PAYROLL Flashcards
Why Accounting for Labor differs from Materials?
- Different employees require different procedures, from piece meal to hourly to commissioned ones. Unlike in Materials, purchases are different but they apply same procedures.
- Payroll Procedures occur in a weekly, daily, bimonthly or in a commissioned basis. Materials on the hand, depends on their level of activity.
- Payroll requires special controls for some labor activities are usually not easily seen compared to materials. `
Do payroll procedures vary between entities, and is there a common pattern in payroll systems?
Yes, payroll procedures vary by entity, but they follow a common pattern that forms the core activities of the payroll system.
It prepares and submits Personnel action forms in preparing payroll function.
Personnel department
are documents which the employee’s Pay rate, Deductions, Job Classification and others. An example is a personnel action form used to advice payroll of an increase in an employee’s salary
Personnel Action Forms
It prepares Time cards and Job Tickets to record employee performance.
Production Department
keep track of the employees’ hours working on the job. The card is punched through a special timekeeping device that records their time of going in and out of the establishment.
Time cards
keep track of the employee hours spent on the job; it also indicates how many they have made on each product job.
Job Tickets
What documents are collected to determine costs and summarize total charges for posting to ledger accounts?
Time cards and job tickets
it collects the data from the personnel department (to determine salary rate and also to determine the employee’s tax level) and from the Production department (to determine total hours/days worked) and performs the following:
1. Prepares the payroll register showing Gross Pay, Withholding taxes and the Net Pay.
2. Entering the information to employee records.
3. Prepares the employee paychecks (salary or wage).
4. Sending the Pay slips to appropriate distribution Department.
5. And Finally, Filing the data. (Forms, copy of Payroll register)
Payroll Department
It is the one who sends a copy of the check along with the disbursement voucher and the payroll register to the AP department, where they are filed (not shown).
Clerk
Where does the department deposit the total amount of the payroll after preparing a single check?
Payroll Imprest Account
It must be transferred from the general cash account to this Payroll Imprest Account before the paychecks can be cashed
Funds
It is prepared and sent to the general ledger function
Journal Voucher
Which department receives the labor distribution summary, disbursement voucher, and journal voucher in the payroll process?
General Ledger Function
What are the risks involving Payroll?
- A person who involves in distribution of payroll who also involves in preparation of it may deliberately manipulate employee hours.
- Outdated personnel information would lead to giving time cards to former employees.
- Redundant employee information would result in giving paychecks more than once.
How can the management avoid it?
- The Personnel department must keep track of employee info; it must be updated in order to verify the employees which are to receive paychecks.
- The duties for Personnel Information, Authorization and Distribution must be given to different persons and each person must work independently to others.
- Time clocks must be supervised, Job tickets must be checked if the information reconciles with the Job requirement for the day.
- Checking the accounting records.
What is the term for the collection of documents that includes time cards, job tickets, disbursement vouchers, journal information, subsidiary ledger accounts, and general ledger accounts in payroll?
Audit Trail
True or False:
Control over access to all journals, ledgers, and the source documents in the payroll system is not important.
False, it is important since it is in all expenditure cycle systems
Give an examples of independent verification controls in the payroll system
Verification of Time
Paymaster
Accounts Payable
General Ledger
The labor distribution summary and the payroll disbursement voucher.
In both manual and automated payroll systems, where do payroll authorization and hours worked originate from?
Personnel and Production departments
What does the payroll department do with the information it receives from personnel and production?
It reconciles the information, calculates the payroll, and distributes paychecks to employees.
How does cost accounting use the time spent on each job in the payroll process?
It receives this information from production and uses it for posting to the Work-in-Progress (WIP) account.
What happens when AP receives payroll summary information from the payroll department?
AP authorizes the cash disbursements department to deposit a single check, equal to the total payroll amount, into a bank imprest account for payroll.
How does the general ledger department handle the summary information from cost accounting and AP?
The general ledger department reconciles the information and updates control accounts to reflect these transactions.
