CHAPTER NO 01: PAYROLL PRACTICES AND SYSTEM FUNDAMENTALS
ANSWERS TO END-OF-CHAPTER MATERIALS
REVIEW QUESTIONS
1. What is the purpose of a payroll system?
a. Provide for internal and external reporting of employee wages and associated
taxes, payment of employee compensation, and monitoring of benefits to
employees. It also serves as a means of tracking labor costs that managers use
for decision-making, budgeting, and planning.
2. What are two differences between large- and small-company payroll practices?
a. Small companies would have fewer employees and reporting requirements and
would be less likely to be required to have automated payroll systems.
b. Large companies have more employees and greater departmentalization. This
increase in employees leads to a higher level of complexity in payroll
accounting, disbursements, and reporting. Larger companies may also provide
Intranet portals for employee self-service options. Additionally, larger
companies may need additional accuracy checks.
3. What is certified payroll? Which companies must use it?
a. Certified payroll is a reporting requirement for companies that work with
federal contracts that are subject to Davis-Bacon wages. Only those companies
that have these types of employees would be required to complete a certified
payroll.
,2|Page
4. Why might it be a good idea to let employees manage their payroll records? What are
some of the pitfalls?
a. An advantage of allowing individuals to self-manage their payroll records
would be the employee would be able to answer some simple questions on their
own without having to come to the payroll accountant for answers. If
employees have access to their payroll records, there would be the need to allow
multiple access points to the confidential information. These open channels
would require security settings to ensure the requirements of confidentiality are
maintained.
5. What are two ways a payroll system may protect a company in the event of a visit from
a government auditor?
Answers may vary, but should contain:
a. The establishment and maintenance of an accurate payroll system. Timely and
accurately reporting wages and withholdings. Adherence to the legal
framework of payroll.
6. What is payroll outsourcing? When might a company consider outsourcing its
payroll?
a. Payroll outsourcing is the process of contracting another company for the
preparation, reporting, and filing of employee payroll. Companies may consider
this option if the company sees a benefit to the company that outweighs the cost
of outsourcing.
7. What are three examples of federal laws that are essential to ensure legal, fair hiring
practices?
Answers should contain three the following:
,3|Page
a. American with Disabilities Act
b. Age Discrimination in Employment Act
c. Fair Labor Standards Act
d. Civil Rights Act
8. What are the major types of payroll processing methods?
a. Manual
b. Computerized
c. Outsourced
d. Certified
9. What are two laws governing the taxes that employers must withhold from employees?
a. 16th Amendment of the U.S. Constitution
b. Social Security Insurance Act
10. What are the guidelines for FLSA, in terms of overtime and pay rate?
a. Maximum hours that covered individuals can work
b. Minimum pay for covered individuals
c. Minimum age for workers
d. Mandatory break times for covered employees
11. Why was the Social Security Act of 1935 created? What were its provisions?
a. The Social Security Act of 1935 was designed to create a contribution-driven
fund to achieve a level of financial stability for the worker when he or she
became too old or infirm to work.
12. How did the Medicare and Medicaid Act of 1965 modify the Social Security Act of
1935?
, 4|Page
a. It was passed to fund medical services needed by older adults, disabled persons,
and low-income individuals.
13. What are two of the advantages of a computerized payroll system over a manual
system?
a. A computerized payroll system can meet the tax and regulatory requirements
efficiently and can typically be set to automatically update for tax law changes.
Web portals can streamline overtime reporting and other functions. A recent
trend in computerized processing is the issuance of employee paycards.
14. Which Act created the term “full-time equivalents”?
a. The Affordable Care Act created the term full time equivalents to determine the
number of employees that should be offered health care coverage under the ac t.
15. How has cloud-based payroll processing affected contemporary payroll practices?
a. Cloud-based payroll processing allows a company the scale of larger
corporations without the additional licensing or responsibilities for updates.
Cloud-based services can contain security comparable with on-site accounting
software.
16. What are two differences between the completion of the I-9 and E-Verify systems?
Answers may vary, but could contain the following:
a. I-9 is mandatory while E-Verify is voluntary.
b. I-9 does not require a Social Security number while E-Verify does.
c. I-9 does not require a photo identification (List B) while E-Verify does.
d. I-9 must be used to reverify expired employment authority while E-Verify may
not be used for this purpose.
17. What was the purpose of the SECURE Act?
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller docusity. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $22.99. You're not tied to anything after your purchase.
