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HR Cycle & Production Cycle

Topik BahasanHuman Resource Cycle Production Cycle

Sumber Materi Romney / Steinbart, AccountingInformationSystems, 9th Edition ch.11-12, PrenticeHall

The Human ResourcesManagement/Payroll CycleChapter 14

Learning ObjectivesDescribe the major business activities and relateddata processing operations performed in thehuman resources management (HRM)/payrollcycle.2. Identify the major threats in the HRM/payrollcycle, and evaluate the adequacy of variousinternal control procedures for dealing withthem.1.

Learning Objectives3.4.5.Explain the key decisions that need to bemade in the HRM/payroll cycle, and identifythe information required to make thosedecisions.Read and understand a data model (REAdiagram) of the HRM/payroll cycle.Create a data model (REA diagram) of theHRM/payroll cycle.

Introduction The HRM/payroll cycle is a recurring setof business activities and related dataprocessing operations associated witheffectively managing the employee workforce.Some of the more important activitiesinclude the following tasks:– recruitment and hiring– training

Introduction– job assignment– compensation (payroll)– performance evaluation– discharge of employees, due to voluntary orinvoluntary termination This chapter focuses primarily on thepayroll system.

Learning Objective 1Describe the major businessactivities and related dataprocessing operations performedin the human resourcesmanagement (HRM)/payrollcycle.

Payroll Cycle ActivitiesThe first function of the AIS isprocessing transactional data. Why is payroll processed in batchmode? Paychecks are prepared periodically. Most employees are paid at the same time.

Payroll Cycle Activities What are the basic activities performed in thepayroll cycle?1.2.3.4.5.6.7.Update master payroll fileUpdate tax rates and deductionsValidate time and attendance dataPrepare payrollDisburse payrollCalculate employer-paid benefits and taxesDeduct payroll taxes and other deductions

Update Master Payroll File(Activity 1)The first activity in the HRM/payroll cycleinvolves updating the payroll master file toreflect payroll changes such as new hires,terminations, changes in pay rates, or changes indiscretionary withholdings. It is important that all payroll changes areentered in a timely manner and are properlyreflected in the next pay period.

Update Tax Rates andDeductions (Activity 2) The second activity in the HRM/payrollcycle involves updating information abouttax rates and other withholdings.These changes happen whenever updatesabout changes in tax rates and otherpayroll deductions are received fromvarious government units and insurancecompanies.

Validate Time andAttendance Data (Activity 3)The third activity in the payroll cycle istovalidate each employee’s time and attendancedata. This information comes in various forms,depending on an employee’s status. What are some pay schemes? – time cards for those paid on an hourly basis– self report for professionals

Validate Time andAttendance Data (Activity 3)– straight commission or salary pluscommission– incentives and bonusesProcedures: The payroll department is responsiblefor validating employee time records. For factory workers, validation involvescomparing the total time worked withthe time spent on each job.

Validate Time andAttendance Data (Activity 3)The payroll clerk calculates batch totals andenters them along with the time data. The batch totals are recalculated by the computerafter subsequent processing steps. Payroll transaction data are entered throughonline terminals. Edit checks are performed on each time andattendance record.

Opportunities for UsingInformation Technology What are some opportunities of usinginformation technology to validate timeand attendance data (Activity 3)?– collecting employee time and attendance dataelectronically, instead of on paper documents– using badge readers– using electronic time clocks

Prepare Payroll (Activity 4)The fourth activity in the payroll cycle involvespreparing payroll. Data about the hours worked are provided bythe department in which the employee works. Pay rate information is obtained from thepayroll master file. The person responsible for preparing paycheckscannot add new records to this file.

Prepare Payroll (Activity 4)Procedures: Payroll processing is performed in thecomputer operations department. The payroll transaction file is sorted byemployee number. The sorted time data file is used toprepare employee paychecks.

Prepare Payroll (Activity 4)All payroll deductions are summed andthe total is subtracted from gross pay toobtain net pay. What are types of payroll deductions? – withholdings– voluntary deductions Finally, the payroll register and employeepaychecks are printed.

Opportunities for UsingInformation Technology What are some opportunities of usinginformation technology to prepare payroll(Activity 4)?– produce and distribute payroll reportselectronically rather than on paper– online terminals– corporate intranets

Disburse Payroll (Activity 5)The fifth activity is actual disbursement ofpaychecks to employees. Most employees are paid either by checkor by direct deposit of the net pay amountinto the employee’s bank account.

Disburse Payroll (Activity 5)Procedures: Once paychecks have been prepared, the payrollregister is sent to the accounts payabledepartment for review and approval. A disbursement voucher is then prepared. The disbursement voucher and payroll registerare then sent to the cashier.

Opportunities for UsingInformation Technology What are some opportunities of usinginformation technology to disburse payroll(Activity 5)?– direct deposit– outsourcing to a payroll service bureau

Calculate Employer-Paid Benefitsand Taxes (Activity 6)Some payroll taxes and employee benefits arepaid directly by the employer. Federal and state laws require employers tocontribute a specified percentage of eachemployee’s gross pay to federal and stateunemployment compensation insurance funds. Employers often contribute to health, disability,and insurance premiums.

Calculate Employer-Paid Benefitsand Taxes (Activity 6)Many companies also offer their employeesflexible benefit plans. Many employees are offered and contributetoward a choice of retirement savings plans.

Disburse Payroll Taxes andOther Deductions (Activity 7)The final activity in the payroll processinvolves paying the payroll tax liability andthe other voluntary deductions of eachemployee. An organization must periodically preparechecks or use electronic transfer to paythe various tax liabilities incurred.

Disburse Payroll Taxes andOther Deductions (Activity 7)The timing of these payments is specifiedby the respective government agencies. The funds voluntarily withheld from eachemployee’s paycheck for various benefitsmust be disbursed to the appropriateorganizations.

Learning Objective 2Identify the major threats in theHRM/payroll cycle,andevaluate the adequacy ofvarious internal controlprocedures for dealingwith them.

Control Objectives,Threats, and Procedures The second function of the AIS in the HRM/payrollcycle is to provide adequate internal controls toensure meeting the following objectives:1.2.3.4.payroll transactions are properly authorizedrecorded payroll transactions are validauthorized payroll transactions are recordedpayroll transactions are accurately recorded

Control Objectives,Threats, and Procedures5.6.7.applicable government regulationsregarding remittance of taxes and filing ofpayroll and HRM reports are metassets (both cash and data) aresafeguarded from loss or theftHRM/payroll cycle activities areperformed efficiently and effectively

Control Objectives,Threats, and Procedures What are some threats?1. hiring of unqualified or larcenous employees2. violation of employment law3. unauthorized changes to the master payrollfile4. inaccurate time data5. inaccurate processing of payroll6. theft or fraudulent distribution of paychecks7. loss or unauthorized disclosure of payrolldata8. poor performance

Control Objectives,Threats, and Procedures What are some exposures? increased expenseslower productivitytheftfines and civil suitsinaccurate records and reportsover/underpayment of employeesreduced morale

Control Objectives,Threats, and Procedures What are some control procedures?– sound hiring practices (verification of jobapplicant’s skills, references, and employmenthistory)– thorough documentation of hiringprocedures– segregation of duties– batch totals and other application controls

Control Objectives,Threats, and Procedures– direct deposit– paycheck distribution by someoneindependent of payroll process– investigation of all unclaimed paychecks– separate payroll checking account– access control– backup procedures– encryption

Learning Objective 3Explain the key decisions thatneed to be made in theHRM/payroll cycle, and identifythe information required tomake those decisions.

Information Needsand ProceduresThe third function of the AIS is to provideinformation useful for decision making. The payroll system must be designed tocollect and integrate cost data with othertypes of information in order to enablemanagement to make the following kindsof decisions:

Information Needsand ProceduresFuture work force staffing needs2 Employee performance3 Employee morale4 Payroll processing efficiencyand effectiveness1

Information Needsand ProceduresSome of the information has traditionally beenprovided by the payroll system. Other information, such as data about employeeskills, had normally been provided andmaintained by the HRM system. Other information, such as data about employeemorale, has traditionally not been collected.

The Production CycleChapter 13

Learning Objectives1.2.3.Describe the major business activities andrelated data processing operations performed inthe production cycle.Explain how a company’s cost accounting systemcan help it achieve its manufacturing goals.Identify major threats in the production cycle,and evaluate the adequacy of various controlprocedures for dealing with those threats.

Learning Objectives4.5.6.Discuss the key decisions that need to bemade in the production cycle, and identify theinformation needed to make those decisions.Read and understand an REA data model ofthe production cycle.Develop an REA data model for theproduction cycle.

Learning Objective 1Describe the major businessactivities and related dataprocessing operationsperformed in theproduction cycle.

Production Cycle ActivitiesThe production cycle is a recurring set ofbusiness activities and related dataprocessing operations associated with themanufacturing of products. The first function of the AIS is to supportthe effective performance of theorganization’s business activities.

Production Cycle Activities What are the four basic activities in theproduction cycle?1 Product design2 Planning and scheduling3 Production operations4 Cost accounting

Product Design (Activity 1)The first step in the production cycle isproduct design. The objective of this activity is to design aproduct that meets customerrequirements for quality, durability, andfunctionality while simultaneouslyminimizing production costs.

Product Design (Activity 1)Documents and procedures: The product design activity creates twomain documents:1 Bill of materials2 Operations list

Product Design (Activity 1) How can accountants be involved in productdesign?– by showing how various design trade-offs affectproduction costs and thereby profitability– by ensuring that the AIS is designed to collectand provide information about the machinesetup and materials handling costs associatedwith alternative product designs– by providing data about repair and warrantycosts associated with existing products