Accounting : Current Liabilities and Payroll Accounting

Study concepts, example questions & explanations for Accounting

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Example Questions

Example Question #1 : Current Liabilities And Payroll Accounting

All of the following conditions except which of the following must be met in order for an employer to accrue liability for employee compensation for future absences?

Possible Answers:

The employer's obligation is related to employee's rights to receive compensation for previous absences is attributable to the employee's services already rendered

The obligation relates to rights that vest or accumulate

Payment of the compensation is probable

The employer's obligation is related to employee's rights to receive compensation for future absences is attributable to the employee's services already rendered

Correct answer:

The employer's obligation is related to employee's rights to receive compensation for previous absences is attributable to the employee's services already rendered

Explanation:

In relation to compensated absences, the knowledge of the conditions that must be met in order to accrue loss contingency is helpful in accounting for compensated absences such as vacation, sick pay, and leave. In order for an employer to accrue liability for employee's compensation for future absences, several conditions must be met. These conditions include the following: the employer's obligation is related to employee's rights to receive compensation for future absences is attributable to the employee's services already rendered; the obligation relates to rights that vest or accumulate; payment of the compensation is probable; and the amount can be reasonably estimated.

Example Question #2 : Current Liabilities And Payroll Accounting

All of the following conditions except which of the following must be met in order for an employer to accrue liability for employee compensation for future absences?

Possible Answers:

The employer's obligation is related to employee's rights to receive compensation for previous absences is attributable to the employee's services already rendered

Payment of the compensation is probable

The obligation relates to rights that vest or accumulate

The employer's obligation is related to employee's rights to receive compensation for future absences is attributable to the employee's services already rendered

Correct answer:

The employer's obligation is related to employee's rights to receive compensation for previous absences is attributable to the employee's services already rendered

Explanation:

In relation to compensated absences, the knowledge of the conditions that must be met in order to accrue loss contingency is helpful in accounting for compensated absences such as vacation, sick pay, and leave. In order for an employer to accrue liability for employee's compensation for future absences, several conditions must be met. These conditions include the following: the employer's obligation is related to employee's rights to receive compensation for future absences is attributable to the employee's services already rendered; the obligation relates to rights that vest or accumulate; payment of the compensation is probable; and the amount can be reasonably estimated.

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