Payroll and Payroll Taxes quiz #2 Flashcards
Payroll and Payroll Taxes quiz #2
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How are payroll taxes calculated for employees? Payroll taxes are calculated as a percentage of gross pay, with specific rates for FICA, federal, and state taxes. What is the accounting entry when an employer pays payroll taxes to the government? The employer debits payroll liabilities and credits cash when paying payroll taxes to the government. Why is it important for employers to accurately calculate and remit payroll taxes? Accurate calculation and remittance prevent legal penalties and ensure compliance with tax regulations. What is included in the employer's payroll tax expense? Payroll tax expense includes the employer's share of FICA and all unemployment taxes. How do payroll taxes affect the employer's financial statements? Payroll taxes increase expenses and liabilities, reducing net income and cash. What is the purpose of recording payroll liabilities? Recording payroll liabilities tracks amounts owed for taxes and benefits until they are paid. How are voluntary deductions, such as charitable contributions, handled in payroll? Voluntary deductions are withheld from employees' paychecks and remitted to the designated organizations. What is the impact of payroll taxes on the cost of employing workers? Payroll taxes increase the total cost of employing workers beyond their gross pay. How does the employer's payment of benefits affect payroll accounting? Employer-paid benefits are recorded as expenses and reduce cash when paid. What is the difference between mandatory and voluntary payroll deductions? Mandatory deductions are required by law (taxes), while voluntary deductions are chosen by the employee (benefits, donations). How are payroll expenses classified on the income statement? Payroll expenses are classified as operating expenses on the income statement. What is the effect of payroll liabilities on the company's balance sheet? Payroll liabilities increase current liabilities until the amounts are paid. How does the employer handle payroll taxes for employees in states without state income tax? The employer withholds only federal income tax and other applicable taxes, omitting state income tax. What is the accounting treatment for employer-paid health insurance premiums? Employer-paid health insurance premiums are recorded as salary and wage expense and reduce cash. How are payroll taxes reported to the government? Payroll taxes are reported through periodic filings and payments to federal and state agencies. What is the significance of payroll accounting for business operations? Payroll accounting ensures employees are paid accurately and tax obligations are met, supporting legal compliance and employee satisfaction. How does the employer's payment of payroll liabilities affect cash flow? Paying payroll liabilities reduces the company's cash balance. What is the role of payroll accounting in financial reporting? Payroll accounting provides accurate expense and liability information for financial statements. How are employer and employee payroll taxes distinguished in accounting records? Employee taxes are withheld from pay and recorded as liabilities; employer taxes are recorded as additional expenses and liabilities. What is the impact of payroll taxes on employee morale? Payroll taxes reduce take-home pay, but proper handling ensures compliance and avoids legal issues, supporting trust. How are payroll expenses allocated in a company with multiple departments? Payroll expenses can be allocated to different departments based on where employees work. What is the process for remitting payroll taxes to the government? Employers withhold taxes, record liabilities, and periodically remit payments to government agencies. How do payroll taxes differ between employees and independent contractors? Employees have taxes withheld by employers; independent contractors are responsible for their own tax payments. What is the effect of payroll errors on financial statements? Payroll errors can misstate expenses, liabilities, and net income, requiring corrections. How are payroll liabilities cleared from the balance sheet? Payroll liabilities are cleared when the employer remits payments to the appropriate parties. What is the importance of accurate payroll recordkeeping? Accurate payroll records ensure compliance, support financial reporting, and facilitate audits. How does payroll accounting handle retroactive pay increases? Retroactive pay increases are added to salary expense and may require additional tax withholdings. What is the impact of payroll taxes on small businesses? Payroll taxes increase operating costs and require careful management to ensure compliance. How are payroll expenses and liabilities presented in financial statements? Payroll expenses appear on the income statement; payroll liabilities appear as current liabilities on the balance sheet. What is the role of payroll accounting in budgeting? Payroll accounting helps estimate labor costs and tax obligations for budgeting purposes.
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