Unit 11: Payroll Accounting Flashcards Preview

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Flashcards in Unit 11: Payroll Accounting Deck (31):
1

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

bookkeeping

2

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

accounting

3

What does accounting do?

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

4

What is payroll's responsibility for accounting?

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

5

What does payroll accounting deal with?

expenses and liabilities arising form compensating employees

6

What is the process of entering the payroll information

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

7

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

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)

8

what does a basic payroll accounting system consist of?

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

9

What does the payroll register capture? Debits

debits for wages expense
debits for employer payroll taxes

10

What does the payroll register capture? Credits

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

11

What are some payroll expenses (debits)

1. salaries expense

12

What are the payroll liabilities (Credits)

1, Income tax withholding payable
2. CPP payable
3. EI payable
4. Union dues payable
5. Net wages payable (cash)

13

what are the two financial statements?

1. Balance sheet (assets= liabilities + equity)
2. Income statement (net income = Revenues - expenses)

14

What financial statement will you find your payroll liabilities on ?

Balance sheet

15

What financial statement will you find your payroll expenses on?

income statement

16

What is the general ledger

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

17

What does the general ledger account consist of ?

assets accounts and liability accounts

18

What does assets - liabilities =

owner's equity

19

what does it mean to have a double entry

for every debit there is a credit
Debits must = credits

20

If your debits do not equal credits what is this called

ledger is out of balance

21

What is the first step in the accounting process?

setting up accounts

22

What are elements of an account?

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

23

What side are debits on?
What side are credits on?

debits are on the left side
credits are on the right side

24

Each journal entry to the general ledger MUST contain the following

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

25

what are payroll journals also called?

payroll registers

26

What is in the payroll journals

information about each transaction

27

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

entered into a general ledger system on a journal entry

28

what are the debits for an employee's wages?

wage expense

29

What are the credits for an employee's wages?

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

30

where are employee deductions recorded

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

31

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

as an expense (debit on income statement)
as a liability (credit on the balance sheet)