Utah Contractor Practice Exam

When tracking payroll, which journal is essential?

1. General ledger

2. Expense journal

3. Payroll journal

4. Profit loss statement

The correct answer is: Payroll journal

The payroll journal is essential for tracking payroll because it is specifically designed to record all payroll-related transactions. This journal captures detailed information about employee hours worked, wages paid, deductions taken (such as taxes and benefits), and any additional payroll expenses. By maintaining a dedicated payroll journal, contractors can ensure accuracy in their payroll processes, facilitate easier reporting, and perform audits if necessary. Using a payroll journal also helps in maintaining compliance with labor laws and tax regulations, as it organizes all payroll data systematically. Furthermore, payroll journals can support the overall recordkeeping for financial reporting, feeding accurate data into the general ledger to assist in broader financial analyses. While the general ledger consolidates various financial transactions, it does not provide the level of detail specific to payroll necessary for managing employee compensation effectively. An expense journal records all business expenses but may not specifically focus on payroll. The profit loss statement summarizes income and expenses, providing an overall view of profitability, but it does not track payroll transactions in detail. Therefore, the payroll journal is the vital tool for managing and tracking payroll accurately.