Basics of Payroll Accounting Quiz

What is the primary reason payroll accounting isn't just a simple transaction of debiting wage expense and crediting cash?

• Because of the need to manage company profits

• Due to various withholdings and taxes

• Because employees prefer it this way

• To simplify accounting processes

Which tax is included in FICA?

• Corporate tax

• Social Security and Medicare

• Sales tax

• Property tax

What is the purpose of withholding taxes from an employee's salary?

• To fund employee benefits directly

• To ensure government receives due taxes

• To increase company's working capital

• To invest in company projects

What might trigger a garnishment of an employee's wages?

• Employee requesting advance salary

• Company financial losses

• Legal obligations like child support

• Performance bonuses

What happens to the garnished amount from an employee's wages?

• Used to pay company taxes

• Reinvested into the company

• Paid to another party due to legal obligations

• Returned to the employee after a year

What is the effect of garnishments on an employee's net pay?

• Increases the net pay

• Reduces the net pay

• Converts part of the pay into company shares

• Has no effect on the net pay

How many journal entries are typically made to account for an employee's salary?

• One

• Four

• Three

• Two

What is the main reason for breaking down payroll accounting into multiple journal entries?

• To delay payments

• Because it is legally required

• To simplify understanding and tracking

• To confuse the tax authorities

What is the net amount an employee receives if their salary is $2000 but has $300 federal tax and $153 FICA withheld?

• $1470

• $1547

• $1600

• $1500

What role does the employer play in handling the taxes withheld from an employee's salary?

• They act as an intermediary, remitting withheld taxes to the government

• They keep the taxes for company use

• They return the taxes to the employee at year-end

• They donate the taxes to charity