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ACG 3401 Exam 2 Review (1)
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ACG 3401 Exam 2 Review (1)
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ACG 3401 Exam 2 ReviewWhat is taken out of paycheck? - ANS-Income Tax, Social Security, and Medicare
Federal Income Tax System - ANS-File 1040 to gov. at end of every year; pay as you go system
(each day you work, some money is taken out of paycheck); calculate fed. tax: if you paid more
you get a refund, if you paid less you have to pay the rest
Circular E - ANS-big book of tables that shows how much is going to be taken out of your check
for federal income taxes
Reasons people with same job have different income taxes - ANS-Dependence (how many kids
you have) and filing status (married)
FICA Tax (Social Security + Medicare) - ANS-7.65% (6.2% + 1.45%)
Actual FICA Tax - ANS-15.3% half is owed by employer and half owed by employees
Tax Caps - ANS-Social Security Cap is $128,400; Medicare has no cap
Social Security - ANS-Ponzi Scheme; money given from young to old; keep increasing
retirement age so money doesn't run out
Journal Entry for 20 hours, $10/hr, $16 is fed withholding - ANS-Wages Expense 200
Wages Payable 168.7
Federal Withholding Payable 16
Social Security Payable 12.4
Medicare Payable 2.9
Payroll Tax Expense 15.3
SS Payable 12.4
Medicare Payable 2.9
Why payroll is different from normal day to day expenditures - ANS-Different classes of
employees
Withholdings
Large batch at an exact time
Special controls due to special fraud issues
W2 - ANS-Given at end of year; shows how much you made with your withholdings; IRS also
gets a copy
, W4 - ANS-filled out for withholding when you first get your job
Activities in Payroll Cycle - ANS-Hiring, Collecting Time Info, Calculate, Prepare Check,
Distribute Check, Journal, Sub Ledger (employee records), Agree to G/L, Update Job Tickets
Documents in Payroll Cycle - ANS-Time Cards, Personnel Files (pay rates and withholdings),
Job Tickets, Paychecks, Pay Stubs (given with direct deposits), Checks to Others, Payroll
Journal, Employee Sub Ledger
Controls in Payroll Cycle - ANS-Authorize New Hires, Time Worked, Segregation of Duties,
Supervision, Access to files, Paymaster, Verification
Paymaster - ANS-one function is to physically deliver the checks
Purging - ANS-making sure people who no longer work at the company cannot log in and they
get them off the payroll
Authorization of new hires... - ANS-should not be calculating and processing the payroll
Imprest Account - ANS-Bank account used for one specific purpose. Often seems like a control,
because it makes life easier with reconciliation. Large lump sums will not roll over
Bank Reconciliations - ANS-help catch fraud like thefts of cash and other things
Payroll is well suited to - ANS-Batch Processing
Ghost Employee - ANS-fake person or real person that doesn't really work there; usually is a
family member or roommate; makes it easier to get check
Payroll Fraud - ANS-4th Most Common Fraudulent Disbursement
Average loss = 72K
Actions to make a ghost employee - ANS-Add to the Payroll, Collect Time Information,
Paycheck Issued, Delivery of the Paycheck
Add to Payroll - ANS-- people processing payroll should not be able to add people to it
- Management has to observe controls and make sure employees follow them
- Need a name that blends in (John Smith) or a name that is similar to someone who actually
works there (John Smithe)
- Can use a former employee if management doesn't purge it
Collect Time Info - ANS-- Have to get time info into the system, not tricky, and getting it
approved, tricky
- If the person approving the time is the one with the ghost, it is easy
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