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ACC 150 - Payroll Accounting > ACC 150 - Chapter 1 > Flashcards

ACC 150 - Chapter 1 Flashcards

1
Q

5 Major Provisions of the Fair Labor Standards Act

A
  1. Minimum Wage (Currently $7.25 for non-exempt employees)
    • If state minimum wage is higher than federal minimum wage, then employers must meet state requirements
  2. Overtime for hours physically worked over 40 in a work week to be paid at 1.5 times regular rate of pay per hour
  3. Equal pay for equal work regardless of sex
  4. Restrictions on child labor
  5. Restrictions on wage garnishments
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2
Q

Civil Rights Act of 1964

A
  • Title VII
  • Forbids employer from discrimination in HIRING, FIRING, PROMOTING, COMPENSATING, or any other condition of employment on the basis of RACE, COLOR, RELIGION, GENDER, or NATIONAL ORIGIN
  • Must have 15 or more workers for this law to apply
  • Indian Tribes and religious sects are exempt
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3
Q

Age Discrimination in Employment Act

A
  • ADEA
  • Protects those employees over 40 years old who work for a business with 20 or more employees
  • Excluded from protection are executives who are 65 years or older who are eligible for $44,000 or more per year in pension benefits if terminated from the company
    • -“Golden Parachutes”
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4
Q

Americans with Disabilities Act

A
  • ADA
  • Passed in 1990
  • Prohibits discrimination in employment practices of those persons with disabilities
  • Applies to employers with 15 or more employees
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5
Q

Immigration Reform and Control Act of 1986

A
  • Purpose is to prevent the hiring of ILLEGAL ALIENS

- I-9 must be obtained on each employee within 3 days of hire

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6
Q

I-9

A

Should prove that an employee is either a US citizen or is a legal alien who has a right to work in the US
-Has a “green card”

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7
Q

Family and Medical Leave Act of 1993

A
  • Gives employees the right to take up to 12 weeks of unpaid leave for childbirth, adoption, or serious illness of self, spouse, child, or parent
  • Leave does NOT have to be taken over 12 consecutive weeks
  • Employee can return to the same or similar job (same pay)
  • Applies to employers with 50 or more employees
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8
Q

Employee Retirement Income Security Act of 1974

A
  • ERISA
  • A law that attempts to protect the soundness of employer provided pensions or retirement accounts
  • Does not mandate that businesses have pension plans for employees
  • Regulates funding, disbursements, who administers the plans, etc
  • Specifies when an employee becomes VESTED in their company’s pension plan
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9
Q

Vested

A

An employee is eligible to receive pension benefits from the company’s plan when retirement age is reached
-Employee MAY OR MAY NOT still work for the company

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10
Q

Vesting

A

Occurs because the employee has worked a certain number of years for the company

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11
Q

Two Vesting Schedules

A
  1. Full vesting of the employer’s contributions in 3 years

2. Gradually over 6 years (20% after 2 years and 20% a year for the next 4 years)

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12
Q

Workers’ Compensation

A
  • An insurance to partially cover a worker’s lost wages while he/she is out of work because of a JOB-RELATED injury
  • Employer pays the workers’ compensation premiums
  • Costs of the premiums depend on how dangerous the work environment is
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13
Q

Disability Insurance

A
  • Usually provides partial compensation while an employee is out of the work force for NON-JOB-RELATED injuries
  • Might cover an employee while out of the workforce for an injury sustained off of the job or difficult pregnancy
  • Many times, offered as an option to employees as a part of a benefit package where employees must pay the group premium rate
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14
Q

Pre-hire Inquiries

A
  • Law does not prohibit asking anything

- Must have a reason for asking questions about a person’s race, color, religion, gender, national origin, or age

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15
Q

Payroll Register

A
  • Generated each pay period
  • Showing
    • -Hours worked by each employee
      • –Both regular and overtime pay and total gross pay
    • -Deductions from gross pay
    • -Net Pay
  • May be set up as a Special Journal that can interface with and be posted to the company’s General Ledger accounts
  • Information is transferred from each pay period to each employee’s Employee’s Earnings Record
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16
Q

Employee’s Earnings Record

A

-A cumulative record of an employee’s gross pay and deductions for the year

17
Q

W-2

A

Produced at the end of the year from Employee’s Earnings Record and provided to employees by January 31 of the next calendar year

18
Q

Separation of Duties in Payroll-Related Functions

A

One key internal control

  1. Human Resource Management or Personnel Department
  2. Timekeeper
  3. Payroll Accounting
  4. Treasurer or Paymaster
19
Q

Reasons for Internal Controls on Payroll

A
  • One of the biggest, or the biggest, expense for most companies
  • Ensure that only those persons who are working for the company are being paid
  • Prevent and detect fictitious employees on the payroll
  • Ensure that retired and terminated employees are removed from the payroll at the appropriate date
  • Make sure that employees are paid at the right rate and that their paychecks are received in a timely manner
  • Make sure that regular and overtime pay must be computed as mandated by the Fair Labor Standards Act or according to the company’s policies if more generous that the federal/state requirements
  • Make sure time and leave records are maintained accurately
20
Q

Human Resource Management or Personnel Department

A
  • Hires, fires, and promotes employees
  • Responsible for maintaining personnel evaluation records, authorizations for deductions such as income taxes (W-4), health and life insurance premiums, United Way contributions, 401-K contributions, US Savings bonds purchases, etc
  • *-All authorizations for pay rate changes must originate in this department
21
Q

Timekeeper

A
  • A supervisor in each area must review records for each pay period to ensure accuracy of regular ad overtime hours worked and annual and sick leave taken during the period
  • Use of BIOMETRIC EQUIPMENT can prevent “buddy clocking”
22
Q

Biometric Equipment

A

Identification through fingerprint, hand geometry, iris scan, whole face recognition, voice recognition

23
Q

Payroll Accounting

A
  • May have to input hours that have been authorized by the Timekeeper if this is not automated through a time clock system
  • Generates a Payroll Register for each pay period
  • If Payroll Register doesn’t post directly to the General Ledger, then journal entries must be made from information in the Payroll Register and then posted to the General Ledger
  • Journal Entries to record the payroll and to pay the payroll must be made
  • The employer’s payroll tax expense journal entry must be made each pay period
  • Journal entries must be made on the appropriate dates for deposits of all payroll taxes into various federal and state deposit accounts at banks or when checks are sent in with tax returns
  • Generates W-2’s for each employee by January 31 folioing each tax year
  • Responsible for filing various tax returns
  • Responsible for ensuring that all payroll taxes are deposited on the appropriate dates
  • Payroll checks or deposit stubs must be generated from the payroll register information
  • *-NOT responsible for signing or distributing checks
  • *-NOT responsible for direct deposits of pay into employees’ bank accounts
24
Q

Various Tax Returns Filed by Payroll Accounting

A
  • 941-for Social Security, Medicare, and Federal Income Taxes Withheld
  • 940-for Federal Unemployment Taxes
  • 1605 and 1606-for State Income Taxes Withheld
  • UCE 120/121-for SC State Unemployment Taxes
25
Q

Treasurer or Paymaster

A
  • Signs and distributes pay checks or pay stubs/ direct deposit
  • Distributing cash and paying taxes to various government agencies should ONLY be done by this area
26
Q

Internal and/or External Auditor Procedures to Detect Payroll Fraud

A
  1. Conduct a “payoff”
  2. Verify current employee pay rates in HRM are consistent with those shooing up on a current Payroll Register
  3. Verify the time records authorized by the Timekeeper for a period are consistent with hours paid per a Payroll Register for that same period
  4. Trace Net Pay for each employee as reflected on the Payroll Register for a pay period to actual pay distributed by the Treasurer to employees for that period
  5. Verify deductions being made from employees’ pay on a Payroll Register to surest deduction authorization forms in HRM
  6. Verify executive pay rates to Board of Director minutes
27
Q

Internal Controls when Allowing Another Person to Pick up an Employee’s Paycheck

A
  1. Have a written and signed authorization from the employ specifying exactly who can pick up the paycheck
  2. Make the person picking up the paycheck sign and date a log when the check is picked up
  3. Make the person picking up the check show a picture ID
28
Q

Unclaimed Pay

A
  • Money is not the employer’s
  • Employer must attempt to locate the former employee
  • Within 1 year, the employer must turn the net pay amount over to the state
  • Process is addressed in the state’s Escheat Laws
29
Q

Escheat Laws

A
  • Administered by the Abandoned Property Section of the Estate Tax Division of the SCDepartment of Revenue in SC
  • State will continue to advertise the abandoned property
  • A website is available to check to see if the state hold’s any unclaimed property of yours
  • Unclaimed pay is a liability first of the employer and then of the state
30
Q

Investigative Consumer Report

A
  • A prospective employee can be denied work based on a bad credit report
  • If this is the reason for not hiring, the business must give the name and address of the credit bureau from which the credit report was received
31
Q

3 Large Credit Bureaus

A
  1. Equifax
  2. Transunion
  3. Experian
32
Q

Certified Payroll Professional

A
  • American Payroll Association certification

- Eligible o take exam after working in the payroll area for 2 or more years

33
Q

APA’s Code of Ethics

A
  1. To be mindful of the personal aspect of the payroll relationship between employer and employee and to ensure that harmony is maintained through constant concern for the Payroll Professional’s fellow employees
  2. To strive for perfect accuracy and timeliness of all payroll activities
  3. To keep abreast of the state of the payroll art with regard to developments in payroll technologies
  4. To be current with legislative developments, actions on the part of regulatory bodies, and the like, in so far as they affect payroll
  5. To maintain the absolute confidentiality of the payroll, within the procedures of the employer
  6. To refrain from using Association activities for one’s personal self-interest or financial gain
  7. To take as one’s commitment the enhancement of one’s professional abilities through the resources of the American Payroll Association
  8. To support one’s fellow Payroll Professionals, both within and outside one’s organization

ACC 150 - Payroll Accounting (2 decks)

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