What is the double entry accounting impact when recording employer FICA liability?

When recording employer FICA liability, the appropriate entries reflect the recognition of the expense related to the employer's share of FICA taxes, which consist of Social Security and Medicare taxes. The correct accounting impact involves debiting the payroll tax expense account to recognize the cost incurred due to employer FICA contributions. Simultaneously, the credit is made to FICA taxes payable, indicating that this amount is owed to the government and will be paid in the future.

This entry accurately captures the financial obligations of the employer because it is essential for businesses to record their FICA tax liabilities as expenses in the period they are incurred. As such, the payroll tax expense increases, representing an expense that reduces net income for the period, while the credit to FICA taxes payable establishes a liability on the balance sheet, showing that this amount will need to be settled.

In this case, the choice that describes this process correctly highlights the essential relationships in double-entry accounting, where every debit has a corresponding credit, maintaining the accounting equation.