2. Cycle of Business Activities
Capital
Capital
Investment
Investment
Financing
Cycle Sale
Revenue
Cycle
Input General Ledger and
Acquisition Reporting System
Expenditure
Human
Cycle Production Resource
Cycle Payroll Cycle
Hire &
Conversion pay employees
3. HRM/Payroll System
Purpose:
recruiting & hiring Human Resource Dept.
training
job assignment Important to integrate and
performance monitor nonfinancial
evaluation measures & intellectual
Discharge capital
compensation
Employees are the most
Payroll
important asset!!
(Controller’s Dept.)
4. Figure 15-1
Payroll Context Diagram
Payroll Changes Paychecks
Employees
H/R
Reports
Withholdings and deductions
Time &
Attendance
Data Payroll check
Depts. Payroll Bank
Reports System
Rate changes & instructions
Gov't
Payroll Taxes &
Tax Reports Insurance/
Checks & reports
Other
Tax Rates and Instructions
5. Figure 15-1
Payroll Context Diagram
Payroll Changes
Employees
H/R
Withholdings and deductions
Time &
Attendance
Data
Depts. Payroll
System
Rate changes & instructions
Gov't
Insurance/
Other
Tax Rates and Instructions
6. Figure 15-1
Payroll Context Diagram
Paychecks
Employees
H/R
Reports
Payroll check
Depts. Payroll Bank
Reports System
Gov't
Payroll Taxes &
Tax Reports Insurance/
Checks & reports
Other
7. Figure 15-1
Payroll Context Diagram
Payroll Changes Paychecks
Employees
H/R
Reports
Withholdings and deductions
Time &
Attendance
Data Payroll check
Depts. Payroll Bank
Reports System
Rate changes & instructions
Gov't
Payroll Taxes &
Tax Reports Insurance/
Checks & reports
Other
Tax Rates and Instructions
8. Payroll Inputs
Job
Time reconcile Tickets
Cards/
Sheets Commission
Reports
Employment Piecework
Forms Reports
19. Payroll Entries
Step 1: Charge to payroll clearing account
Dr. Cr.
Payroll Clearing
control account XX
Cash XX
Payroll taxes payable XX
Other deductions payable XX
20. Payroll Entries
Step 2: Allocate labor to various expense
categories
Dr. Cr.
Sales salaries XX
Z
er
o
Admin. salaries XX bn
ac
le
a
Indirect labor XX cc
h
ek
Direct labor XX
Payroll clearing
control account XX
21. Payroll Entries - Employer
Benefits & Taxes
Dr. Cr.
Payroll tax expense XX
F.I.C.A. payable XX
State unemployment taxes payable XX
Federal unemployment taxes payable XX
Other benefits payable (i.e. insurance) XX
Employers must match employee F.I.C.A. tax.
Unemployment taxes are based on various percentages.
22. Payroll System Reports
Special Purpose Reports: Control
• various cumulative Reports
earnings reports
Earnings
Statements/ Payroll
W-2’s Register
Deduction (Journal)
Register
23. Outsourcing Options
Payroll Service Bureau
» Benefits
– reduced costs
– privacy
– free-up computer resources
» Disadvantages
– difficult integration with HRM system
Professional Employer Organization
24. Opportunities for Using I/T
On-line employee access to
benefits/withholding info on company
intranet
direct deposit and EDI
Electronic time clocks
Badge readers
28. Combating Payroll Threats
Imprest payroll account
unclaimed paychecks sent to I/A
reconciliation of check signing machine
control of time cards/blank checks
segregate payroll distribution
payroll file access controls
file backups