Pujah Srinivasan is the controller for HHT Industries. She has been asked to explain the payroll accounts on the financial statements for the preceding month. What information will she find about payroll accounting on the financial statements?
What will be an ideal response?
On the Income Statement, expenses related to payroll would include wages, taxes, unemployment insurance costs, and any employer matched portion of retirement expenses. These cause expenses to increase thereby reducing net income. On the Balance Sheet, any unpaid amounts of tax liabilities, wages payable, or deductions withheld from the employees to remit to another party (union dues, garnishments, or 401(k) amounts for example) would appear in the liabilities section.
Using the amount of payroll expenses in total, Pujah could inform the company of labor trends, departmental expenses, and what it would cost should they need to add more staff.
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