Test Bank for Financial Accounting: IFRS Edition
TF = True-False
C = Completion
Ma = Matching
MC = Multiple Choice
Ex = Exercise
S-A = Short-Answer Essay
CHAPTER STUDY OBJECTIVES
Discuss the objectives of internal control for payroll.
The objectives of internal control for
payroll are (1) to safeguard company assets against unauthorized payments of payrolls, and
(2) to ensure the accuracy and reliability of the accounting records pertaining to payrolls.
Compute and record the payroll for a pay period.
The computation of the payroll involves
gross earnings, payroll deductions, and net pay.
In recording the payroll, Salaries (or Wages)
Expense is debited for gross earnings, individual tax and other liability accounts are credited
for payroll deductions, and Salaries (Wages) Payable is credited for net pay. When the payroll
is paid, Salaries and Wages Payable is debited, and Cash is credited.
Describe and record employer payroll taxes.
Employer payroll taxes consist of FICA,
unemployment taxes, and state unemployment taxes. The taxes are usually accrued at the
time the payroll is recorded by debiting Payroll Tax Expense and crediting separate liability
accounts for each type of tax.
Internal control over payroll is not necessary because employees will complain if they do
not receive the correct amount on their payroll checks.
Answer: F, SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA-BB: Legal/Regulatory Perspective, AICPA-FN: Risk Analysis, AICPA-PC:
Professional Demeanor, IMA: Internal Controls, Sector: General, IFRS: No
A good internal control feature is to have a written hiring authorization form completed
before a new employee is added to the payroll.
Answer: T, SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Strategic/Critical Thinking, AICPA-FN: Risk Analysis,