Open Question
The following information relates to the monthly payroll expenses at ABC Company:
Record three journal entries:(1) employee salary expense, (2) employer-sponsored benefits, and (3) employer payroll taxes
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9. Current Liabilities
Payroll and Payroll Taxes
Multiple Choice
What is the term for the total amount of money an employee earns in a pay period before any deductions are made?
A
Payroll tax
B
Withholding allowance
C
Net pay
D
Gross pay
Verified step by step guidance1
Understand the concept of 'Gross Pay': Gross pay refers to the total amount of money an employee earns during a pay period before any deductions, such as taxes, insurance, or retirement contributions, are subtracted.
Differentiate between related terms: Payroll tax refers to taxes deducted from an employee's earnings, withholding allowance affects the amount of tax withheld, and net pay is the amount an employee takes home after deductions.
Recognize that gross pay is the starting point in payroll calculations, as it represents the full earnings before any adjustments.
Apply this understanding to the question: The term that matches the description of total earnings before deductions is 'Gross Pay.'
Reinforce the concept: Gross pay is a foundational term in payroll accounting and is used to calculate deductions and net pay.
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