Page 41 - Essentials of Payroll: Management and Accounting

ESSENTIALS of Payr oll: Management and Accounting
employees, and then use IRS-provided tax tables to determine the
amount of taxes to withhold, plus the amount of matching taxes to be
remitted by the company. This task is also subject to a high error rate
and should be reviewed with care. Third, the payroll staff must create

paychecks from the prior information and manually summarize the
results in a payroll register. And because employees expect to see all
deductions broken out on their paychecks,the paycheck-writing process
is lengthy. In comparison to the outsourcing and in-house computer
system solutions described previously, the manual payroll process is
painfully slow and is at risk of so many errors that the payroll staff will
find itself taking a disproportionate amount of its time to ensure that

outputs from the process are correct. The manual payroll process is
shown in the flowchart in Exhibit 1.6.

EXHIBIT 1.6

The In-House Manual Payroll Process

Notify
employees
about missing
hours.
No
Manually Create and post
Compile Manually Manually
Create
time card calculate calculate generate OK? Yes paychecks. journal entries
payroll
for payroll
totals. wages due. taxes due.
register. transactions.
Obtain
supervisory File payroll
approval of register.
overtime
worked.
Collect Collect Deposit
withheld and
manual employee
paycheck change matching
information. forms. federal
taxes at bank.
Related Activities
Deposit
Distribute
File annual Issue annual withheld state
File quarterly federal W-2 forms to paychecks. income and
federal tax unemployment employees and other taxes.
return.
tax return. government.
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