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Payroll liabilities such as taxes withheld from employees (federal income tax, Social Security, Medicare) are recorded in liability accounts until remitted to the appropriate agency. A payroll clearing account functions as a temporary holding place, allowing payroll to be recorded promptly while ensuring accurate reconciliation before final payment. This prevents misstatements in the general ledger. Revenue and capital accounts are unrelated to payroll transactions, while expense accounts record payroll costs, not liabilities. On APA exams, candidates must demonstrate an understanding of basic accounting principles, particularly the treatment of payroll in double-entry accounting. Recognizing how payroll liabilities flow through clearing accounts is essential for balancing ledgers and ensuring compliance with IRS deposit schedules. Effective management of payroll liabilities reduces audit risk and aligns payroll practices with financial reporting standards.