Accounting Knowledge practice questions

Payroll, sales tax, 1099s, fixed assets & period close

30 practice questions on payroll, sales tax, 1099s, fixed assets & period close, each with the answer and why it is right. From Questiva Consultants' QuickBooks Online skills test.

1. An employee earns gross wages of $3,000 for the pay period. Federal income tax withheld is $300 and the employee's share of Social Security and Medicare is $229.50, so net pay is $2,470.50. Which entry records the payroll (ignoring the employer's own taxes)?

   1. Debit Wages Expense 2,470.50; Debit Payroll Tax Expense 529.50; Credit Cash 3,000 on payday
   2. Debit Wages Expense 3,000; Credit Payroll Liabilities 529.50; Credit Cash 2,470.50
   3. Debit Wages Expense 3,000; Credit Cash 3,000 on the payroll date
   4. Debit Wages Expense 2,470.50; Credit Cash 2,470.50 on the payroll date

   Answer: B) Debit Wages Expense 3,000; Credit Payroll Liabilities 529.50; Credit Cash 2,470.50. The company's cost is the gross wage, $3,000. The $529.50 withheld belongs to the employee and is owed to the government, so it is a liability until remitted — never the employer's expense. Booking only net pay understates wages and hides the amount owed; booking withholdings as tax expense charges the company for the employee's taxes — gross pay is the expense, withholdings are liabilities.

2. For the same $3,000 payroll, the employer owes its own matching share of Social Security and Medicare, $229.50, which will be deposited with the IRS next month. How is the employer's share recorded on payday?

   1. Nothing is recorded until the deposit is actually made to the IRS next month
   2. Debit Payroll Tax Liabilities 229.50; Credit Cash 229.50 on payday
   3. Debit Payroll Tax Expense 229.50; Credit Payroll Tax Liabilities 229.50
   4. Debit Wages Expense 229.50; Credit Cash 229.50 on the payroll date

   Answer: C) Debit Payroll Tax Expense 229.50; Credit Payroll Tax Liabilities 229.50. The employer's share is a genuine cost of employing people, incurred when the wages are earned, so it is an expense on payday. Because it has not yet been deposited it is also a liability. Waiting for the deposit understates the period's expense and hides the debt; crediting cash now records a payment that has not happened — employer payroll taxes are an expense and a liability until deposited.

3. On the 15th the bookkeeper sends the IRS a $759 deposit made up of last month's withheld income tax, the employee FICA, and the employer's matching FICA, all of which were recorded on the payroll dates. Which entry records the deposit?

   1. Debit Payroll Tax Liabilities 759; Credit Cash 759
   2. Debit Payroll Tax Expense 759; Credit Cash 759 on the 15th
   3. Debit Wages Expense 759; Credit Cash 759
   4. Debit Cash 759; Credit Payroll Tax Liabilities 759

   Answer: A) Debit Payroll Tax Liabilities 759; Credit Cash 759. Every dollar in the deposit was already recognised on payday — the withholdings as liabilities and the employer's share as expense plus liability. Paying it simply settles the liability: debit the liability, credit cash. Charging the deposit to expense counts the employer's share twice and treats employee withholdings as company cost; the reversed entry would increase the debt — settling a recorded liability.

4. A furniture store invoices a customer $1,000 for a table plus $80 of sales tax, total $1,080. How much revenue does the store record, and what is the $80?

   1. Revenue $1,080; the $80 is income earned from collecting tax
   2. Revenue $1,000; the $80 is a sales tax expense of the store
   3. Revenue $920; the $80 is a deduction that reduces the sale
   4. Revenue $1,000; the $80 is a liability owed to the state

   Answer: D) Revenue $1,000; the $80 is a liability owed to the state. Sales tax is collected on behalf of the state, so it never belongs to the store. The sale is $1,000 of revenue; the $80 is a liability (Sales Tax Payable) until it is remitted. Including it in revenue overstates sales and income; calling it an expense charges the store for money that was never its own — sales tax collected is a liability, not income.

5. A retailer's year-end reports show Sales Tax Expense of $9,600 on the profit and loss and a zero balance in Sales Tax Payable. The store collects tax on every sale and files quarterly. What most likely happened?

   1. The store collected no tax this year because all its customers held exemption certificates
   2. Tax collected went into sales and remittances into expense, overstating both revenue and expenses
   3. The remittances were recorded correctly, because sales tax is an ordinary expense of doing business
   4. The payable was cleared because the store remitted the tax the same day it was collected

   Answer: B) Tax collected went into sales and remittances into expense, overstating both revenue and expenses. Tax collected should build a liability that each remittance draws down. A zero payable beside that expense means collections went into sales and payments into expense, so revenue and expenses are both overstated. Net income looks about right, but taxable sales are wrong.

6. At year end a design studio reviews its vendor payments to decide who needs a Form 1099-NEC. Assume every payment is above the reporting threshold and all were paid by check. Which payee should receive one?

   1. A freelance copywriter, a sole proprietor, paid $6,000 for writing services
   2. An office-supply company, paid $7,500 for paper, toner and a desk during the year
   3. An IT firm organised as a C corporation, paid $9,000 for network support services
   4. A part-time receptionist on the payroll, paid $8,000 in wages during the year

   Answer: A) A freelance copywriter, a sole proprietor, paid $6,000 for writing services. Form 1099-NEC reports payments for services to non-employees who are not incorporated — the freelance copywriter. Purchases of goods are not reportable, payments to corporations are generally exempt, and an employee's wages belong on a W-2. Missing a contractor or sending a 1099 to an employee both create filing problems — the 1099-NEC rule: services, non-employee, not a corporation.

7. A landscaping company is about to hire an independent contractor for a six-week project. Before the first payment, the bookkeeper asks the contractor for a signed Form W-9. What is the W-9 for?

   1. It is the contractor's written agreement to pay their own income taxes on the project fee
   2. It authorises the company to withhold federal income tax from each of the contractor's payments
   3. It gives the company the contractor's name, taxpayer ID and entity type for year-end reporting
   4. It registers the contractor with the state as a licensed vendor for the duration of the project

   Answer: C) It gives the company the contractor's name, taxpayer ID and entity type for year-end reporting. A W-9 is the payee's certification of name, address, taxpayer identification number and entity type. The company needs it to decide whether a 1099 is required and to file it accurately. It is not a withholding authorisation (that is an employee's W-4), not a tax agreement, and not a licence. Collecting it before the first payment avoids chasing it at year end — the W-9 supplies information, not withholding.

8. In the same week a print shop buys a $3,200 laptop it expects to use for three years and pays $180 to repair a jammed printer. How should the two payments be recorded?

   1. Both as expenses of the month in which the two payments were made
   2. Both as fixed assets to be depreciated over three years
   3. The laptop as a depreciated fixed asset; the repair as an expense
   4. The laptop as an expense; the repair as a depreciated fixed asset

   Answer: C) The laptop as a depreciated fixed asset; the repair as an expense. A purchase that will be used beyond the current year is capitalised as an asset and its cost spread over its useful life through depreciation. A repair that merely keeps existing equipment working is an expense of the period. Expensing the laptop overstates this month's costs; capitalising a repair parks an expense on the balance sheet — the capitalise-versus-expense rule.

9. On January 1 a café buys an espresso machine for $12,000. It expects to use it for five years and then sell it for $2,000. Using straight-line depreciation, which entry records the first full year?

   1. Debit Depreciation Expense 2,000; Credit Accumulated Depreciation 2,000
   2. Debit Depreciation Expense 2,400; Credit Equipment 2,400 for the year
   3. Debit Depreciation Expense 2,000; Credit Cash 2,000 for the year
   4. Debit Accumulated Depreciation 2,000; Credit Depreciation Expense 2,000 for the year

   Answer: A) Debit Depreciation Expense 2,000; Credit Accumulated Depreciation 2,000. Straight-line depreciation spreads cost less salvage evenly: (12,000 − 2,000) ÷ 5 = 2,000 a year. The credit goes to Accumulated Depreciation, a contra-asset shown under the equipment so the original cost stays visible; the equipment account itself is not reduced. No cash moves, and the reversed entry would add value to the machine — straight-line depreciation and the contra-asset account.

10. It is April 8 and the owner wants the March financial statements by the end of the day. Which step must be done before the statements are reliable?

    1. Pay every open vendor bill so that accounts payable is zero
    2. Delete any bank transactions that have not yet been categorised
    3. Run the April payroll so that wages are fully up to date
    4. Reconcile every bank and card account to its March statement

    Answer: D) Reconcile every bank and card account to its March statement. Reconciling proves that every transaction the bank processed is in the books and nothing is duplicated or missing; until then the cash balance, and everything it touches, is unproven. Paying bills changes March's position rather than verifying it, April payroll belongs to April, and deleting uncategorised transactions throws away real activity — the month-end close starts with reconciliation.

11. In February a staff member edits a vendor bill dated last November, changing it from $1,400 to $1,800, after the prior year's statements and tax return were prepared. Which control would have prevented this, and what is the result now?

    1. Deleting the bill and re-entering it in February; no consequence, since the expense has only moved
    2. A closing date on the prior year; the ledger now disagrees with the statements and return already issued
    3. Making the bill a recurring template so it can't be edited; the return is unaffected because bills aren't on it
    4. Restricting the staff member to view-only access; the change reverses itself at year end

    Answer: B) A closing date on the prior year; the ledger now disagrees with the statements and return already issued. A closing date locks the prior period, so any change needs a logged override. Without one, a casual edit rewrites last year's expenses and the statements and return on file no longer match the ledger. Re-dating still alters the prior year.

12. A client's tax return has been filed and accepted. The owner asks whether the prior year's receipts, bank statements and invoices can now be shredded to save space. What should the bookkeeper advise?

    1. Yes — once the return has been accepted the records have served their purpose
    2. Yes for receipts and invoices, but bank statements must be kept forever
    3. No — every record must be kept permanently for as long as the business exists and beyond
    4. No — keep them for as long as the return can be examined, usually several years

    Answer: D) No — keep them for as long as the return can be examined, usually several years. A filed return can be examined years after it is accepted, and it is only as defensible as the documents behind it. Receipts, invoices, payroll records and bank statements substantiate the figures and must be kept for the statutory period — in principle several years, longer for assets and payroll. Acceptance is not approval, and "forever" is neither required nor practical — records retention supports the return.

13. A cleaning company pays Ramon as a 1099 contractor. The company sets his hours, he drives its van, uses its supplies, was trained in its methods, and can't take other clients. The owner says it's settled because Ramon signed a contractor agreement. What is the correct reading?

    1. The signed agreement decides it, because worker status is whatever the two parties put in writing
    2. He is a contractor as long as the company issues him a Form 1099-NEC each January
    3. He is a contractor because he is paid by the job instead of through payroll each pay period
    4. The facts of control point to an employee, and misclassification means back taxes and penalties

    Answer: D) The facts of control point to an employee, and misclassification means back taxes and penalties. Status depends on the facts of control, tools and freedom to take other clients. A contract, a 1099 or a payment method can't turn an employee into a contractor. If the facts say employee, the company owes withholding, employer taxes and penalties.

14. Employees earned $4,200 of wages for work done between December 26 and December 31. Their paychecks are dated January 5. The company closes its books at December 31. What should the December books show for those wages?

    1. Nothing in December; the wages belong to January, when the checks are dated and the cash leaves
    2. Debit Wages Expense 4,200; Credit Accrued Wages Payable 4,200 as a December 31 adjusting entry
    3. Debit Accrued Wages Payable 4,200; Credit Wages Expense 4,200 dated December 31 for the year
    4. Debit Prepaid Wages 4,200; Credit Cash 4,200 on December 31 so the cost lands in the right year

    Answer: B) Debit Wages Expense 4,200; Credit Accrued Wages Payable 4,200 as a December 31 adjusting entry. The work was done in December, so December carries the cost even though the cash leaves in January: debit the expense, credit a liability, and the January payroll clears it. Omitting it understates December wages and December liabilities. The reversed entry credits an expense that was genuinely incurred, and nothing was prepaid — wages follow the work, not the check date.

15. A new bookkeeper is setting up payroll and asks which payroll costs the company pays out of its own pocket rather than holding back from the employee's check. Which item is charged entirely to the employer?

    1. Federal income tax withheld according to the employee's Form W-4
    2. The employee's own share of Social Security and Medicare tax
    3. Federal unemployment tax (FUTA) on the wages the employee earns
    4. The employee's voluntary contribution to the company retirement plan

    Answer: C) Federal unemployment tax (FUTA) on the wages the employee earns. Federal unemployment tax is levied on the employer and is never held back from a worker's pay, so it is payroll tax expense as soon as the wages are earned. Income tax withholding, the employee's FICA share and a retirement contribution are all the employee's money, kept back from gross pay and owed onward — employer taxes are a cost, withholdings are a liability.

16. A client uses an outside payroll service. Each payday the bank feed shows one $9,470 withdrawal covering net pay and taxes, which the bookkeeper categorises to Payroll Expense; she also enters the payroll journal from the service's report. Wages Expense looks far too high and Payroll Liabilities keeps growing. What has gone wrong?

    1. The payroll journal should not be entered at all; the bank withdrawal is the only record a payroll run needs
    2. The bank withdrawal was coded as a second expense instead of clearing the liabilities the journal created
    3. The payroll service is depositing the taxes late, which is why the liability balances keep growing each month
    4. Payroll Liabilities always grows, because the employer's share stays on the books until the annual return is filed

    Answer: B) The bank withdrawal was coded as a second expense instead of clearing the liabilities the journal created. The journal already records the wages, the withholdings and the employer taxes. The withdrawal is the payment of those amounts, so it must be split against the liability accounts rather than coded to expense again — hence inflated wages and liabilities that never clear. Dropping the journal would hide the withholdings, and neither a late deposit nor the employer's share explains both symptoms — a payment settles a liability.

17. A court order requires a company to hold back $150 from an employee's weekly paycheck and send it to a state child-support agency. How should the $150 be handled in the books each week?

    1. As part of Wages Expense, since it is money the company pays out on the employee's behalf
    2. As a reduction of Wages Expense, because the employee never receives that part of the gross pay
    3. As a liability when withheld, cleared when it is sent, with no effect on Wages Expense
    4. As Payroll Tax Expense of the employer, alongside the company's Social Security and Medicare match

    Answer: C) As a liability when withheld, cleared when it is sent, with no effect on Wages Expense. Gross wages are the company's expense whatever happens to them afterwards. A garnishment is the employee's own money, held back and owed to a third party, so it credits a liability that the payment to the agency clears. Reducing wages understates the cost of employing the worker, and this is not a tax the employer bears — an amount withheld is a liability, not an expense.

18. Cash is tight in March. The owner tells the bookkeeper to use the $4,800 of withheld income tax and FICA in Payroll Liabilities to pay rent, and deposit it with the IRS next month. How should the bookkeeper respond?

    1. Agree, provided the deposit is made before the quarterly payroll return is filed
    2. Agree, as long as a journal entry moves the shortfall to a loan-from-owner account until the cash returns
    3. Decline for this amount only; smaller balances can be deposited whenever cash allows
    4. Decline; withheld tax is held in trust, and a late deposit brings penalties and personal liability

    Answer: D) Decline; withheld tax is held in trust, and a late deposit brings penalties and personal liability. Withheld income tax and FICA belong to the employees and are held in trust until deposited on schedule. Missing the deadline brings penalties and interest, and those who decided can be held personally liable. No journal entry creates the cash.

19. A boutique sells a jacket for $200 plus $16 of sales tax, not yet remitted. The customer returns it in the same filing period and gets the full $216 back. What does the refund do to the books?

    1. Sales fall by $200 and Sales Tax Payable falls by $16, so only tax on kept sales is remitted
    2. Sales fall by $216, and the $16 stays in Sales Tax Payable until the next return is filed
    3. Sales fall by $200 and the $16 becomes a refund expense, since the tax was already reported
    4. Nothing changes for the return; the tax follows the original sale and the refund is an expense

    Answer: A) Sales fall by $200 and Sales Tax Payable falls by $16, so only tax on kept sales is remitted. The store collected the tax as the state's agent, so when the sale is undone it never owed it. The credit reverses revenue ($200) and the liability ($16) together. Charging all $216 to sales leaves $16 to remit on a sale that no longer exists.

20. A shop pays a local supplier $650 for cleaning supplies plus $52 of sales tax. The bookkeeper debits the $52 to Sales Tax Payable, reasoning that it offsets tax the shop collects from its own customers. Why is that wrong?

    1. Sales tax paid to a supplier is never part of what was bought, so it belongs in its own Sales Tax Expense account
    2. The offset is right in amount but must wait until the shop files and pays its own sales tax return
    3. Tax paid on a purchase is part of what the supplies cost; it doesn't offset tax collected from customers
    4. The offset applies only to goods bought to resell, and these supplies are used up in the store

    Answer: C) Tax paid on a purchase is part of what the supplies cost; it doesn't offset tax collected from customers. US sales tax has no input credit. Tax paid to a supplier goes with the item it was charged on, here supplies expense. Sales Tax Payable holds only tax collected from customers, so a debit there quietly shrinks the remittance.

21. A tile wholesaler sells $4,000 of tile to a contractor who has supplied a valid resale certificate, so no sales tax is charged on the sale. How should the wholesaler handle it?

    1. Record $4,000 of revenue, keep the certificate on file, and report the sale as exempt on the return
    2. Record $4,000 of revenue and leave the sale off the sales tax return, since no tax was collected
    3. Record $4,000 of revenue and accrue the tax anyway, in case the certificate is later challenged
    4. Record the sale net of the tax normally charged, treating the certificate as a customer discount

    Answer: A) Record $4,000 of revenue, keep the certificate on file, and report the sale as exempt on the return. An exempt sale is still a sale: it belongs in revenue and on the return, where gross sales are reported and the exemption deducted, with the certificate as the evidence behind it. Omitting the sale makes the return disagree with the books, accruing tax records a liability nobody owes, and a certificate is not a price concession — exemptions are documented, not hidden.

22. A furniture store in a destination-based state charges its own city's 8% rate on every sale. A $5,000 order ships to a county with a combined 9% rate, so $50 less tax was collected than the state expects. The state assesses the difference. Who owes the $50?

    1. The customer owes it, so the store should collect the shortfall before remitting anything to the state
    2. The store owes the correct tax; it remits the difference and charges the destination rate from now on
    3. Nobody owes it, because the store used the rate registered for its own location in good faith
    4. The store may net the shortfall against tax over-collected on other sales in the same period

    Answer: B) The store owes the correct tax; it remits the difference and charges the destination rate from now on. The seller owes the correct tax whether or not it collected enough. In a destination-based state the rate follows the ship-to address, so the store remits the $50 and fixes its rate setup. Good faith and netting against other sales don't change that.

23. A studio paid an unincorporated graphic designer $9,000 over the year, $3,500 by check and $5,500 on the company credit card. What amount goes on the Form 1099-NEC?

    1. $9,000, the full amount paid in the calendar year, however each payment was made
    2. $0, because the designer invoices under a registered business name, which exempts the payments
    3. $5,500, because card payments are the traceable ones and the checks are in the studio's bank records
    4. $3,500, because card payments are reported to the IRS by the card processor, not the studio

    Answer: D) $3,500, because card payments are reported to the IRS by the card processor, not the studio. Card payments are reported by the processor on Form 1099-K, so the payer leaves them off to avoid double reporting. Only the $3,500 paid by check goes on the 1099-NEC. A registered trading name isn't incorporation.

24. A bakery pays $2,400 a month to rent its shop from a landlord who owns the building personally, and $500 a month to a sole-proprietor cleaner. At year end, how should the two payments be reported?

    1. The rent on a Form 1099-MISC and the cleaning on a Form 1099-NEC
    2. Both on a Form 1099-NEC, since both payees are unincorporated
    3. The rent on a Form 1099-NEC and the cleaning on a Form 1099-MISC
    4. Neither one; a lease and a service agreement are contracts, not reportable

    Answer: A) The rent on a Form 1099-MISC and the cleaning on a Form 1099-NEC. The 1099-NEC reports fees for services performed by a non-employee, which is what the cleaner's $6,000 is. Rent is not payment for services; it is reported as rent on the 1099-MISC. Swapping the forms files the right money in the wrong place, and having a signed contract exempts nothing — the form follows what the money bought.

25. A subcontractor billed a client $18,000 this year and was paid $15,000. The last $3,000 invoice, dated December 18, was paid January 8. The client keeps its books on the accrual basis. What goes on the 1099-NEC for the year just ended?

    1. $18,000. The form follows the expense the client recorded on the accrual basis
    2. $15,000. The form reports the cash actually paid during the calendar year
    3. $15,000 now, with a corrected form issued in January once the last invoice is paid
    4. $0. The subcontractor reports the income himself, so the client files nothing

    Answer: B) $15,000. The form reports the cash actually paid during the calendar year. Information returns use the cash basis for the calendar year, whatever basis the payer's books use. Only the $15,000 actually paid is reported, and the January payment goes on next year's form. No corrected form is needed for it.

26. A landscaper has paid a subcontractor $4,000 so far this year. The subcontractor has ignored three requests for a Form W-9 and won't give a taxpayer identification number. What should the company do?

    1. Recode the payments to miscellaneous expense so no information return is needed
    2. Stop paying the subcontractor and treat the amounts already paid as outside the 1099 rules
    3. Start backup withholding on further payments and still file the 1099 for the year's amounts
    4. Nothing more; with no W-9 there is no number to report, so no obligation to file

    Answer: C) Start backup withholding on further payments and still file the 1099 for the year's amounts. The duty to report belongs to the payer and doesn't go away when a payee won't identify itself. A missing taxpayer ID calls for backup withholding on later payments, and the 1099 is still filed. The other choices leave an unreported payment and penalties.

27. A bakery buys an oven for $18,000 and also pays $900 freight, $1,200 for installation and wiring, $1,440 sales tax on the purchase, and $400 to train two staff on it. What goes in the Equipment account?

    1. $21,540. Every cost of getting the oven in place and ready to use is capitalised
    2. $21,940. Every amount paid in connection with acquiring the oven belongs in the asset
    3. $18,000. Only the invoice price is the oven's cost, and the rest are expenses of the month
    4. $20,100. Freight and installation are capitalised, but sales tax is recovered on the tax return

    Answer: A) $21,540. Every cost of getting the oven in place and ready to use is capitalised. Asset cost includes the price, freight, installation and the sales tax charged, $21,540 in all. Training is a cost of the staff, not the oven, so it is expensed. Sales tax paid isn't recoverable.

28. A delivery van that cost $28,000 has accumulated depreciation of $22,000 when the company sells it for $9,000 cash. What does the sale produce, and what happens to the two van accounts?

    1. A $19,000 loss; the $28,000 of cost leaves the books against the $9,000 received
    2. A $3,000 gain; leave the accumulated depreciation in place and reduce Equipment by $6,000
    3. No gain or loss; record the $9,000 as other income and write the van down to zero
    4. A $3,000 gain; remove the $28,000 of cost and the $22,000 of accumulated depreciation

    Answer: D) A $3,000 gain; remove the $28,000 of cost and the $22,000 of accumulated depreciation. Carrying value is cost less accumulated depreciation: $28,000 − $22,000 = $6,000, so $9,000 of proceeds is a $3,000 gain. Disposal removes both accounts in full; leaving the accumulated depreciation behind keeps a sold van on the schedule. Measuring against original cost ignores the depreciation already taken, and treating the whole receipt as income double-counts it — gain is proceeds less carrying value.

29. A company buys a $9,600 machine on October 1 and puts it into service the same day. The machine has a four-year life and no salvage value and is depreciated straight-line, and the company closes its books on December 31. How much depreciation belongs in the year of purchase?

    1. $2,400 — a full year's charge, because the machine was bought during the year
    2. $9,600 — the whole cost, because the machine was paid for in the current year
    3. $600 — three months of the $2,400 annual charge, counted from the day it went into service
    4. $0 — depreciation begins with the first full year the machine is in service

    Answer: C) $600 — three months of the $2,400 annual charge, counted from the day it went into service. Depreciation runs from the date an asset is placed in service, so a machine working for three months of the year carries three months of charge: $9,600 ÷ 4 = $2,400 a year, $200 a month, $600 this year. A full year overstates the expense, expensing the cost skips depreciation altogether, and waiting a year understates it — depreciation starts when the asset goes to work.

30. At June 30 the bank reconciliation is finished and balanced, yet Undeposited Funds still shows $3,600. The office manager confirms every customer check received in June went to the bank before month end. What is the most likely explanation?

    1. The June deposits were entered straight to income, leaving the received payments stranded in the account
    2. Undeposited Funds is a clearing account, so it is expected to carry a balance from month to month
    3. The deposits are in transit; the bank hasn't credited them yet, and that is where such amounts wait
    4. The payments were never applied to the customers' invoices, which is what the clearing account holds them for

    Answer: A) The June deposits were entered straight to income, leaving the received payments stranded in the account. Undeposited Funds holds received payments only until the deposit is recorded. If that deposit was entered as new income, the payments stay stranded and revenue is counted twice. A deposit in transit sits in the bank account, not here.