liab + owner's equity

Front 24

TF8
The property owned by a business is known as its liabilities.

Back 24

false
assets

Front 25

TF9
Revenue can be obtained in the form of cash or accounts receivable.

Back 25

true

Front 26

TF10
Payments of expenses decrease assets and decrease owner's equity.

Back 26

true

Front 27

TF11
Amounts charged for the sale of services or goods are referred to as revenue.

Back 27

true

Front 28

TF12
After all amounts on the balance sheet have been recorded in accounts, the total debits must equal the total credits.

Back 28

true

Front 29

TF13
Entering an amount on the left side of an account is called debiting the account.

Back 29

true

Front 30

TF14
A separate account is kept for each asset, liability, and owner's equity item that a business has.

Back 30

true

Front 31

TF15
The revenue earned during the accounting period appears on the balance sheet.

Back 31

false
revenue appears on the income statement

Front 32

TF16
Any accounting period of 12 consecutive months can serve as a company's fiscal year.

Back 32

true

Front 33

TF17
The purpose of a journal entry is to provide all the essential information about a business transaction.

Back 33

true

Front 34

TF18
A journal entry containing more than one debit or more than one credit is called a compound entry.

Back 34

true

Front 35

TF19
General ledger accounts are arranged in the order they appear on the chart of accounts.

Back 35

true

Front 36

TF20
At the end of each pay period, many businesses enter the hours worked, gross earnings, deductions, and net pay of their ee's in a payroll register.

Back 36

true

Front 37

TF21
The general ledger is classified as a record of original entry

Back 37

false
record of final entry

Front 38

TF22
The payroll expense journal will debit salaries/wages payable and credit an expense account for the labor cost.

Back 38

false
will debit an expense account
credit a liability account

Front 39

TF23
Payroll expenses are accrued when the payroll period ending date and the accounting period ending date do not coincide.

Back 39

true

Front 40

TF24
Paychecks that cannot be delivered should be returned to the payroll dept.

Back 40

false
returned to another dept and kept until the ee returns

Front 41

TF25
One method of reducing phanthom ee's is the physical payout.

Back 41

true

Front 42

TF26
Blank checks should never be stored in the same place as the check signing machine.

Back 42

true

Front 43

MC1
When revenues and expenses are recorded in the same accounting period, which accounting concept is being applied?
a. business entity
b. matching
c. realization
d. continuing concern

Back 43

b

Front 44

MC2
When the same accounting concepts are applied in the same way in each accounting period, which accounting concept is being applied?

a. objectivity
b. continuing concern
c. consistency
d. business entity

Back 44

cc

Front 45

MC3
When each transacation is described by a business document that proves the transaction did occur, which accounting concept is being applied?
a. objectivity
b. cost
c. matching
d. business entity

Back 45

a

Front 46

MC4
In the modern audit process how does testing occur?
a. checking every transaction
b. checking those transaction indicated by the co
c. checking similar transaction to the last audit
d. sampling

Back 46

d

Front 47

MC5
How are marketable securities classified?
a. current assets
b. tangible assets
c. intangible assets
d. current liabilities

Back 47

a

Front 48

MC6
Where are business transactions first recorded?
a. journal
b. general ledger
c. trial balance
d. balance sheet

Back 48

a

Front 49

MC7
If a pay period ends August 22, ee's are paid Aug 29th, and the payroll tax deposit is due Sept 15, when should the payroll expenses be recorded?
a aug 22nd
b. aug 23rd
c. aug 29th
d. sept 15

Back 49

a

Front 50

MC8
Which of the following account describes the legal obligations of a business to pay its debts.
a. asset
b. liability
c. owner's equity
d. expenses

Back 50

b

Front 51

MC9
futa and suta taxes payable are what types of accounts?
a. owner's equity
b. assets
c. liabilities
d. net worth

Back 51

c

Front 52

MC10
When a company purchases a computer on credit for $2500, which of the following journal entries are made?
a. debit assets and debit liab
b. debit assets and credit liab
c. credit assets and debit liab
d. credit assets and credit owner's eq

Back 52

b

Front 53

MC11
What financial statement shows the new income or net loss of a business?
a. income statment
b. balance sheet
c. statement of owner's equity
d. statement of cash flow

Back 53

a

Front 54

MC12
What is the difference between the debits and credit's to an account called?
a. single entry
b. double-entry
c. cross-footing
d. balance

Back 54

d

Front 55

MC13
What effect do revenues have on accounts?
a. increasing exp
b. decreasing liab
c. decreasing owner's equity
d. increasing owner's equity

Back 55

d

Front 56

MC14
In what account is the payment of salaries and wages recorded?
a. assets
b. liability
c. expense
d. revenue

Back 56

c

Front 57

MC15
What is common name for a journal?
a. record of final entry
b. record of secondary entry
c. record of original entry
d. record of cross-reference

Back 57

c

Front 58

MC16
What is the process of transferring entries from the journal to the general ledger called?
a. journalizing
b. posting
c. footing
d. balancing

Back 58

b

Front 59

MC17
What document records payroll data for each pp?
a. earning record
b. payroll register
c. payroll ledger
d. accounts receivable ledger

Back 59

b

Front 60

MC18
What account is credited for child support withheld?
a. child support exp
b. child support pay
c. ap
d. payroll tax exp

Back 60

b

Front 61

MC19
Which account has an entry when the deposit of state income tax withheld is made?
a. ee's income tax payable
b. payroll tax exp
c. state tax exp
d. state tax payable

Back 61

c

Front 62

MC20
What journal entry is made to record the deposit of federal income tax?

a. debit payroll taxes exp, credit federal income tax pay
b. debit cash, credit federal income tax pay
c. credit payroll taxes exp, debit cash
d. debit federal income tax pay, credit cash

Back 62

d

Front 63

MC21
Which of the following is not a payroll dpt internal control?
a. segregation of duties
b. physical payouts
c. computer edits
d. balancing accounts

Back 63

d