(T) Section 11 payroll accounting

Question 2

What is GAAP?

Answer 2

Generally Accepted Accounting PrinciplesA set of concepts and principles issued by FASB and GASB.

Question 3

How is Accounting for Business different than our personal checking account?

Answer 3

Accounting for Business- accrual accounting is utilized- double entry accounting for each transactions- data is used to create financial statements and compare the company’s financial situation to other companiesIn Personal Checking we use cash accounting with single entry fro each transaction.

Question 4

What is FASB?

Answer 4

Financial Accounting Standards BoardSince 1974, this private organization has set the standards for recording financial transactions.

Question 5

What is GASB?

Answer 5

Government Accounting Standards BoardSets the standards for recording financial transactions for the public sector.

Question 6

What is the Business Entity Concept?

Answer 6

Each organization that operates separately is treated separately (under an EIN).

Question 7

What is the Continuing Concern Concept?

Answer 7

This concept assumes a business entity to operate well into the future.

Question 8

What is the Time Period Concept?

Answer 8

Each organization must determine its own accounting period based on the type of business it is engaged in.

Question 9

What is the Cost Principle?

Answer 9

All goods and services purchased are recorded at the cost of acquiring them.

Question 10

What is the Objectivity Principle?

Answer 10

Transactions must be recorded objectively to ensure personal opinions and emotions are not part of the transaction.

Question 11

What is the Matching Principle?

Answer 11

Expenses and revenue are recoded in the accounting period in which the expense is incurred or the revenue is earned.Ex. Power bill for July is incurred in July but the bill is received in August. That expense would be entered for July.

Question 12

What is the Realization Principle?

Answer 12

Revenue is recognized and reported when earned, which is during the accounting period when the goods have been transferred or the service provided.

Question 13

What is the Consistency Principle?

Answer 13

Transactions are recorded the same way today, tomorrow, next week, next month and next year.

Question 14

What are Assets?

Answer 14

Items of value owned by the company. Can be sold for cash.- Current Assets - Cash and what can be turned in to cash with in 3 months- Long-Term Assets - Items that will take up to 3 months to turn in to cash.

Question 15

What are Liabilities?

Answer 15

Items PAYABLE to someone else. Money that is owed to others; Money withheld from pay, but owed to third parties.- Current Liabilities - Bills that are due with in 3 months- Long-Term Liabilities - Bills that are due after the next 3 months

Question 16

What is Owner’s Equity?

Answer 16

Capital/Net Worth. What the company is worth.

Question 17

What is Revenue?

Answer 17

The money brought in from sales.

Question 18

What are Expenses?

Answer 18

The costs of running the business.

Question 19

What is Double Entry Accounting?

Answer 19

For each transaction, at least two entries are made - a Debit and a Credit. One account will increase, while another is decreased.Debits = Credits

Question 20

What equation provides the basis for the Balance Sheet?

Answer 20

Assets = Liabilities + Owner’s EquityA=L+OE

Question 21

What equation provides the basis for the Income Statement?

Answer 21

Revenue - Expenses = Net Income

Question 22

What are Debit Balance Accounts?

Answer 22

A debit increases the account.Asset AccountsExpense Accounts Assets/Expenses _____________ Debit I Credit IIncrease I Decrease

Question 23

What are Credit Balance Accounts?

Answer 23

A credit increases the account.Liability AccountsRevenue AccountsOwner’s Equity Accounts Liabilities _____________ Debit I Credit IDecrease I Increase

Question 24

What is the Statement of Cash Flows?

Answer 24

Where cash came from and where it went.

Question 25

What is the Notes to Financial Statement?

Answer 25

What is happening in the company that is no reflected in the statements or what needs further explanation.

Question 26

What is the Report of the Independent Accountants or Auditors?

Answer 26

Unbiased analysis as to the validity of the statements.

Question 27

What is considered the Book of Original Entry?

Answer 27

Journal- Contains every entry made by the company - in chronological order.

Question 28

What is considered the Book of Final Entry?

Answer 28

General Ledger- Period-to-Date Balance of general accounts like taxes payable- Used to prepare Financial Statements

Question 29

What Accounting Document replaces journals in computerized accounting systems?

Answer 29

Subsidiary Ledger- Period-to-date balance of individual accounts like federal unemployment taxes payable.

Question 30

What is the accounting flow?

Answer 30

Transaction —> Journal —> General Ledger —> Financial StatementsOR for computerized accountingTransaction —> Subsidiary Ledger —> General Ledger —> Financial Statements

Question 31

What is accrual accounting?

Answer 31

The last day of pay periods and the last day of accounting periods generally do not all occur on the same day. For this reason, companies must accrue or account for payroll expenses through the end of each accounting period.

Question 32

At what periods should the accuracy of payroll by verified?

Answer 32

Balancing should be done periodically during the accounting period,- every payroll period- before filing forms 940(annually) and 941 (quarterly)- before sending employees their W-2sEmployees who issue or control checks on an account should not be responsible for reconciliation of that account.

Question 33

What are Internal Controls?

Answer 33

Internal controls are a system of checks and balances applied with in an organization to ensure the accuracy of its financial records and the security of its assets.

Question 34

What is Segregation of Job Duties?

Answer 34

No one person should do everything.

Question 35

What is Rotation of Job Duties?

Answer 35

What you do today won’t be what you do in a couple months.

Question 36

What is Payroll Distribution?

Answer 36

Employees only get their own paycheck - physical payout.

Question 37

What is a Phantom Employee?

Answer 37

Paying people that don’t actually exist.

Question 38

What are Negative Pay Deductions?

Answer 38

Easy way to give people money fraudulently

Question 39

What is the Internal Control Payroll Bank Account?

Answer 39

The balancing and reconciliation of the payroll bank account should be segregated from the payroll department.

Question 40

What is the internal control for Blank Checks?

Answer 40

This is a large source for fraud.Blank checks should not be stored near the payroll department and away form the method of signature.

Question 41

What is the internal control for Time Reporting?

Answer 41

Overreporting of hours worked and incorrect classification of paid time can lead to large losses for a business. It is essential that time cards are reviewed and approved by department supervisors or managers.

Question 42

What is the internal control for Computer System Edits?

Answer 42

Identify unusual activity in the payroll system.

Question 43

What is and internal auditor used for?

Answer 43

Review efficiency of the organization’s internal control procedures and recommend changes.

Question 44

What is Group 1 Security in the controlling check fraud process?

Answer 44

Group 1 security features are manufactured into the check paper.- Mould Made and Fourdriner Watermarks - true watermarks- Overt Fibers and Planchettes - found in national currencies- Covert Fibers - invisible to the naked eye- Chemical Reactants - safety papers that produce visible chemical reactions- Toner Bond Enhancers - trademarked paper

Question 45

What is Group 2 Security in the controlling check fraud process?

Answer 45

Group 2 security features are printed onto the paper.- Screened Printing- Microprinting- Simulated Watermarks- Warning Bands and Security Icons- VOID Features- Prismatic Printing- Anti Splice Lines- Aniline Dye- Holograms and Foils- Thermochromic Ink- Nonnegotiable Backer- Security Lock Icons

Question 46

What is Group 3 Security in the controlling check fraud process?

Answer 46

Group 3 security is also called “Positive Pay” - bank sponsored electronic data checking. While it is the most effective security measure, it is also the most costly and labor intensive. Requires the actual one-to-one comparison of the check information.

Question 47

What is Training in the controlling check fraud process?

Answer 47

Make sure all employees know how to identify a fraudulent check.