Payroll Cycle (ACCT 427)

who are the departments in this cycle

1) all departments (keep track of timecards for hourly employees and overtime/expense reimbursements)

2) HR--> hiring and firing of employees (master data)

3) payroll department--> executes payroll transactions and REVIEWS for accuracy (tax wizards)

4) A/P department--> APPROVES payroll for payment

5) cashier--> prints and mails payroll checks for payment

offer/contract

defines annual salary for customer upon hiring (not salaried employee)

time sheet/card

documents the number of hours worked by hourly employees

payroll register

summary of payroll JE and includes our withholdings and preview of what payroll would look like

(reviewed by payroll department and approved by A/P)

processing payroll journal entry

dr: wage expense

cr: wage payable and withholdings

who is primarily invovled in processing payroll

payroll department (they are the tax wizards that execute payroll and REVIEWS it for payment)

paycheck journal entry

dr: wage payable

cr: cash

(happens paychecks are printed and triggered)

payroll tax check journal entry

dr: withholdings and tax expense

cr: cash

(paying government agencies for taxes that we owe)

control: criminal background checks of all applicants should be performed for integrity-based positions

risk: hiring unqualified/larcenous employees

(this control would PREVENT hiring weird people)

control: overtime pay is reviewed and approved by supervisor of employees prior to payroll processing

risk: inaccurate time and attendance data

(payroll department, this would detect if there was any incorrect data entered)

control: AIS performing integrity controls on hourly data (cannot exceed 1000 hours of work)

risk: inaccurate time and attendance data (detect)

purpose of payroll checking account

prevent fraud

(companies should not pay payroll checks from normal checking accounts. They should calculate total checks and move that amount of cash to the payroll checking account where as employees cash checks, this account will decrease)

control: access to edit employee master data should be restricted to HR departments

risk: inaccurate/invalid master data

control: employee master data should be encrypted (employee and payroll master data)

prevent unauthorized disclosure of sensitive information from leaking

control: transaction/master data should be backed up on a daily basis

risk: prevent loss or destruction of data

how do we bring payroll checking account down

employees cash their checks

responsibility of the payroll department

reviews payroll register for accuracy and processes payroll

employee paycheck is an example of _______ data

transactional data

(recurring and usually has a data and time)

is zero-balance/impreset payroll checking account preventative/detective

allows accounting department to DETECT paycheck forgery has occurred because the payroll impreset account will overdraft

(prevents fraud from occurring)

what department is responsible for not paying taxes (IRS sends us letter saying we missed paying our FICA tax last year)

payroll department would be at fault (they are the tax wizards and reviews processing payment)

a salesperson's commission paycheck was double what it was supposed to be this period due to them submitting fraudulent sales orders to boost commission, besides the employee, who else is to be responsible?

employee's direct supervisor would be responsible as well for catching the problem

what would cause a financial MISSTATEMENT (over or understated) on GL account

- payroll department did not process payroll

- inaccurate time and attendance data

- failure to make required tax payments accurately/timely manner

what shows us a list of employees for a given pay date, their withholdings, gross wages, and their net pay

payroll register

(this is a summary of what payroll will look like-remember this gets reviewed by the payroll department and approved by A/P department)

processing payroll triggers what journal entry

dr: wages expense

cr: withholdings, wages payable

paychecks trigger what journal entry

dr: accounts payable

cr: cash

checks trigger what journal enrty

dr: withholdings, tax expense

cr: cash