Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

9. Current Liabilities

Payroll and Payroll Taxes

Financial Accounting

9. Current Liabilities

Payroll and Payroll Taxes

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Multiple Choice

Which of the following statements about payroll liabilities is correct?

Payroll liabilities are only recorded after the payroll is paid to employees.

Payroll liabilities include amounts owed to employees and government agencies for wages and payroll taxes.

Payroll liabilities do not include employer payroll taxes.

Payroll liabilities are classified as long-term liabilities on the balance sheet.

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Verified step by step guidance

Understand the concept of payroll liabilities: Payroll liabilities are obligations a company owes related to employee compensation and payroll taxes. These include amounts owed to employees for wages and salaries, as well as amounts owed to government agencies for payroll taxes such as Social Security, Medicare, and unemployment taxes.

Clarify the timing of recording payroll liabilities: Payroll liabilities are recorded when the obligation arises, not only after the payroll is paid. For example, when employees earn wages, the company incurs a liability even if the payment is made later.

Identify the components of payroll liabilities: Payroll liabilities include both amounts owed to employees (e.g., wages, salaries, bonuses) and amounts owed to government agencies (e.g., payroll taxes withheld from employees and employer payroll taxes). Employer payroll taxes, such as Social Security and Medicare contributions, are also part of payroll liabilities.

Classify payroll liabilities on the balance sheet: Payroll liabilities are typically classified as current liabilities because they are expected to be settled within one year. They are not classified as long-term liabilities unless there is a specific reason for a longer settlement period.

Evaluate the statements provided: Based on the explanations above, the correct statement is: 'Payroll liabilities include amounts owed to employees and government agencies for wages and payroll taxes.' The other statements are incorrect because payroll liabilities are recorded when incurred, include employer payroll taxes, and are generally classified as current liabilities.