Payroll Processing and Fixed Asset Procedures:The Physical Payroll System

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The Physical Payroll System

In this section we examine the physical payroll system. This begins with a very brief review of manual procedures.2 We then move on to review examples of automated and reengineered payroll systems.

MANUAL PAYROLL SYSTEM

Figure 6-8 presents a flowchart detailing the previous procedures in the context of a manual system. The following key tasks are discussed.

1. Payroll authorization and hours worked enter the payroll department from two different sources: personnel and production.

2. The payroll department reconciles this information, calculates the payroll, and distributes paychecks to the employees.

3. Cost accounting receives information regarding the time spent on each job from production. This is used for posting to WIP account.

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4. AP receives payroll summary information from the payroll department and authorizes the cash disbursements department to deposit a single check, in the amount of the total payroll, in a bank imprest account on which the payroll is drawn.

5. The general ledger department reconciles summary information from cost accounting and AP. Control accounts are updated to reflect these transactions.

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