Future Business Leaders of America (FBLA) Accounting Practice Test

What is direct deposit?

1. A method for paying employees via check

2. Where an employee is paid based on hours worked

3. The employee's net pay is deposited in their personal bank account

4. A record of employee earnings over time

The correct answer is: The employee's net pay is deposited in their personal bank account

Direct deposit refers to the process where an employee's net pay is electronically transferred directly into their personal bank account rather than receiving a physical paycheck or check. This method of payment is highly efficient, both for employers and employees, as it ensures that wages are credited to the employee's account on payday without any need for manual handling of checks. It minimizes the risk of lost or stolen checks, speeds up the payment process, and often allows employees to manage their finances more effectively. The other options do not accurately define direct deposit. Paying employees via check indicates a manual payment method rather than an automated electronic transfer. An employee being paid based on hours worked relates to the calculation of wages rather than the method of payment itself. Lastly, a record of employee earnings over time describes payroll records instead of the method by which earnings are deposited.