PAYROLL ACCOUNTING EXAMINATION QUESTIONS AND
CORRECT ANSWER&EXPLANATION|GRADED A+ STUDY
GUIDE SOUTHERN NEW HAMPSHIRE UNIVERSITY
1. Payroll accounting primarily deals with:
A. Inventory valuation only
B. Employee compensation and related taxes
C. Marketing expenses only
D. Investment analysis only
Answer: B
Rationale: Payroll accounting tracks wages, deductions, and employer obligations.
2. Gross pay refers to:
A. Net earnings after deductions
B. Total earnings before deductions
C. Employer payroll taxes only
D. Bonuses after taxes only
Answer: B
Rationale: Gross pay is total compensation earned.
3. Net pay equals:
Net\ Pay = Gross\ Pay - Total\ Deductions
A. Gross Pay + Taxes
B. Gross Pay − Total Deductions
C. Salary × Tax Rate
D. Overtime + Bonuses
Answer: B
Rationale: Net pay is take-home pay after deductions.
4. Mandatory payroll deductions commonly include:
,A. Charitable donations only
B. Income taxes and social insurance taxes
C. Vacation reimbursements only
D. Inventory costs only
Answer: B
Rationale: Certain deductions are legally required.
5. Voluntary payroll deductions may include:
A. Federal income taxes only
B. Retirement contributions and insurance premiums
C. Employer taxes only
D. Unemployment taxes only
Answer: B
Rationale: Employees authorize voluntary deductions.
6. FICA taxes in the United States fund:
A. Inventory purchases
B. Social Security and Medicare
C. Corporate dividends
D. Sales commissions
Answer: B
Rationale: FICA supports federal social insurance programs.
7. Social Security tax is generally applied up to:
A. Unlimited wages
B. Annual wage base limit
C. Net pay only
D. Overtime earnings only
Answer: B
Rationale: Social Security taxation has annual limits.
8. Medicare tax differs from Social Security tax because:
, A. It has no wage limit for standard tax
B. It applies only to bonuses
C. It is voluntary
D. Employers do not contribute
Answer: A
Rationale: Medicare taxes apply to all covered earnings.
9. Federal income tax withholding is based primarily on:
A. Inventory turnover
B. Employee earnings and withholding information
C. Sales commissions only
D. Corporate tax rates only
Answer: B
Rationale: Withholding depends on pay and tax elections.
10. Form W-4 in the United States is completed by:
Internal Revenue Service
A. Employers only
B. Employees to determine withholding
C. External auditors only
D. Vendors only
Answer: B
Rationale: W-4 guides federal income tax withholding.
11. Payroll taxes paid by employers may include:
A. Employer FICA and unemployment taxes
B. Employee retirement contributions only
C. Sales taxes only
D. Property taxes only
Answer: A
Rationale: Employers incur additional payroll-related taxes.
12. FUTA stands for:
CORRECT ANSWER&EXPLANATION|GRADED A+ STUDY
GUIDE SOUTHERN NEW HAMPSHIRE UNIVERSITY
1. Payroll accounting primarily deals with:
A. Inventory valuation only
B. Employee compensation and related taxes
C. Marketing expenses only
D. Investment analysis only
Answer: B
Rationale: Payroll accounting tracks wages, deductions, and employer obligations.
2. Gross pay refers to:
A. Net earnings after deductions
B. Total earnings before deductions
C. Employer payroll taxes only
D. Bonuses after taxes only
Answer: B
Rationale: Gross pay is total compensation earned.
3. Net pay equals:
Net\ Pay = Gross\ Pay - Total\ Deductions
A. Gross Pay + Taxes
B. Gross Pay − Total Deductions
C. Salary × Tax Rate
D. Overtime + Bonuses
Answer: B
Rationale: Net pay is take-home pay after deductions.
4. Mandatory payroll deductions commonly include:
,A. Charitable donations only
B. Income taxes and social insurance taxes
C. Vacation reimbursements only
D. Inventory costs only
Answer: B
Rationale: Certain deductions are legally required.
5. Voluntary payroll deductions may include:
A. Federal income taxes only
B. Retirement contributions and insurance premiums
C. Employer taxes only
D. Unemployment taxes only
Answer: B
Rationale: Employees authorize voluntary deductions.
6. FICA taxes in the United States fund:
A. Inventory purchases
B. Social Security and Medicare
C. Corporate dividends
D. Sales commissions
Answer: B
Rationale: FICA supports federal social insurance programs.
7. Social Security tax is generally applied up to:
A. Unlimited wages
B. Annual wage base limit
C. Net pay only
D. Overtime earnings only
Answer: B
Rationale: Social Security taxation has annual limits.
8. Medicare tax differs from Social Security tax because:
, A. It has no wage limit for standard tax
B. It applies only to bonuses
C. It is voluntary
D. Employers do not contribute
Answer: A
Rationale: Medicare taxes apply to all covered earnings.
9. Federal income tax withholding is based primarily on:
A. Inventory turnover
B. Employee earnings and withholding information
C. Sales commissions only
D. Corporate tax rates only
Answer: B
Rationale: Withholding depends on pay and tax elections.
10. Form W-4 in the United States is completed by:
Internal Revenue Service
A. Employers only
B. Employees to determine withholding
C. External auditors only
D. Vendors only
Answer: B
Rationale: W-4 guides federal income tax withholding.
11. Payroll taxes paid by employers may include:
A. Employer FICA and unemployment taxes
B. Employee retirement contributions only
C. Sales taxes only
D. Property taxes only
Answer: A
Rationale: Employers incur additional payroll-related taxes.
12. FUTA stands for:
