8/3/2018

E-CON-FER-M
LENDING BUSINESS CYCLES
COMPANY

CONSUELO, REGINE C., ENRIQUEZ, SOFIA KATE, FERIA

PHOEBE KATE, MONDIA, ROSHELLE B.
 PAYROLL CYCLE
Payroll/HR Cycle is a recurring set of business activities and related data processing operations associated with effectively
managing the employee work force. Some of the most important activities include the following task:
 Recruitment and Hiring  Performance evaluation
 Training  Discharge of employees due to voluntary or involuntary
 Job Assignment termination
 Compensation (payroll)
There are the basic procedures in payroll cycle, which are:
1. Updating Payroll Master File
From human resources, it’s provided the employee changes and new employment data document and update the employee
changes. It includes new hires, terminations, and changes in pay rates. After that, the human resources prepare the approved
employee changes and key in to computer the changes. The human resource will key in the employee changes and update
the payroll master file as how much to pay off these employees.
2. Update Tax Rates and Deductions
The company will receive the tax rates and deductions from the government, insurances, and other agencies to prepare for
the payroll for the employee. Then, the company will update the tax rates and deductions to the computer for them to prepare
the paychecks of employee after the tax rates and deductions.
3. Validate Time and Attendance Data
Information on time and attendance comes in the form of job time ticket and time cards from departments in company. Then
after receiving both of this documents, we do the reconciliation and key-in to the computer the validated and the total of all the
time data as the payroll transactions file in computer. Then in computer we sort it into the sorted payroll transaction file for the
purpose of preparing the payroll checks along with the current payroll master file and the tax rates and deductions from
government, insurances, and other agencies.
4. Prepare Payroll
In preparing the payroll, the following documents are produced which are the employee paychecks, various reports and
payroll register. As payroll transactions are prepared and processed, labor costs are accumulated to general ledger and then
updated also in payroll master file. The various reports are periodically sent to departments.
5. Disburse Payroll
The payroll register will be sent later to Account Payable account. Then approving the payroll register and preparation of
disbursement voucher are to be made which is later to be forward to the cashier. A copy of payroll register is to be included in
general ledger here. Also, the employee paychecks will be processed further to cashier for distribution to employee. The
employee paychecks, disbursement voucher, and payroll register are to be reviewed and sign in cashier. Then, it produces
the payroll register which are to be sent to payroll department to be file based on date. The cashier also produces the
disbursement voucher for accounting department, the signed employee checks for employee after deducting and withholding
taxes, and the payroll transfer checks to the bank.
 6. Calculate Employee-paid benefits and taxes
In cashier department, the employer pays some payroll taxes and employee benefits directly by the existence of the
withholding taxes and miscellaneous reductions from employee paychecks, retirement reductions, contributions to the
countries, etc.
7. Disburse payroll taxes and miscellaneous deductions
Last, the company via cashier will record the withholding taxes and miscellaneous deductions to the general ledger and will
also give them to the government, insurances, and various agencies.
fig.1.1 Payroll Cycle Functions
Basic Functions Internal Control Objectives Threats Control Procedures
Processing Payroll transactions are properly Hiring of unqualified or larcenous Sound Hiring Practices
transactional data authorized employee (verification of job applicant’s
about employee skills, references, and
activities employment history)
Safeguarding the Recorded payroll transactions are Violation of employment law Thorough documentation of
organization’s valid hiring procedures
assets
Providing Authorized payroll transactions are Unauthorized changes to the master Segregation of duties
information for recorded payroll file
decision-making
Payroll transactions are accurately Inaccurate time data Batch totals and other
recorded application controls
Applicable government regulations Inaccurate processing of payroll Paycheck distribution by
regarding remittance of taxes and someone independent of
filling of payroll and HR reports are payroll process
met
Assets (both cash and data) are Theft or fraudulent distribution Direct deposit
safeguarded from loss or theft paychecks
HR/Payroll Cycle activities are Loss or unauthorized disclosure of Investigation of all unclaimed
performed efficiently and effectively payroll data paychecks
Poor performance Separate payroll checking
account
Access control
Backup procedures
Encryption
 Update Tax
Updating Payroll
rates and
Master File
deductions

Disburse Payroll
taxes and Validate Time and
miscellaneous attendance data
deductions

Calculate Prepare
employer-paid payroll
benefits and taxes

Disburse payroll

fig.1.2 Payroll Cycle