Question
Corporate law and the Internal Revenue Code mandated that deductions from earnings of statutory employees should be funds collected on behalf of the federal and
Corporate law and the Internal Revenue Code mandated that deductions from earnings of statutory employees should be funds collected on behalf of the federal and state governments. Therefore funds collected from employees' earnings, by companies' payroll departments, must not be classified as assets.
Required:
(1) Provide detailed explanations as to why a company's accounting process must not treat payroll deductions as assets.
(2) Discuss to which accounting category (i.e., Assets, Liabilities, Owner's Equity, Revenue, or Expenses) would payroll deductions belong. How would payroll deductions be recorded in a general journal?
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