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

When Alan is recording payroll in the accounting records, which of the following journal entries correctly reflects the employer's liability for payroll taxes withheld from employees' wages?

Debit Payroll Taxes Payable; Credit Cash and Salaries Expense

Debit Cash; Credit Salaries Expense and Payroll Taxes Payable

Debit Payroll Taxes Payable; Credit Salaries Expense

Debit Salaries Expense; Credit Cash and Credit Payroll Taxes Payable

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Verified step by step guidance

Understand the context: Payroll taxes withheld from employees' wages represent amounts that the employer is obligated to pay to the government. These taxes are liabilities for the employer until they are paid.

Identify the accounts involved: Salaries Expense represents the gross wages paid to employees, Cash represents the payment made to employees, and Payroll Taxes Payable represents the employer's liability for taxes withheld.

Determine the journal entry structure: The employer needs to record the gross salaries as an expense (debit Salaries Expense), the payment made to employees as a reduction in cash (credit Cash), and the liability for payroll taxes withheld as a payable (credit Payroll Taxes Payable).

Apply the double-entry accounting principle: For every debit, there must be an equal credit. In this case, the debit to Salaries Expense reflects the expense incurred, while the credits to Cash and Payroll Taxes Payable reflect the reduction in cash and the creation of a liability, respectively.

Write the journal entry: Debit Salaries Expense to record the gross wages, Credit Cash to reflect the payment made to employees, and Credit Payroll Taxes Payable to record the liability for taxes withheld.