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

Recording employee payroll deductions may involve:

Debiting Payroll Tax Expense and crediting Salaries and Wages Payable

Debiting Federal Income Taxes Payable and crediting Salaries and Wages Expense

Debiting Salaries and Wages Expense and crediting various liability accounts such as FICA Taxes Payable and Federal Income Taxes Payable

Crediting Salaries and Wages Expense and debiting Cash

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Verified step by step guidance

Understand the concept of payroll deductions: Payroll deductions are amounts withheld from an employee's gross pay for taxes, benefits, and other obligations. These deductions are recorded as liabilities because the employer owes these amounts to third parties (e.g., government agencies).

Identify the correct accounts involved: Salaries and Wages Expense represents the total gross pay earned by employees, while liability accounts such as FICA Taxes Payable and Federal Income Taxes Payable represent amounts withheld from employees' paychecks that the employer must remit to the appropriate entities.

Determine the correct journal entry: To record payroll deductions, debit Salaries and Wages Expense to recognize the cost of employee compensation, and credit the liability accounts (e.g., FICA Taxes Payable, Federal Income Taxes Payable) to reflect the amounts withheld and owed to third parties.

Exclude incorrect options: For example, debiting Payroll Tax Expense and crediting Salaries and Wages Payable is incorrect because Payroll Tax Expense is used to record the employer's share of payroll taxes, not employee deductions. Similarly, crediting Salaries and Wages Expense and debiting Cash is incorrect because it does not account for the liabilities created by payroll deductions.

Summarize the correct approach: The correct journal entry for recording employee payroll deductions is to debit Salaries and Wages Expense and credit various liability accounts such as FICA Taxes Payable and Federal Income Taxes Payable. This ensures accurate representation of the employer's obligations and expenses.