GROUP 7

THE EXPENDITURE CYCLE PART II:

PAYROLL PROCESSING AND FIXED
ASSET PROCEDURES

SHANE PASTRANA BSA 2 S1

THE CONCEPTUAL
PAYROLL SYSTEM
 PAYROLL PROCESSING

PAYROLL PROCESSING – a special-case purchases system in whichh the organization

purchases labor rather than raw materials or finished goods for resale. The nature of payroll
processing, however, creates the need for specialized procedures for the following reasons:

A firm can design general purchasing and disbursement procedures that apply to all
vendors and inventory items. Payroll procedures, however, differ greatly among classes of
employees.
General expenditure activities, constitute a relatively steady stream of purchasing and
disbursing transactions. Payroll activities, on the other hand, are discrete events which
disbursements to employees occur weekly, biweekly, or monthly.
Writing checks to employees requires special controls. Combining payroll and trade
transactions can encourage payroll fraud
BY CLAUDIA ALVES Thesis Defense Presentation Template
 PERSONNEL
DEPARTMENT
Prepares and submits personnel
action forms to the prepare payroll
function. These documents identify
employees. Authorized to receive a
paycheck and are used to reflect
changes in hourly pay rates, payroll
deductions, and job classifications.
Figure 6-2 shows a personal action
form used to advice payroll of
identities in an employees salary.

PRODUCTION DEPARTMENT
AND UPDATE WIP ACCOUNT

RAMELYN S. CARPIO REPORTER NO. 2

PRODUCTION DEPARTMENT

Production employees prepare two types of time records: job tickets and time cards.
Job tickets capture the time that individual workers spend on each production job.
Cost accounting uses these documents to allocate direct labor charges to work-in-
process (WIP) accounts. Time cards capture the time the employee is at work. These
are sent to the prepare payroll function for calcu- lating the amount of the employee's
paycheck. Figure 6-3 illustrates a job ticket, and Figure 6-4 illustrates a time card.
FIGURE 6-3
JOB TICKET

FIGURE 6-4
TIME CARD

PRODUCTION DEPARTMENT

shift, employees place their
Each day at the beginning of the
time cards in a special clock that records the time. Typically,
they clock out for lunch and at the end of the shift. This time
card is the formal record of daily attendance. At the end of the
week, the supervisor reviews, signs, and sends the time cards
to the payroll department
PRODUCTION DEPT.

UPDATE WIP ACCOUNT

After cost accounting allocates labor costs to the WIP
accounts, the charges are summarized in a labor distribution
summary and forwarded to the general ledger function.

 PREPARE
PAYROLL
ATHENA GIAN A. MARGIN REPORTER NO. 3
1. PREPARES THE PAYROLL REGISTER
SHOWING GROSS PAY, DEDUCTIONS,
OVERTIME PAY, AND NET PAY.

 FIGURE 6-5
PAYROLL REGISTER

2. ENTERS THE ABOVE INFORMATION

INTO THE EMPLOYEE PAYROLL
RECORDS

 FIGURE 6-6
EMPLOYEE PAYROLL
RECORD

3. PREPARES EMPLOYEE
PAYCHECKS
 FIGURE 6-7
EMPLOYEE PAYCHECK

4. SENDS THE PAYCHECKS TO THE

DISTRIBUTE PAYCHECK FUNCTION.

5. FILES THE TIME CARDS, PERSONNEL

ACTION FORM, AND COPY OF THE PAYROLL
REGISTER
 DISTRIBUTE
PAYCHECK
AMABELLE PAGAY REPORTER NO. 4
 DISTRIBUTE PAYCHECK
Companies use a paymaster to distribute the paychecks to
employees

This individual is independent of the payroll process — not

involved in payroll authorization or preparation tasks

If a valid employee does not claim a paycheck, the paymaster

returns the check to payrollk
PREPARE ACCOUNTS PAYABLE

The Accounts The clerk records the

A copy of the
Payable (AP) clerk voucher in the
reviews the payroll voucher register and disbursement
register for submits the voucher voucher is sent to
correctness and packet (voucher and the update general
prepares copies of a payroll register) to ledger function.
cash disbursement the prepare cash
voucher for the disbursements
amount of the payroll. function.
PREPARE CASH DISBURSEMENT
The cash disbursements function prepares a single check for the entire
amount of the payroll and deposits it in the payroll imprest account.

The employee paychecks are drawn on this account, which is used

only for payroll.

The clerk 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).

A journal voucher is prepared and sent to the update general ledger

function.
 UPDATE GENERAL LEDGER

The general ledger function receives the labor distribution

summary from cost accounting, the disbursement voucher
from accounts payable, and the journal voucher from cash
disbursements.
With this information, the general ledger clerk makes the following
accounting entries:

From the Labor Distribution Summary

Dr Cr
Work-in-Process (Direct Labor) xx
Factory Overhead xx
Wages Payable xx
From Disbursement Voucher
DR CR
Wages Payable xx
Cash xx
Federal Income Tax Withholdings Payable xx
State Income Tax Withholdings Payable xx
FICA Income Tax Withholdings Payable xx
Group Insurance Premiums Payable xx
Pension Fund Withholdings Payable xx
Union Dues Payable xx
 The debits and credits from these entries must be equal.
If they are not, there is an error in the calculation of either
labor distribution charges to payroll. When the quality has
been verified, the clerk files the voucher and labor
distribution summary.
 PHYSICAL
PAYROLL SYSTEM
HANNAH GRACE Z. PUMARIN REPORTER NO. 5
WHAT IS PAYROLL SYSTEM?

A payroll system involves everything that has to do with the

payment of employees and the filing of employment taxes. This
includes keeping track of hours, calculating wages, withholding
taxes and other deductions, printing and delivering checks and
paying employment taxes to the government
PHYSICAL PAYROLL SYSTEM

In this section we examine the physical payroll system. This

begins with a review of the operational features and control
issues pertinent to a basic technology system. We then review
the features and controls of an integrated system that uses
advanced technologies.
PERSONAL DEPT. PRODUCTION DEPT.

Personal department uses personal Production employees fill out two forms :
action forms to:
•Activate new employees •Job tickets- account for the time spent by
the worker on each production job.
•Change the pay rate of employees
•Change marital status and/ or
•Time cards- used to capture the total time
number of dependents worked each period for payroll
•Terminate employees calculations
COST ACCTG. DEPT. PAYROLL DEPT.
-Uses them to:
Cost accounting department: • prepare the payroll register
• uses the job tickets to allocate • enter the information into the employee
payroll records
labor costs to WIP or work in
• prepare paychecks
progress accounts
• send paychecks to cash disbursements
• summarizes these charges in a and a copy of the payroll register to
labor distribution summary which is accounts payable
forwarded to GL department
 ACCOUNTS CASH DISBURSEMENTS
PAYABLE DEPT. DEPT.
• Reviews and signs the paychecks and
• prepare cash disbursements forward them to a paymaster for
voucher for the total amount of the distribution to the employees
payroll
• sends copies to the cash • Writes a check for the payroll and
disbursements and GL departments deposits it into the payroll imprest
account.
 ADVANCED TECHNOLOGY
PAYROLL SYSTEM
For moderate-sized and large organizations,
payroll processing is often integrated within the
human resource management (HRM) system.
 HUMAN RESOURCES
MANAGEMENT SYSTEM
A human resources management system or Human
Resources Information System or Human Capital
Management is a form of Human Resources software that
combines a number of systems and processes to ensure the
easy management of human resources, business processes
and data.
 HUMAN RESOURCES
MANAGEMENT SYSTEM
The HRM system captures and process a wide range of
personnel-related data, including employee benefits, labor
resource planning, employee relations, employee skills,
internal training , personnel action (pay rates, deduction, etc.),
and payroll processing.
 HUMAN
RESOURCES
NOELLE LEI G. REYES REPORTER NO. 6
 HUMAN RESOURCES

the division of a business that is charged with finding,

recruiting, screening, and training job applicants. It also
administers employee-benefit programs.
 COST ACCOUNTING
The cost accounting department enters job cost data in
real time to create the labor usage file
EMPLOYEE TIMEKEEPING
Keeping track of time spent on work is the easiest way to
calculate work costs that is being used since ancient times.
Historically, many types of employee timekeeping have evolved
that are now being used in different fields.
FIGURE 6-9 INTEGRATED PAYROLL AND HRM SYSTEM
 BIOMETRIC TIME CLOCKS
verify employees' identities by using
fingerprint or hand-vein scan tech- nology
 BIOMETRIC TIME CLOCKS MAGNETIC SWIPE ID CARDS
verify employees' identities by using work like a credit card. Each employee is
fingerprint or hand-vein scan tech- nology issued an ID card that has a magnetic
strip containing employee information.
 BIOMETRIC TIME CLOCKS MAGNETIC SWIPE ID CARDS
verify employees' identities by using work like a credit card. Each employee is
fingerprint or hand-vein scan tech- nology issued an ID card that has a magnetic
strip containing employee information.

PROXIMITY CARDS
are similar to swipe cards but don't
require the user to slide the card through
a reader.
 BIOMETRIC TIME CLOCKS MAGNETIC SWIPE ID CARDS
verify employees' identities by using work like a credit card. Each employee is
fingerprint or hand-vein scan tech- nology issued an ID card that has a magnetic
strip containing employee information.

PROXIMITY CARDS MOBILE REMOTE DEVICES

are similar to swipe cards but don't allow employees to clock in using
require the user to slide the card through handheld devices (tablet or cell phone) or
a reader. web browsers from laptop computers.
 DATA PROCESSING
At the end of the work period, the following tasks are performed in a batch process:

1. Labor costs are distributed to various WIP, overhead, and expense accounts.
2. An online labor distribution summary file is created. Copies of the file are accessible
from terminals in the cost accounting and general ledger departments.
3. Payroll is calculated, and an online payroll register is created from the time and
BY CLAUDIA ALVES
attendance file and the employee records file. The payroll register file is accessible from
the AP and cash disbursements departments.
4. The employee records file is updated.
5. Paychecks are prepared, signed, and distributed to the employees.
6. Funds sufficient to cover the full amount of the payroll are transferred to the payroll
imprest account, and the transfer is recorded in the check register.
7. Digital journal vouchers are entered into the journal voucher file. The system
automatically updates the general ledger from the journal voucher and labor distribution
summary files.
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