Unit 11: Payroll Accounting

Question 1

what is the process of recording transactions relating to goods or services rendered and the costs incurred to run the business (expenses)

Answer 1

bookkeeping

Question 2

what is the process of measuring, recording, summarizing and analyzing the information recorded in the ledger?

Answer 2

accounting

Question 3

What does accounting do?

Answer 3

it helps a company plan and control their business activities based on financial information gathered and communicate to their banks, auditors and shareholders

Question 4

What is payroll’s responsibility for accounting?

Answer 4

to make sure all payroll information is recorded correctly in the general ledger.
- good controls help achieve this (efficient and safeguard company info)

Question 5

What does payroll accounting deal with?

Answer 5

expenses and liabilities arising form compensating employees

Question 6

What is the process of entering the payroll information

Answer 6

1. the transaction is recorded in a journal entry

2. next the journal entry feeds into the business’s financial statements through the general ledger

Question 7

What are the payroll benefits which must be accounted for in the GL

Answer 7

1. Salary and wages (bonus, commission, overtime)
2. Employee contributions to CPP, EI, and IT
3. Employer expense for CPP and EI
4. Payroll taxes such as WSIB and EHT
5. Employer paid benefits include pensions plans or group insurance
6. compulsory deductions such as garnishments or union dues
7. voluntary deductions such as charitable donations
8. accruals for future expenses (vacation or sick time banks)

Question 8

what does a basic payroll accounting system consist of?

Answer 8

1. a payroll register
2. payroll bank account
3. payroll cheques (dir dep)
4. earnings record for each employee

Question 9

What does the payroll register capture? Debits

Answer 9

debits for wages expense

debits for employer payroll taxes

Question 10

What does the payroll register capture? Credits

Answer 10

liabilities for these payroll taxes (amounts owed that are not yet paid)

Question 11

What are some payroll expenses (debits)

Answer 11

1. salaries expense

Question 12

What are the payroll liabilities (Credits)

Answer 12

1, Income tax withholding payable

2. CPP payable
3. EI payable
4. Union dues payable
5. Net wages payable (cash)

Question 13

what are the two financial statements?

Answer 13

1. Balance sheet (assets= liabilities + equity)

2. Income statement (net income = Revenues - expenses)

Question 14

What financial statement will you find your payroll liabilities on ?

Answer 14

Balance sheet

Question 15

What financial statement will you find your payroll expenses on?

Answer 15

income statement

Question 16

What is the general ledger

Answer 16

used to keep an organized record, by account of the business transactions (can be few or many accounts depending on size of company)

Question 17

What does the general ledger account consist of ?

Answer 17

assets accounts and liability accounts

Question 18

What does assets - liabilities =

Answer 18

owner’s equity

Question 19

what does it mean to have a double entry

Answer 19

for every debit there is a credit

Debits must = credits

Question 20

If your debits do not equal credits what is this called

Answer 20

ledger is out of balance

Question 21

What is the first step in the accounting process?

Answer 21

setting up accounts

Question 22

What are elements of an account?

Answer 22

has at least 5 elements

1. account name and number
2. opening balance
3. reference
4. debit or credit entry
5. a closing balance

Question 23

What side are debits on?

What side are credits on?

Answer 23

debits are on the left side

credits are on the right side

Question 24

Each journal entry to the general ledger MUST contain the following

Answer 24

1. a journal entry reference #
2. the date of the transaction
3. debit or credit amount to be applied to each account
4. total of the debits and credits (these must equal each other)
5. a brief explanation of why you are making the entry

Question 25

what are payroll journals also called?

Answer 25

payroll registers

Question 26

What is in the payroll journals

Answer 26

information about each transaction

Question 27

After you enter the information in the payroll journal where are the transactions then entered

Answer 27

entered into a general ledger system on a journal entry

Question 28

what are the debits for an employee’s wages?

Answer 28

wage expense

Question 29

What are the credits for an employee’s wages?

Answer 29

1. cpp payable
2. ei payable
3. taxes payable
4. union dues payable
5. wages payable (net)

Question 30

where are employee deductions recorded

Answer 30

as current liabilities on the balance sheet from the date the deduction is made until the amount is remitted (government or third party)

Question 31

What are employer paid expenses (other items) shown on financial statements

Answer 31

as an expense (debit on income statement)

as a liability (credit on the balance sheet)