Payroll and Compensated Absences

Question 1

What is a payroll liability comprised of?

Answer 1

Payroll liability is composed of wages earned by the employee and the money withheld from the employee.

Question 2

How do you account for the sales tax that is withheld on behalf of the employee? What are examples of these withholding?

Answer 2

They are liability until they are remitted.

• Income Tax
• FICA
• Medicare
• Fringe benefits
• Union Dues
• Parking

Question 3

The portion of payroll liabilities that is the employers portion is accounted for as?

Answer 3

Expense

Question 4

What are the four criteria for accruing compensated absences (PTO)?

Answer 4

1) The obligation is attributable to services rendered
2) The rights vest or accumulate
3) Payment is probable
4) The amount can be estimable.

Question 5

If an employee historically allows benefits to lapse- how is this accounted for when you do allow accrual of PTO?

Answer 5

The accrual is not necessary because only probably amounts are accrued.

Question 6

When you accrue PTO, what pay rate should be used?

Answer 6

Use past pay rate, if the pay rate changes then you change the accrual amount to the change in rate currently and prospectively NOT retroactively.

Question 7

If a company decides to pay a bonus, which period do those bonuses belong?

Answer 7

If a company pays a bonus on January 21, X2 for the year 20X1, the bonus belongs in 20X1.

Question 8

What amounts go into payroll tax accrual?

Answer 8

FICA, unemployment.

Federal income tax withheld is not apart of payroll taxes