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ALBERTA PAYROLL SPECIALIST EXAM|
QUESTIONS AND CORRECT ANSWERS
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Question 1 Which legislation primarily governs payroll deductions in Canada? A. Employment Standards Act only B. Income Tax Act C. Securities Act D. Bankruptcy Act Correct Answer: B Rationale: The Income Tax Act governs federal payroll deductions such as income tax, CPP, and EI. Question 2 What is gross pay? A. Pay after deductions B. Total earnings before deductions C. Net salary D. Taxable income only Correct Answer: B Rationale: Gross pay includes all earnings before any deductions are applied. Question 3 What is net pay? A. Total earnings B. Pay after statutory and voluntary deductions C. Bonus income only D. Taxable benefit
Correct Answer: B Rationale: Net pay is the employee’s take-home pay. Question 4 Which is a statutory deduction in Canada? A. Union dues B. CPP contributions C. Parking fees D. Gym membership Correct Answer: B Rationale: CPP is legally required for eligible employees. Question 5 What is Employment Insurance (EI) used for? A. Retirement income B. Temporary income support during unemployment C. Tax reduction D. Investment savings Correct Answer: B Rationale: EI provides temporary financial assistance to eligible workers. Question 6 Who is responsible for remitting payroll deductions to CRA? A. Employee only B. Employer C. Bank D. Auditor Correct Answer: B Rationale: Employers are legally required to remit deductions.
Question 10 What is CPP maximum contribution based on? A. Employee age B. Annual pensionable earnings limit C. Employer size D. Province only Correct Answer: B Rationale: CPP contributions are capped annually. Question 11 What is EI insurable earnings? A. Investment income B. Earnings subject to EI premiums C. Tax refund D. Capital gain Correct Answer: B Rationale: Only eligible employment income is insurable. Question 12 What is a T4 slip used for? A. Investment reporting B. Employment income reporting C. Business taxes only D. Bank statements Correct Answer: B Rationale: T4 summarizes annual employment income and deductions. Question 13 What is a ROE (Record of Employment)?
A. Tax return B. Employment history document for EI claims C. Payroll ledger D. Investment record Correct Answer: B Rationale: ROE is required when employment is interrupted. Question 14 When must an ROE be issued? A. Monthly B. On employment interruption C. Annually only D. Never Correct Answer: B Rationale: ROE must be issued when employment stops or earnings are interrupted. Question 15 What is retroactive pay? A. Future bonus B. Payment for previous underpaid wages C. Tax refund D. Severance pay Correct Answer: B Rationale: Retro pay corrects past payroll errors or increases. Question 16 What is garnishment of wages? A. Bonus payment B. Court-ordered deduction from wages
Correct Answer: B Rationale: Payroll registers track all payroll transactions. Question 20 What is direct deposit? A. Cash payment B. Electronic transfer of wages to bank account C. Tax refund D. Paper cheque only Correct Answer: B Rationale: Direct deposit electronically pays employees. Question 21 What is taxable income for payroll purposes? A. Gross earnings only B. Earnings subject to income tax C. Net pay only D. Bonus only Correct Answer: B Rationale: Taxable income includes all income subject to taxation. Question 22 What is payroll reconciliation? A. Hiring employees B. Matching payroll records with financial accounts C. Tax filing only D. Budget forecasting Correct Answer: B Rationale: Reconciliation ensures accuracy of payroll records.
Question 23 What is source deduction? A. Employer expense B. Amount withheld from employee pay C. Investment income D. Bonus calculation Correct Answer: B Rationale: Source deductions are taken before pay is issued. Question 24 What is taxable fringe benefit? A. Free parking provided by employer B. Cash salary only C. Loan repayment D. Insurance payout Correct Answer: A Rationale: Non-cash benefits may be taxable. Question 25 What is payroll compliance? A. Ignoring tax laws B. Following legal payroll requirements C. Increasing salaries D. Reducing deductions illegally Correct Answer: B Rationale: Compliance ensures legal payroll processing.
A. Only gross income B. Deductions and taxes C. Investment returns D. Market value Correct Answer: B Rationale: Net pay is reduced by all deductions. Question 30 What is the primary purpose of payroll systems? A. Investment tracking B. Accurate and compliant employee compensation processing C. Tax evasion D. Market analysis Correct Answer: B Rationale: Payroll systems ensure accurate, legal employee payments. Question 31 An employee earns $25/hour and works 40 regular hours plus 10 overtime hours at 1.5× rate. What is total pay (before deductions)? A. $ B. $1, C. $1, D. $1, Correct Answer: D Rationale: Regular pay = 40 × 25 = 1,000. Overtime = 10 × (25 × 1.5) = 375. Total = 1,375. Question 32 What is CPP calculated on? A. Gross pay only B. Pensionable earnings
C. Net pay D. Bonus only Correct Answer: B Rationale: CPP is based on pensionable earnings within annual limits. Question 33 What happens when an employee reaches EI maximum insurable earnings? A. EI stops increasing B. EI contributions stop C. Tax increases D. CPP increases Correct Answer: B Rationale: EI contributions are capped at annual maximums. Question 34 What is taxable income after deductions called? A. Gross income B. Net taxable income C. Investment income D. Base salary Correct Answer: B Rationale: Taxable income is reduced after allowable deductions. Question 35 What is a benefit in kind? A. Cash bonus B. Non-cash benefit provided by employer C. Loan payment D. Tax refund
Question 39 What is payroll compliance risk? A. Investment loss B. Risk of violating payroll laws C. Market volatility D. Credit risk Correct Answer: B Rationale: Non-compliance leads to penalties and audits. Question 40 What is an employee taxable benefit example? A. Salary B. Employer-paid gym membership C. Base wage D. Commission Correct Answer: B Rationale: Certain non-cash benefits are taxable. Question 41 What is statutory deduction error risk? A. Tax savings B. Penalties for incorrect remittance C. Bonus increase D. Investment return Correct Answer: B Rationale: Incorrect deductions can lead to CRA penalties.
Question 42 What is payroll reconciliation purpose? A. Increase salaries B. Ensure payroll records match accounting records C. Reduce taxes D. Hire employees Correct Answer: B Rationale: Reconciliation ensures accuracy in payroll reporting. Question 43 What is vacation accrual? A. Bonus system B. Earned vacation pay accumulated over time C. Tax deduction D. Severance pay Correct Answer: B Rationale: Employees accumulate vacation entitlement over time. Question 44 What is statutory holiday eligibility based on? A. Age B. Employment standards rules C. Salary level D. Job title Correct Answer: B Rationale: Eligibility is governed by employment standards legislation. Question 45 What is payroll source deduction remittance frequency based on?
C. Bonus income D. Investment return Correct Answer: B Rationale: Reimbursements are not taxable if properly supported. Question 49 What is payroll audit trail? A. Investment record B. Documented record of payroll transactions C. Tax rate sheet D. Salary scale Correct Answer: B Rationale: Audit trails ensure traceability of payroll activity. Question 50 What is overtime eligibility based on? A. Employee preference B. Employment standards rules C. Tax rate D. Bonus policy Correct Answer: B Rationale: Employment law defines overtime eligibility. Question 51 What is payroll fraud? A. Tax refund B. Intentional manipulation of payroll data C. Bonus calculation D. Expense claim
Correct Answer: B Rationale: Payroll fraud includes falsifying hours or payments. Question 52 What is employee classification important for? A. Tax evasion B. Determining payroll obligations C. Investment returns D. Market analysis Correct Answer: B Rationale: Classification affects deductions and benefits. Question 53 What is contractor vs employee distinction based on? A. Salary only B. Control and independence C. Tax refund D. Industry type Correct Answer: B Rationale: Control over work determines classification. Question 54 What is payroll year-end reporting? A. Monthly reporting B. Annual summary of earnings and deductions C. Investment report D. Tax audit only Correct Answer: B Rationale: Year-end reports summarize payroll activity.
Question 58 What is payroll compliance audit focus? A. Marketing B. Accuracy and legal adherence C. Investment growth D. Sales performance Correct Answer: B Rationale: Audits ensure payroll is correct and compliant. Question 59 What is payroll adjustment entry? A. Marketing adjustment B. Correction of payroll errors in accounting records C. Investment correction D. Loan adjustment Correct Answer: B Rationale: Adjustments fix errors in payroll accounting. Question 60 What is ultimate goal of payroll administration? A. Maximize taxes B. Ensure accurate, timely, compliant employee compensation C. Reduce salaries D. Increase penalties Correct Answer: B Rationale: Payroll ensures correct and legal employee payment processing. Question 61 What is the primary objective of a payroll compliance audit?
A. Increase employee wages B. Ensure adherence to payroll legislation and accuracy of remittances C. Reduce hiring costs D. Approve bonuses Correct Answer: B Rationale: Payroll audits verify compliance with tax laws, employment standards, and remittance accuracy. Question 62 What is CRA payroll audit most likely to focus on? A. Marketing expenses B. Source deductions accuracy and remittance timing C. Employee promotions D. Sales forecasts Correct Answer: B Rationale: CRA focuses on accurate calculation and timely remittance of payroll deductions. Question 63 What is payroll non-compliance risk exposure? A. Increased profit B. Penalties, interest, and legal consequences C. Higher bonuses D. Investment gains Correct Answer: B Rationale: Non-compliance leads to financial and legal penalties. Question 64 What is payroll internal control designed to prevent?
