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