A contingent liability Contingent liabilities Good internal control A contingent liability The revenue principal that will probably sometimes pose an for payroll requires that that has a remote requires that revenue be become an actual ethical challenge the human resources possibility of becoming recorded in the same liability must be because they are not real department distribute an actual loss is period that warranty estimated and liabilities paychecks to the included in a expense is recorded. recorded as an expense. and are easy to employees. note to the financial overlook. statements. Amounts owed for Warranties pose an Accounts payable are Adequate separation of Most companies pay products or services accounting challenge amounts owed for duties prohibit the employees with cash. purchased on account because a company does products or services payroll department from are contingent liabilities. not know which or how purchased on account. recording the many products will transactions related to have to be repaired. payroll. Good business requires The entry to estimate The employee earnings Net pay is greater than paying employees warranty payable record is NEITHER a take-home pay because accurately and on time. includes a credit to journal NOR a ledger. optional deductions are FREE SPACE warranty expense. deducted from net pay. Accrued liabilities are Gross pay is the total The three payments Unearned revenue is an Payroll tax expense expenses that have not amount of salary, wages, made by employers for obligation to provide includes the employer's yet been paid. commissions, and bonus payroll include net pay goods or services to the portion of FICA taxes, earned by an to employees, payroll customer. state unemployment employee during a pay taxes and other payroll taxes, period. deductions, and and federal employee benefits. unemployment taxes. If an installment note An employer must file The old age, survivors, State and federal The failure to accrue payable has installments Form 941 with both the and disability insurance unemployment taxes are warranty expenses will due within a year, the federal and state portion of FICA taxes is withheld from each result in the entire note is treated as a governments. imposed on all of an employee's paycheck. understatement of net current liability. individual employee's income. earnings.
A contingent liability that will probably become an actual liability must be estimated and recorded as an expense. Contingent liabilities sometimes pose an ethical challenge because they are not real liabilities and are easy to overlook. Good internal control for payroll requires that the human resources department distribute paychecks to the employees. A contingent liability that has a remote possibility of becoming an actual loss is included in a note to the financial statements. The revenue principal requires that revenue be recorded in the same period that warranty expense is recorded. Amounts owed for products or services purchased on account are contingent liabilities. Warranties pose an accounting challenge because a company does not know which or how many products will have to be repaired. Accounts payable are amounts owed for products or services purchased on account. Adequate separation of duties prohibit the payroll department from recording the transactions related to payroll. Most companies pay employees with cash. Good business requires paying employees accurately and on time. The entry to estimate warranty payable includes a credit to warranty expense. FREE SPACE The employee earnings record is NEITHER a journal NOR a ledger. Net pay is greater than take-home pay because optional deductions are deducted from net pay. Accrued liabilities are expenses that have not yet been paid. Gross pay is the total amount of salary, wages, commissions, and bonus earned by an employee during a pay period. The three payments made by employers for payroll include net pay to employees, payroll taxes and other payroll deductions, and employee benefits. Unearned revenue is an obligation to provide goods or services to the customer. Payroll tax expense includes the employer's portion of FICA taxes, state unemployment taxes, and federal unemployment taxes. If an installment note payable has installments due within a year, the entire note is treated as a current liability. An employer must file Form 941 with both the federal and state governments. The old age, survivors, and disability insurance portion of FICA taxes is imposed on all of an individual employee's earnings. State and federal unemployment taxes are withheld from each employee's paycheck. The failure to accrue warranty expenses will result in the understatement of net income.
Ch11TrueFalsebingo.docx