SOFA-CFE · Question #388
Worker's compensation is not a payroll account, but rather an insurance expense.
The correct answer is A. true. A (True) is correct because worker's compensation is classified as an insurance expense on the income statement, not as a payroll liability or payroll account. It represents the cost a business pays to insure employees against work-related injuries and illnesses - a separate…
Question
Worker’s compensation is not a payroll account, but rather an insurance expense.
Options
- Atrue
- BFalse
How the community answered
(47 responses)- A83% (39)
- B17% (8)
Explanation
A (True) is correct because worker's compensation is classified as an insurance expense on the income statement, not as a payroll liability or payroll account. It represents the cost a business pays to insure employees against work-related injuries and illnesses - a separate overhead cost from wages and salaries.
B (False) is wrong because worker's compensation premiums are not tied to the payroll accounts (like Wages Payable or Payroll Tax Expense) that track employee earnings and employer payroll taxes. While the premium is often calculated as a percentage of payroll, the account it lands in is Insurance Expense, not a payroll account.
Memory tip: Think of it this way - payroll accounts track what you pay employees; worker's comp is what you pay the insurance company to protect those employees. Insurance company = Insurance Expense.
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