FINAL AIS study set
Automate capture of time data
- Badge readers/proximity cards - Electronic/biometric time clocks - Automated time sheets - Remote mobile devices
Reconciliation
- Compare trial balance debits and credits - Compare general ledger control account balance to total balance in the corresponding subsidiary ledger
Basic REA template
- Each event linked to at least one resource - Each event linked to at least one other event (give-get) - Each event linked to at least 2 participating agents
General threats unique to payroll
- Hiring unqualified employees - Violation of employment law - Extended use of independent contractors
Threats in posting adjusting entries
- Inaccurate adjusting entries - Unauthorized journal entries
Threats in updating the general ledger
- Inaccurate updating of general ledger - Unauthorized journal entries
Advantages of a separate payroll bank account
- Limits loss exposure (operated as imprest/petty cash fund) - Easier to spot fraudulent checks - Easier to reconcile payroll
Updating payroll master file
- New hires - Terminations - Changes in pay rates - Changes in discretionary withholdings Dismissed employees marked as inactive, not deleted
HR tasks performed once
- Recruiting/hiring - Discharge (voluntary or involuntary)
Benefits of outsourcing payroll
- Reduced costs - Wider range of benefits (helps small companies) - Freeing up of computer resources Especially attractive to small businesses
SLDC phases
- System analysis - Conceptual design - Physical design - Implementation - Operation and maintenance
Audit trails
- Trace any transaction from original source document to general ledger and vice versa - Trace changes in GL accounts from beg to end balance - Trace transaction to dependents and precedents
HR tasks performed repeatedly
- Training - Job assignments - Performance evaluations
Threats in updating payroll master data
- Unauthorized changes to payroll master data - Inaccurate updating of payroll master data
Steps to build REA diagram
1. Identify the events 2. Identify the resources and agents 3. Determine the cardinalities of each relationship
Steps in preparing payroll
1. Payroll transaction data is edited, validated transactions are sorted by employee number 2. Payroll deductions are summed; Gross pay - deductions = net pay 3. Year-to-date fields for gross pay, deductions, and net pay in each employee's record in the payroll master file are updated. 4. Payroll and deduction registers are created 5. System prints or deposits employee paychecks
Human resource management (HRM) tasks
1. Recruiting 2. Training 3. Job assignment 4. Performance evaluation 6. Discharge of employees
Flexible budget
A budget in which the amounts are stated in terms of formulas based upon ACTUAL level of activity; e.g. dividing into fixed and variable cost components
Payroll clearing account
A general ledger account used to check the accuracy and completeness of recording payroll costs and their subsequent allocation to appropriate cost centers
Stockflow events
Affect the quantity of a resource - represent either an inflow or outflow of that resource
Maximum cardinality of many
An instance of the entity could be linked to more than one instance of the other entity participating in that relationship
Maximum cardinality of one
An instance of the entity on this side of the relationship CAN ONLY be linked to one specific instance of the other event
Entity
Any class of objects about which data are collected, such as the RESOURCES, EVENTS, and AGENTS in the REA data model! Represented by rectangle
Events (REA model)
Business activities in which the organization engages; Sales and Receive Cash
Soft close
Closing the books using an abbreviated closing procedure skipping many of the adjusting and closing entries
Function of General Ledger system
Collect and organize data for financial reporting - Accounting cycle subsystems: summary data - Treasurer: information about financing and investing activities - Budget department: budget numbers - Controller: adjusting entries
Disburse taxes and misc. deductions
Companies either prepare checks or use electronic funds transfer to pay through the Accounts Payable and Expenditure cycle
Cumulative earnings register
Cumulative year-to-date gross pay, net pay, and deductions for each employee; Used for employee information and annual payroll reports
Minimum cardinality of one
Each instance of that entity must be linked to at least one instance of the other entity participating in that relationship
Goal of HR/Payroll cycle
Effectively manage the workforce
Form 941
Employer's quarterly federal tax return (showing all wages subject to tax and amounts withheld for income tax and FICA); Filed quarterly to reconcile monthly tax payments with total tax liability for the quarter
Environmental factors
Energy Water Emissions Hazardous waste Recycling Packaging
Sustainability accounting (triple bottom line)
Environmental Social Economic
Threats in preparing payroll
Errors in payroll processing
Payroll tax withholdings
Federal, state, and local income taxes, as well as Social Security taxes
Entity-Relationship (E-R) Diagram
Graphical depiction of a database's contents showing the various entities being modeled and the important relationships among them. Used to represent the contents of any kind of database; Shows entities and relationships; No industry standard
Bonuses ($ or stock)
Improves performance (amount produced, less mistakes) but need to monitor for unintended performance.
Paychecks
Individual compensation to employees for their services
Data from human resources
Information on new employees, terminations, and pay-rate changes
Minimum cardinality of zero
Instance of the entity on this side NEED NOT be linked to any specific instances of the other event
Commitment events
Linked to other events to reflect sequential cause-effect relationships. No effect on quantity
Position control report
List of each authorized position, job qualifications, budgeted salary, and position status (filled or vacant); Used in planning future workforce needs
Skills inventory report
List of employees and current skills; Useful in planning future workforce needs and training programs
Workforce inventory
List of employees by department; Used in preparing labor-related reports for government agencies
Payroll register
Lists each employee's gross pay, payroll deductions, and net pay for a payroll period in a multicolumn format; Once approved by A/P, disbursement voucher is prepared.
Payroll services bureau
Maintains the payroll master file for each client and performs the payroll processing activities; LESS expensive than PEO
Fixed salray
No time card
Professional Employer Organization (PEO)
Not only processes payroll but also provides HRM services such as employee benefit design and administration
Production/piece-rate
Pay on a per unit basis (must still meet minimum wage requirements)
Calculate payroll (Files Out)
Payroll Voucher TRX Employee master file
Disburse payroll (Files In)
Payroll Voucher TRX Employee master file
Disburse payroll (Files Out)
Payroll cash disbursement TRX Payroll Voucher TRX Direct deposit TRX
Agents (REA model)
People and organizations who participate in events; Employees and Customers
Direct deposit
Provides savings to employers by eliminating cost of purchasing, processing, and distributing paper checks; reduces bank fees + postage
Estimate
Reflect a portion of expenses that occur over a number of accounting periods - Depreciation - Bad debt expense - Inventory obsolescence reserve - Sales return reserve
Form 1099-Misc.
Report of income paid to independent contractors; Sent to recipients of income for use in filing their income tax returns; due by January 31
Form W-2
Report of wages and withholdings for each employee; Sent to each employee for use in preparing individual tax returns; due by January 31
Accruals
Represent entries made at the end of the accounting period to reflect events that have occurred but for which cash has not yet been received or disbursed E.g. salary for partial week
Deferrals
Represent entries made at the end of the accounting period to reflect he exchange of cash prior to performance of the related event. (Unearned revenue)
Corrections
Represent entries made to counteract the effects of errors found in the general ledger - Reversed in next period after subsystem is corrected
Unclaimed payroll checks
Returned to Treasurer's office for prompt redeposit. Traced to time records and master file data
Commission or salary plus commission
Sales staff
Payroll check
Sent to the bank to transfer funds from the company's regular accounts to its payroll account
Form W-3
Summary of all W-2 forms; Sent to federal government along with a copy of all W-2 forms; due by February 28
Phases where data modeling occurs
Systems Analysis Conceptual design
Data from government agencies
Tax information and reporting requirements
Threats in payroll disbursement
Theft or fraudulent distribution of paychecks
Resources (REA model)
Those things that have economic value; Cash, inventory, supplies, factories, land
Capture and verify time data (Files Out)
Time Data TRX File
Hourly basis
Time card with supervisor approval
Hard close
Traditional method; Everything reconciled, adjusting entries made; Could take weeks to know money made month before
Componentization
an IFRS requirement (not GAAP); Instead of recording asset as 'building', separate into 'roof', 'heating system', etc.
Data modeling
is the process of defining a database so that it FAITHFULLY represents all aspects of the organization, including its interactions with the external environment; Occurs during the Systems Analysis and Conceptual Design stages
Circular E, Employer's Tax Guide
published by the IRS, provides detailed instructions about an employer's obligations for withholding and remitting payroll taxes and for filing various reports.
Trial balance
report that lists the balances for all general ledger accounts; Total debits = total credits
cross-footing the payroll register
the total of the net pay column should equal the total of the gross pay less total deductions.
Threats in disbursing taxes and misc. deductions
- Failure to make required payments - Untimely payments - Inaccurate payments
Steps for disbursing payroll
1. Payroll - Forward payroll register to AP after paycheck are prepared 2. AP - Prepares a disbursement voucher to authorize the transfer to the payroll bank account 3. AP - Forwards disbursement voucher and payroll register to the cashier 4. Cashier - Transfer funds to payroll bank account 5. Cashier - Reviews, signs, and distributes the employee paychecks 6. Cashier - Returns the payroll register to the payroll department
Sources of journal entries
1. Summary journal entries from other AIS cycles 2. Direct entries made by the treasurer
General ledger and Reporting process
1. Update general ledger 2. Post adjusting entries 3. Prepare financial statements 4. Produce managerial reports
HR/Payroll transaction processing cycle
1. Update master data 2. Validate time and attendance 3. Prepare payroll 4. Disburse payroll 5. Disburse taxes and misc. deductions (periodically)
Flexible benefits plan
A plan under which each employee chooses some minimum coverage in medical insurance, retirement plans, and charitable contributions
Earnings statement
A report listing the amount of gross pay, deductions, and net pay for the current period and year-to-date for each category
Preparing financial statements
After GL is updated and adjusting entries are posted, financial statements is as simple as pushing a button - Balance sheet - Income statement - Statement of cash flows Final review and reconciliation are done before releasing the financial statements to management
Payroll tasks
Compensating employees. Reports to the Controller.
Voluntary deductions
Contributions to a pension plan; premiums for group life, health, and disability insurance; union dues; and contributions to various charities
Various other reports to government agencies
Data on compliance with various regulatory provisions, state and local tax reports, etc.; To document compliance with applicable regulations
Cardinalities
Describe the nature of the relationship between two entities by indicating how many instances of one entity can be linked to each specific instance of another entity
Batch totals for payroll
Even used by advanced HRM/payroll systems; Calculated at time of data entry; Checked against comparable totals during each stage of processing. Hash totals for employee numbers
Adjusting entries
Handled by controller - done after general ledger is updated at period end. - Accruals - Deferrals - Estimates - Revaluations - Corrections
Human resources
Hiring, developing, retaining and dismissing employees. Reports to Director of Human Resources who reports to the President/CEO.
Data from various company departments
Hours worked
Deduction register
Lists the miscellaneous voluntary deductions for each employee.
Phases where data model is used
Physical design Implementation Operation and maintenance
Revaluations
Represent entries made to reflect either differences between the actual and recorded value of an asset or a change in accounting principle - Reduce inventory for actual obsolescence - Adjust inventory after physical count
Knowledge management system
Software that stores and organizes expertise possessed by individual employees so that the knowledge can be shared and used by others; Also serves as a directory; Consultants can store solutions to specific problems.
REA data model
Specifically for designing AIS. Focuses on the business semantics underlying an org's value chain activities; Will change every time org changes processes REA stands for: - Resources - Events - Agents
Capture and verify time data (Files In)
Tax tables master file Employee master file
Update master data (Files out)
Tax tables master file Employee master file
Calculate payroll (Files In)
Tax tables master file Employee master file Time Data TRX File