Fundamental Payroll Certification (FPC) Practice Exam

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What does ACH stand for in payroll processing?

  1. Automated Clearing House

  2. Automated Credit Handling

  3. Association for Clearing Houses

  4. Account Handling System

The correct answer is: Automated Clearing House

ACH stands for Automated Clearing House, which is a network that facilitates electronic payment transfers and fund transfers between bank accounts. In payroll processing, the ACH system is primarily used for direct deposit, allowing employers to electronically deposit employees' wages into their bank accounts. This method ensures timely and secure payments, reduces the risk associated with handling paper checks, and streamlines the payroll process. The other choices do not accurately represent the correct term in the context of payroll processing. Automated Credit Handling and Account Handling System do not refer to a recognized standard within payroll practices. Likewise, the Association for Clearing Houses is not related specifically to payroll but rather to organizations that oversee clearinghouse operations, which is not the focal point in this context. Thus, the accurate term and its significance in payroll processing is clearly encapsulated by Automated Clearing House.