Question

Money deducted from employee paychecks and deposited in the bank should be recorded as ____ in the practice's checking account.

a) Revenue
b) Liability
c) Expense
d) Asset

Answer 1

Deductions from employee paychecks deposited into a bank are recorded as liabilities because the bank owes these funds to the depositors.

Step-by-step explanation:

Money deducted from employee paychecks and deposited in the bank should be recorded as liability in the practice's checking account. When bank customers, including businesses, deposit money into a checking account, the bank views these deposits as liabilities because the bank owes these funds to its depositors, who may wish to withdraw their money. Just as it is for individual customers, the funds held on deposit by a practice are a liability on the bank's balance sheet.