Question

Expenses are costs incurred by an organization in the process of earning revenue during a given time period. Expense accounts have a direct impact on the profitability of an organization.

List three expense accounts related to payroll. Describe when you would expect the account to be cleared to zero. Explain the methods you could use to reconcile these accounts.

Answer 1

1.

Three expenses accounts related to payroll are-

• Employees salaries expenses
• Employees benefit expenses or Staff welfare expenses
• Employees Bonus and commission expenses

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2.

The payroll accounts are cleared to Zero in the following way

1.A special payroll checking account and payroll cheques are used

2.After payroll rgister has bee completed, then a cheque is written on the company general checking account acknowledging for payable towards net pay

3.The cheque is deposited in special payroll checkimh account, against which payroll cheques are drawn for each employees.

4.This Account will be reduced to zero as soon as all employees have cashed their payroll cheques.

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3.

Methods used for reconciliation of payroll accounts are:

• reconcilling against budget set
• reconcilling with entries in the payroll register regarding theattendance of the worker
• ensuring making entries to distribute payroll to theappropriate cost accounts.
• Verification of the compensation rate for each employeedocumented against an offer letter or other source document