This document discusses the personnel/payroll cycle and accounting information systems used to manage employee data and payroll processing. It covers: - The key activities in the personnel/payroll cycle like hiring, training, compensation, and termination - How HR and payroll systems record and process employee data and payroll transactions - The main functions and responsibilities of personnel management executives - How payroll data is collected, transactions are processed, and accounting entries are recorded for payroll in both manual and computer-based systems - Important control objectives and procedures for payroll processing like proper authorization, transaction accuracy, and file maintenance - Typical reports produced by payroll systems like registers, taxes withheld, and employee performance reports

1. Chapter 29:
ACCOUNTING INFORMATION SYSTEM
THE PERSONNEL/
PAYROLL CYCLE

2. HUMAN RESOURCE MANAGEMENT
(HRM)/PAYROLL CYCLE
1. Recruiting and hiring new
employees
2. Training
3. Job assignment
4. Compensation (payroll)
5. Performance evaluation
6. Discharge of employees due to
voluntary or involuntary
termination
- It is a recurring set of
business activities and
related data processing
operations associated with
effectively managing the
employee workforce. The
more important tasks
include the following:
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HRM/payroll cycle information system
Human Resource or
Personnel Management
System
Payroll System
- records and processes data
about the activities of
recruiting, hiring, training,
assigning, evaluating, and
discharging employees.
- records and processes data
used to pay employees for
their services.

4. THE PERSONNEL
MANAGEMENT
FUNCTION

5. A. THE TOP PERSONNEL EXECUTIVE
Board responsibilities
 Participates in planning allocation of
corporate resources,
 Recommends companywide personnel
policies to top management.
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 Develops organization of personnel
function.
 Delegates authority to manage
personnel activities.
 Monitors and evaluates performance
of those to whom authority was
delegated.

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 Quantitative information
 Qualitative information
B. INFORMATION NEEDS.

8. THE PAYROLL DATA
PROCESSING
SYSTEM

9.  Collecting data on time worked by all employees,
through:
- Employee’s clock cards for hourly employees
- Biometric time and attendance systems’ record
 Collecting data on new hires, terminations, and
changes in rates and deductions.
A. KEY DATA PROCESSING OPERATIONS
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10.  Determining gross pay, deductions, and net
pay.
 Preparing and distributing paychecks.
 Maintaining payroll history files for all
employees
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11. B. THE ACCOUNTING TRANSACTIONS
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The following is a representative entry to record payroll.
Payroll XXX
Withholding Taxes Payable XXX
SSS Premiums Payable XXX
Pension Fund Withholding Payable XXX
Cash XXX

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The following is a representative entry to record the
distribution of payroll costs to various expense and
inventory accounts.
Work-in-Process Inventory XXX
Manufacturing Overhead XXX
General and Administrative Expense XXX
Selling and Administrative Expense XXX
Payroll XXX

13. B. THE EMPLOYEE DATA BASE
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The data base used by automated systems
integrates the information found in the payroll
master file maintained manually by accounting
and the personnel master file maintained
manually by personnel.

14. A MANUAL SYSTEM
OF PROCESSING
PAYROLL

15. A. CONTROL OBJECTIVES AND PROCEDURES
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 All personnel and payroll transactions are properly
authorized on the basis of established criteria.
a. Personnel department reviews and approves
personnel transactions (new hires, pay
changes, terminations, etc.).
b. Departmental supervisors review and approve
time worked by employees.
c. Timekeeping reviews and approves clock cards.

16. A. CONTROL OBJECTIVES AND PROCEDURES
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 All employees are assigned to productive work
that matches their capabilities, and carry out
that work effectively and efficiently.
a. Primarily, departmental supervisors discharge
this responsibility
b. Formal employee performance evaluation
reports should be prepared regularly.

17. A. CONTROL OBJECTIVES AND PROCEDURES
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 All valid payroll transactions are accurately
recorded and processed.
a. Clock cards and job time tickets are reconciled.
b. The payroll control account has a zero balance
check.
c. Payroll registers are cross-footed.
d. Personnel, timekeeping, and cost distribution
activities are assigned to separate parts of the
organization.
e. Separate payroll bank accounts are used.

18. COMPUTER-BASED
PAYROLL DATA
PROCESSING

19. PROCESS:
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Reporting
1
Data capturing
2
Transaction processing

20. A. DATA CAPTURE
 Hourly employees
 Commission basis employee
 Salaried employee
 Personnel and payroll file changes may
be keyed in online terminals
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B. TRANSACTION PROCESSING
 Time-worked records.
a. Generally processed in one large batch.
b. Computer assisted processing and edit checks are
performed on time-worked records.
- Records are sorted for sequential processing.
- Field checks are made for numeric data.
- A validity check is made for employee number.
- A reasonableness check is made for hours worked.
- A record count, a hash total of employee numbers,
and a control total of total hours are tallied.

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 Personnel and payroll file changes.
a. Changes are made for new hires, wage rate and
salary changes, transfers or promotions,
terminations, and corrections.
b. Computer edit checks are performed, including field
checks, validity checks, range checks, and
reasonableness tests. Batch control totals
should be used.
 File maintenance

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 Control Objectives:
a. Proper authorization for personnel and payroll file
change transactions remains with the personnel
department.
b. Computer systems can enhance the effectiveness of
managers by providing more timely and complete
employee performance information
c. Computer techniques, in addition to those already
mentioned can be used to achieve accurate recording and
processing of all valid payroll transactions.

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 Procedures can be implemented to ensure
maintenance of accurate employee personnel
and payroll master files,
- Use external and internal file labels.
- Produce backup files as a matter of course.
- Save a log of all payroll transactions.
- Store backup files in a secure offsite location.
- Control online access with account numbers
and passwords.

25. Typical scheduled reports would include the following:
a. The payroll register
b. The deduction register
c. Taxes Withheld
d. Other deductions (e.g., SSS, Pag-ibig, etc)
e. Employee performance reports
f. Departmental employee status and position
reports
C. REPORTING
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Demand reports may request information on a number of
different aspects of the employee data base.
a. Documentation of compliance with government
laws and regulations.
b. List of employees possessing certain
characteristics; e.g. electrical engineers who speak
c. Spanish and have 10 years of experience.
d. Variables that can be used to evaluate the causes of
employee turnover.
e. Decision support systems are frequently used, to
assist managers and labor negotiators in contract
negotiators with labor unions.

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