lOMoARcPSD|12222140 lOMoARcPSD|12222140

CHAPTER 6: THE EXPENDITURE - A summary of charges forwarded acts as n important authorization o The AP clerk verifies the
CYCLE PART II: PAYROLL to the general ledger function after control to ensure that only the accuracy of the payroll
PROCESSING AND FIXED ASSET cost accounting allocates labor time card of current and valid register before creating a
PROCEDURES costs to the WIP accounts employees are processed disbursement voucher that
transfer funds to the imprest
Payroll Register Segregation of Duties
account
CONCEPTUAL PAYROLL SYSTEM - A listing of employees receiving - The timekeeping function should D. General ledger
payroll showing gross pay, be separate from the personnel o The general ledger
Payroll Processing
additional pay, deductions, and function department provides
- A special-case purchase withholding taxes - If timekeeping is provided with pay verification of the overall
processing system rates, attendance or the pay rate process by reconciling the
Employee Payroll Records
o Purchases labor rather than may be manipulated to increase labor distribution summary
raw material or finished - Payslip: a record of an employee’s employee payroll and the payroll disbursement
goods for resale payroll breakdown per cutoff voucher
Supervision
o Payroll process differs per
Paycheck
classes of employees (hourly - Sometimes employees will clock in
paid, monthly paid, piece - A negotiable instrument that is for another worker who is late or PHYSICAL PAYROLL SYSTEM
workers, etc.) presented to the bank for absent
KEY TASKS IN PHYSICAL PAYROLL
o Requires special accounting encashment of amount received as - Supervisors should observe the
SYTEM
procedures for employee payroll time-keeping process and
deductions and withholdings reconcile the time cards with 1. Payroll authorization and hours
Payroll Imprest Account actual attendance
for taxes that do not apply to worked enter the payroll
trade accounts - A cash fund account set aside for department form two different
Accounting Records
o Payroll activities are discrete the payment of payroll only sources: personnel and production
events in which 1. Time cards, job tickets, and 2. The payroll department reconciles
disbursements to employees The clerk in payroll performs the disbursement vouchers this information, calculates the
occur weekly, biweekly, or following tasks: 2. Journal information, which comes payroll, and distributes the
monthly from the labor distribution paychecks to the employees
1. Prepare payroll register showing summary and the payroll register
o Writing check to employee 3. Cost accounting receives
gross pay, deductions, overtime 3. Subsidiary ledger accounts, which
requires special control information regarding the time
pay, and net pay contain the employee records and spent on each job from production.
PAYROLL PROCESSING RECORDS 2. Enter this information into the various expense accounts This is used for posting to WIP
employee records 4. The general ledger accounts:
Personnel Action Form account
3. Prepares employee paychecks payroll control, cash, and the 4. AP receives payroll summary
- Identify employees authorized to 4. Sends the paychecks to the payroll clearing account information from the payroll
receive a paycheck and are used to distribute paycheck function
department and authorizes the
reflect changes in hourly pay 5. Files the time cards, personnel Asset Controls
cash disbursement department to
rated, payroll deductions, and job action form, and the copy of the
- A dishonest individual can deposit a single check, in the
classification payroll register
misrepresent the number of hours amount of the total payroll, in a
- Prepared by the personnel worked on the time cards and thus bank imprest account on which the
department embezzle cash payroll is drawn
Job Tickets - Similarly, control over access to all 5. The general ledger department
Submitting time cards for journal, ledger, and source reconciles summary information
- A document that captures the time nonexistent employees – form of documents in the payroll system is from cost accounting and AP.
that individual workers spend on payroll fraud important, as it is in all Control accounts are updated to
each production job expenditure cycle systems reflect these transactions
- To prevent this, many
- Prepared by the production
companies use a paymaster Independent Verification Advantages Disadvantages
department
to distribute the paychecks to Relatively cheaper Becomes more
Time Cards employees A. Verification of time difficult as the
- Paymaster – independent of o Before sending time cards to number of
- Capture the time the employee is the payroll process; not payroll, the supervisor must employees grow
at work involved in payroll verify their accuracy and Cost saving More tedious to
- These are sent to the prepare authorization or preparation sign them prepare
payroll function for calculating the Can readily start Does not allow
amount of employee’s paycheck payroll processing real time
- Prepared by the production PAYROLL PROCESSING CONTROLS B. Paymaster reporting and
department o The use on an independent analytics
Transaction Authorization Intimate Difficult error
paymaster to distribute
understanding of tracing
- Personnel Action Form describes checks helps verify the
the process
the additions, deletions, and other existence of the employees Hassle
Labor Distribution Summary changes to the employee file and C. Accounts Payable

Downloaded by Adrian Guevarra (aguevarra272@gmail.com) Downloaded by Adrian Guevarra (aguevarra272@gmail.com)

 lOMoARcPSD|12222140 lOMoARcPSD|12222140

COMPUTER-BASED PAYROLL 5. Properly record the retirement and depreciation techniques, and other - Internal auditors should
SYSTEM disposal of fixed assets things periodically verify FAS Records
a. Recording the asset in the fixed o The reasonableness of
- Because payroll systems run THE LOGIC OF A FIXED ASSET
asset subsidiary ledger factors used in decisions
periodically, they are well suited to SYSTEM
b. Creation of the fixed asset status o Location and condition of the
batch processing
Asset Acquisition report fixed asset records in the
Control Implications c. Preparation of the depreciation subsidiary ledger
- Usually begins with the schedule o The programming logic for
- This system promotes accounting departmental manager (user)
automatic calculations
accuracy and reduces check- recognizing the need to obtain a
writing errors new asset or replace an existing
Asset Maintenance Procedures
- It does not significantly enhance one – depending on the asset’s
operational efficiency; however, for value - Includes:
many types of organizations, this o Calculating the current
Asset Maintenance
level of technology is adequate period’s depreciation
- involves adjusting the fixed asset o Updating the accumulated
Reengineering the Payroll System
subsidiary account balances as the depreciation and book value
- Human Resource Management assets (excluding and) depreciate fields in the subsidiary
(HRM) system over time or with usage records
o Captures and processes a - Common depreciation methods: o Posting the total amount of
wide range of personnel- a. Straight line depreciation to the affected
related data, including b. Sum-of-the-years’ digits general ledger accounts
employee benefits, albor c. Double-declining balance o Recording the depreciation
resource planning, employee d. Units of production transaction by adding a
relations, employee skills, - Depreciation calculation – record to the journal voucher
and personnel actions (pay transaction that the fixed asset file
rates, deductions) as well as system must be designed to
anticipate internally when no Asset Disposal Procedures
payroll
o Need to provide real-time external event (source document) - After the clerk removes the asset
access to personnel files for triggers the action; an important from the record, the system
purposes of direct inquiries record used to initiate this task is automatically:
and recording changes in the depreciation schedule o Posts an adjusting entry to
employee status as they the fixed asset control
Asset Disposal
occur account in the general
- When an asset has reached the ledger
end of its useful life or when o Records any loss or gain
CONCEPTUAL FIXED ASSET management decide to dispose of associated with the disposal
SYSTEM it, the asset must be removed form o Prepares a journal voucher
the fixed asset subsidiary ledger
Fixed Assets FIXED ASSET CONTROL SYSTEM
- Property, plant and equipment Authorization Controls
used in the operation of a business
- Land, buildings, furniture, - Should be forma and explicit
machinery, and motor vehicles because of high costs of fixed
assets
SPECIFIED OBJECTIVES OF THE - Implementation of capital
FIXED ASSET SYSTEM ARE TO: PHYSICAL FIXED ASSET SYSTEM rationing
1. Process the acquisition of fixed COMPUTER-BASED FIXED ASSET
assets as needed an in accordance SYSTEM
with formal management approval
- Process of tracking and
and procedures Supervision Control
maintaining an organization’s
2. Maintain adequate accounting
physical assets and equipment - Threat of misappropriation
records of asset acquisition, cost,
using a fixed asset software requires constant management
description, and physical location
- Asset types includes furniture, oversight:
in the organization
vehicles, computers, and - Theft: secure physical locations of
3. Maintain accurate depreciation
machinery assets
records for depreciable assets in
accordance with acceptable Asset Acquisition Procedures - Misuse: monitor on-the-job
methods activities
- Asset receipts are digitally stores
4. Provide management with Independent Verification
in the system together with date
information to help plan for future
about their useful lives,
fixed asset investments

Downloaded by Adrian Guevarra (aguevarra272@gmail.com) Downloaded by Adrian Guevarra (aguevarra272@gmail.com)