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Chapter 14—The Human Resources Process (HR) Management and Payroll Process

TRUE/FALSE

1. A job time ticket is the source document used in the payroll system to determine the hours for which
an employee should be paid.

ANS: F

2. Attendance time records reflect the start and stop times on specific jobs to allow the distribution of
payroll costs to jobs in process (or to other accounts).

ANS: F

3. Attendance time records show the time periods that employees are in attendance site and available for
work.

ANS: T

4. The checking account is a general ledger account that should show a zero balance after both the debit
for gross pay earned by workers and the credit for gross pay distributed to jobs have been posted to the
account.

ANS: F

5. An imprest payroll bank account is one to which cash transfers are made in an amount exactly equal to
the total net pay for the period.

ANS: T

6. Human resource management is the process of managing how people are hired, developed, assigned,
motivated and retained.

ANS: T

7. The hman capital management process is an interacting structure of people equipment, methods, and
controls that supports the decision needs of the HR department

ANS: F

8. The payroll process maintains data for payroll taxes, fringe benefits, attendance reporting,
timekeeping, and paying employees for work performed.

ANS: T

9. The manager of safety, health, and human services usually reports to the controller.

ANS: F

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10. The manager of employee and industrial relations helps to settle employee complaints and grievances.
ANS: T

11. The manager of safety, health and human services has key functions that include plans and forecasts of
an organization’s short term and long term HR needs.
ANS: F

12. Systems that allow employees to access personal as well as business related information and functions
are known as self service systems.

ANS: T

13. As shown in the “computer” column of the HR flowchart, process inputs are actions taken by
departmental managers or supervisors that are captured on various online forms (enterprise system
screens).

ANS: F

14. According to the HRM flowchart, the employee/payroll data is stored in the enterprise database.
ANS: T

15. The skills inventory data maintains data concerning an organization’s short term and long term staffing
requirements.

ANS: F

16. The labor force planning data catalogs each employee’s set of relative skills.
ANS: F

17. Internal audit usually reports to the controller.

ANS: F

18. The VP finance usually has direct supervision of the treasurer, controller, and internal audit.

ANS: T

19. The GL supervisor usually reports to the treasurer.

ANS: F

20. Business tax deposits are made directly to the IRS.

ANS: F

21. Attendance time records show the time periods that employees are in attendance.

ANS: F
The Human Resources Process (HR) Management and Payroll Process 75

22. Job time records reflect the start and stop times on specific jobs.

ANS: T

23. The trigger for the payroll process “pay employees” is the payroll register.

ANS: F

24. The data flow between “prepare paychecks” and “prepare disbursement voucher” is the payroll
register.

ANS: T

25. The employee/payroll master data is the central repository of data about people who work for the
organization.

ANS: T

26. The employee wage and tax statement is known as a W-4.

ANS: F

27. Annuities, pensions, and retirement pay are reported on Form 1099-P.

ANS: F

28. Wages taxable under FICA are reported on Form 941.

ANS: T

29. An electronic time management system is a computer based system that captures, stores, and reports
time.

ANS: T

30. A company that specializes in rendering payroll services to client companies for a fee is a payroll
service bureau.

ANS: T

31. Independent contractors are employees who do not actually work for the company, but who receive
paychecks.

ANS: F

32. For good internal control, there should be a segregation of duties between personnel data
creation/modification, payroll preparation, and disbursement of the checks.

ANS: T
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33. As each field of data is completed on a preformatted screen the cursor moves to the next field on the
screen with a structured data entry process.

ANS: T

34. The control plan “use an imprest bank account” entails having paychecks distributed to employees by
an entity not otherwise involved in payroll processing.

ANS: F

35. In a imprest system, the bank account is reimbursed for the exact amount of the disbursements made
from the fund, rather than being reimbursed for round amounts.

ANS: T

36. A payroll clearing account is used to transfer the exact amount necessary to cover payroll checks and
related expenses.

ANS: T

37. One of the control goals of the operations process is to ensure the security of operations.

ANS: F

MULTIPLE CHOICE

1. The process of preparing paychecks for hourly employees is triggered by which of the following data
flows?
a. validated attendance time cards
b. job time tickets
c. a temporal event
d. employee paychecks
ANS: A

2. Information for distributing labor charges to jobs, departments, or other accounts comes primarily
from:
a. attendance time cards
b. job time tickets
c. a temporal event
d. employee paychecks
ANS: B

3. In a payroll system logical DFD, all of the following processes likely would provide updates to the
general ledger except for:
a. reconcile hours worked
b. distribute labor costs
c. pay employees
d. accrue employer taxes
ANS: A
The Human Resources Process (HR) Management and Payroll Process 77

4. The control plan independent reconciliation of payroll bank account is directed primarily at achieving
which of the following control goals?
a. Provide employees with timely pay checks.
b. Ensure efficient employment of resources.
c. Ensure security of resources.
d. Ensure validity, completeness and accuracy of time card inputs.
ANS: C
5. Which of the following activities related to payroll is not an effective control plan?
a. Paychecks should be drawn on an imprest payroll bank account.
b. Approve imprest clearing check
c. Approve attendance time data and job time data
d. After their preparation, paychecks should be delivered directly to the employees'
supervisors for distribution to the employees.
ANS: D
6. According to the text, what is the process of managing how people are hired, developed, assigned,
motivated and retained that presumes that employees are a strategic investment?
a. organizational management
b. personnel management
c. human resource management
d. none of the above
ANS: C
7. Which of the following began with the handling of payroll, personnel administration, and later added
the functions of recruiting and employee relations?
a. strategic management
b. personnel management
c. human capital management
d. none of the above
ANS: B

8. Which of the following recognized the importance of personnel in achieving organizational objectives,
but viewed personnel as something that could be controlled?
a. human resource management
b. personnel management
c. human capital management
d. none of the above
ANS: A

9. Which of the following is based on the three principles of individuals add value to the organization,
that employees are human assets, and that an employee’s relationship with the organization must be
nurtured for maximum lifetime value?
a. human resource management
b. personnel management
c. human capital management
d. none of the above
ANS: C
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10. Which of the following is not part of the information provided by HR management to support
management decisions
a. generating a variety of HR forms and documents
b. preparing management reports
c. preparing governmental reports
d. none of the above
ANS: D

11. Which of the following is false regarding the payroll management process?
a. it supports the repetitive work routines of the payroll process
b. was traditionally considered part of the HR management process
c. maintains data for payroll taxes and fringe benfits
d. none of the above
ANS: B

12. The HR module in most ERP systems includes all of the following except:
a. personnel management
b. time management
c. payroll
d. none of the above
ANS: D

13. All of the following are advantages of integrating the HR and payroll processes except:
a. creating a single source of obtaining HR information
b. data redundancy
c. improving data accuracy
d. none of the above
ANS: B

14. The key functions of planning and forecasting HR needs, analyzing job skills, assisting in recruiting,
and helping new hires adjust to their work environment is the job position of the manager of:
a. personnel appraisal and development
b. employee and industrial relations
c. human resource systems
d. personnel planning and staffing
ANS: D

15. The key functions of handling employee complaints and negotiating with unions is the job position of
the manager of:
a. personnel appraisal and development
b. employee and industrial relations
c. human resource systems
d. personnel planning and staffing
ANS: B
The Human Resources Process (HR) Management and Payroll Process 79

16. The key functions of meeting information needs of personnel and serving as a liaison between the IT
department and the personnel department is the job position of the manager of:
a. personnel appraisal and development
b. employee and industrial relations
c. human resource systems
d. personnel planning and staffing
ANS: C

17. The key functions of assisting managers in setting rewards for good employee performance, helping
line managers provide training or take disciplinary action, and reducing employee turnover by helping
workers achieve their career goals is the job position of the manager of:
a. personnel appraisal and development
b. employee and industrial relations
c. human resource systems
d. personnel planning and staffing
ANS: A

18. According to the flowchart for the HR management process, the capturing of information about HR
related events is:
a. enter HR data
b. selecting employees
c. evaluating employees
d. terminating employees
ANS: A

19. According to the flowchart for the HR management process, satisfying immediate hiring needs is part
of the process of:
a. process inputs
b. enter employment request
c. evaluating employees
d. terminating employees
ANS: B

20. According to the flowchart for the HR management process, the flowchart begins in:
a. various departments
b. employees
c. computer
d. HR department
ANS: A

21. According to the flowchart for the HR management process, the update of employee/payroll master
data and preparing documents, screens and reports is in the column for:
a. various departments
b. employees
c. computer
d. HR department
ANS: C
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22. According to the flowchart for the HR management process, needs requests, supervisor review,
employee termination, and employee requests are approved in the column for:
a. various departments
b. employees
c. computer
d. HR department
ANS: D

23. Payroll reports may be provided to all of the following except:
a. unions
b. employees
c. government
d. none of the above
ANS: D

24. Which of the following data stores is updated when employees gain new on the job training?
a. labor force planning data
b. skills inventory data
c. payroll data
d. none of the above
ANS: B

25. Which of the following data stores is updated for job specifications?
a. labor force planning data
b. skills inventory data
c. payroll data
d. none of the above
ANS: A

26. The payroll supervisor usually reports to:
a. the treasurer
b. the cashier
c. the controller
d. the VP Finance
ANS: C

27. Internal audit usually reports to:
a. the treasurer
b. the cashier
c. the controller
d. the VP finance
ANS: D
The Human Resources Process (HR) Management and Payroll Process 81

28. Which of the following shows when the employees are at work in general and are maintained usually
near the entrance of the workplace taking the physical form of cards?
a. attendance time records
b. job time records
c. payroll contribution notice
d. none of the above
ANS: A

29. Which of the following shows start and stop times with the purpose of allowing the distribution of
payroll costs to work in process?
a. attendance time records
b. job time records
c. payroll contribution notice
d. none of the above
ANS: B

30. Which of the following is a data flow that generally goes to insurance companies?
a. attendance time records
b. job time records
c. payroll contribution notice
d. none of the above
ANS: C

31. Which of the following is a data flow that generally goes to government agencies?
a. attendance time records
b. job time records
c. payroll contribution notice
d. none of the above
ANS: D

32. Payroll tax deposits are initially remitted to:
a. government agencies
b. the bank
c. the general ledger process
d. none of the above
ANS: B

33. Payroll tax reports are initially remitted to:
a. government agencies
b. the bank
c. the general ledger process
d. none of the above
ANS: A
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34. Updates of the tax rates data are stored in:
a. tax rates data
b. employee/payroll master data
c. HR master data
d. none of the above
ANS: A

35. What is the process that compares total hours of each worker as shown by the attendance record with
the hours reflected on the job time records for each employee?
a. accrue employer taxes
b. distribute labor costs
c. reconcile hours worked
d. pay employees
ANS: C

36. What is the process that interfaces with the GL to provide the necessary journal entries to allocate
employee payroll?
a. accrue employer taxes
b. distribute labor costs
c. reconcile hours worked
d. pay employees
ANS: B

37. What is the process that is initiated by validated attendance time records?
a. accrue employer taxes
b. deistribute labor costs
c. reconcile hours worked
d. pay employees
ANS: D

38. Which of the following is processed in batches?
a. HR activities
b. payroll
c. both a and b
d. none of the above
ANS: B

39. Which of the following is processed in the immediate mode?
a. HR activities
b. payroll
c. both a and b
d. none of the above
ANS: A
The Human Resources Process (HR) Management and Payroll Process 83

40. Which of the following is an example of processing the company’s payroll for a fee?
a. electonic time management
b. payroll direct deposit system
c. payroll service bureau
d. none of the above
ANS: C

41. Which of the following has the inputs of attendance and work on specific jobs?
a. electronic time management
b. payroll direct deposit system
c. payroll service bureau
d. none of the above
ANS: A

42. According to the flowchart of the payroll process, the payroll register is on a display in the column for
a. electonic time management system
b. computer
c. accounts payable department
d. cashier
ANS: C

43. According to the flowchart of the payroll process, the approved payroll disbursement voucher is on
display in the column for
a. electonic time management system
b. computer
c. accounts payable department
d. cashier
ANS: D

44. Which of the following payroll related frauds has the highest median loss?
a. ghost employees
b. falsified hours and salary
c. commission schemes
d. false workers compensation claims
ANS: A

45. Which of the following payroll related frauds has the lowest median loss?
a. ghost employees
b. falsified hours and salary
c. commission schemes
d. false workers compensation claims
ANS: B
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46. Employee fraud schemes in the area of reimbusement of expenses include all of the following except”
a. overstating expenses
b. fake receipts
c. overstating commissions
d. using personal expenses as business expenses
ANS: C

47. Which of the following control plans transers the exact amount of funds necessary to cover payroll
checks and related expenses?
a. approve attendance time data and job time data
b. distribute labor costs
c. independent paycheck distribution
d. use payroll clearing account
ANS: D

48. Which of the following control plans, when this entry balances as it should, we will detect and correct
any discrepancies between the attendance time and job time?
a. approve attendance time data and job time data
b. distribute labor costs
c. independent paycheck distribution
d. use payroll clearing account
ANS: B

COMPLETION

1. A(n) ____________________ is the source document used in the payroll system to determine the
hours for which an employee should be paid.

ANS: attendance time card

2. ____________________ reflect the start and stop times on specific jobs to allow the distribution of
payroll costs to jobs in process (or to other accounts).

ANS: Job time records

3. ____________________ show the time periods that employees are in attendance at the job site and
available for work.

ANS: Attendance time records

4. The ____________________ is a general ledger account that should show a zero balance after both the
debit for gross pay earned by workers and the credit for gross pay distributed to jobs have been posted
to the account.

ANS: payroll clearing account
The Human Resources Process (HR) Management and Payroll Process 85

5. A(n) ____________________ payroll bank account is one to which cash transfers are made in an
amount exactly equal to the total net pay for the period.

ANS:
imprest or clearing account
either answer is correct

6. __________________ is the process of managing how people are hired, developed, assigned,
motivated and retained.

ANS: Human capital management

7. The _____________________ process is an interacting structure of people equipment, methods, and
controls that supports the decision needs of the HR department

ANS: HR management

8. The __________ process maintains data for payroll taxes, fringe benefits, attendance reporting,
timekeeping, and paying employees for work performed.

ANS: payroll

9. The manager of safety, health, and human services usually reports to the _______________.

ANS: VP of HR

10. The manager of _______________ helps to settle employee complaints and grievances.

ANS: employee and industrial relations

11. The _______________ has key functions that include plans and forecasts of an organization’s short
term and long term HR needs.

ANS: manager of personnel planning and staffing

12. Systems that allow employees to access personal as well as business related information and functions
are known as ____________________.

ANS: self service systems

13. According to the HRM flowchart, the employee/payroll data is stored in the ____________ database.

ANS: enterprise

14. The ______________ data maintains data concerning an organization’s short term and long term
staffing requirements.

ANS: labor-force planning

15. The ____________ data catalogs each employee’s set of relative skills.
86 Chapter 14

ANS: skills inventory

16. Internal audit usually reports to ____________________.

ANS: the VP of finance

17. The VP finance usually has direct supervision of the treasurer, ____________ and ___________.

ANS:
controller
internal audit

18. The GL supervisor usually reports to _______________.

ANS: the controller

19. Tax deposits are made to _____________.

ANS: the bank

20. ________________ reflect the start and stop times on specific jobs.

ANS: Job time records

21. The trigger for the payroll process “pay employees” is the _______________.

ANS: validated attendance time records

22. The data flow between “prepare paychecks” and “prepare disbursement voucher” is the
______________.

ANS: payroll register

23. The ________________ data is the central repository of data about people who work for the
organization.

ANS: employee/payroll master

24. The employee wage and tax statement is known as a ________.

ANS: W-2

25. Annuities, pensions, and retirement pay are reported on Form ________.

ANS: 1099-R

26. Wages taxable under FICA are reported on Form _____.

ANS: 941
The Human Resources Process (HR) Management and Payroll Process 87

27. A (n) __________________ system is a computer based system that captures, stores, and reports time.

ANS: electronic time management

28. A company that specializes in rendering payroll services to client companies for a fee is a (n)
________________.

ANS: payroll service bureau

29. ________________ are employees who do not actually work for the company, but who receive
paychecks.

ANS: Ghost employees

30. For good internal control, there should be a __________________ between personnel data
creation/modification, payroll preparation, and disbursement of the checks.

ANS: segregation of duties

31. As each field of data is completed on a ________________, the cursor moves to the next field on the
screen with a structured data entry process.

ANS: preformatted screen

32. The control plan _________________, entails having paychecks distributed to employees by an entity
not otherwise involved in payroll processing.

ANS: independent paycheck distribution

33. A ______________ account is used to transfer the exact amount necessary to cover payroll checks and
related expenses.

ANS:
payroll clearing or imprest
either answer is correct

34. One of the control goals of the operations process is to ensure the ____________ of operations.

ANS: effectiveness

35. One of the controls goals of the operations process is to ensure the efficient ___________ of
resources.

ANS: employment

PROBLEM
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1. Figure TB-14.1 is a level 0 DFD of a payroll process, but several labels have been omitted from the
figure (indicated by small boxes in the figure). Listed below is a numbered, alphabetical list of the
omitted items.

Omitted Labels
1. Accrue employer taxes
2. Attendance time records
3. Distribute labor costs
4. Employee/payroll master data
5. General ledger process
6. GL employer tax accrual update
7. GL tax deposit update
8. Government agencies
9. Job time records
10. Pay employees
11. Payroll transfer check
12. Tax deposit

Required:

Match the list of labels above to the spots in Figure TB-14.1 where they belong by placing one of the
numbers (1 through 12) from the above list in the appropriate box in the figure.
The Human Resources Process (HR) Management and Payroll Process 89

Current tax
rates ?
Gov’t
Agencies
1.0
5.0 ?
Perform
data mainte-
nance

?
Accrual
Tax rates data notification
Bank

6.0
Prepare Tax
?
Deposit

Dept
Managers & 2.0
supervisors Reconcile
Hours Payment
Worked contribution
notice

Insurance
companies etc

7.0
Prepare
payroll
reports
Employee/payroll
master data Payroll tax
Validate reports
job time
records

Validated
?
attendance
3.0 time records

4.0

W-2 Benefits
Forms reports
GL labor Employee
distribution GL disbursement ? paychecks
update voucher update

Employees
General
Ledger Bank
Process

Figure TB 14.1

ANS:
90 Chapter 14

Current tax
rates 5
Gov’t
Agencies
1.0
5.0 6
Perform
1
data mainte-
nance

7
Accrual
Tax rates data notification
Bank

2 or 9 6.0
Prepare Tax
12
Deposit

Dept
Managers & 2.0
supervisors Reconcile
Hours Payment
Worked contribution
notice

Insurance
9 or 2 companies etc

7.0
4 Prepare
payroll
reports
Employee/payroll
master data Payroll tax
Validate reports
job time
records

Validated
8
attendance
3.0 time records
3 4.0
10

W-2 Benefits
Forms reports
GL labor Employee
distribution GL disbursement 11 paychecks
update voucher update

Employees
General
Ledger Bank
Process

Figure TB 14.2
The Human Resources Process (HR) Management and Payroll Process 91

Validated
attendance time Tax rates data Employee/ payroll
records master data

4.0
Pay
Employees

GL Employee
disbursements Paychecks
Payroll
voucher update
transfer check

General Bank Employees
Ledger

2. Figure TB 14.3 is a part of the payroll process level 0 DFD shown in the text. The narrative that
follows is paraphrased from the text description of process 4.0 in the diagram.

Narrative Description
Validated attendance time records initiate the payment to workers in process 4.0.
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This process begins with the validated attendance time records. In calculating employees gross and
net pay, the first process retrieves data from both the employee/payroll master data and the tax rates
data. This process accumulates current, quarter-to-date, and year-to-date totals for each employee and
reports this information via the data flow Payroll register. This information also is used to update the
employee/payroll master data. Finally, this first process prints and distributes paychecks to employees
as reflected in the represented by an employee paychecks data flow.

The data flow “payroll register” triggers the next process where the disbursement voucher is prepared.
This will result in a data flow for the GL disbursement voucher update, and a data flow for the
disbursement voucher.

Finally, the payroll transfer check is prepared in the next process and sends it to the bank to cover the
organizations periodic net payroll.

Required:

From the DFD in the figure below and the narrative description above, explode bubble 4.0 into a lower
level diagram showing the details of that process.

ANS:

Figure TB 14.4

3. Assume that you are working with a payroll application that produces weekly paychecks, including
paystubs. Listed below are 20 data elements that appear on the paycheck/paystub.

Data Elements

Number Description
1. Employee identification number
2. Social security number
3. Employee name
4. Employee address
5. Regular hours worked
The Human Resources Process (HR) Management and Payroll Process 93

6. Overtime hours worked
7. Pay rate classification
8. Hourly pay rate
9. Regular earnings
10. Overtime earnings
11. Total earnings
12. Deduction for federal income tax
13. Deduction for state income tax
14. Deduction for FICA tax
15. Union dues withheld (flat amount based on length of service)
16. Net pay
17. Check number (same number is also preprinted on each check form)
18. Year-to-date amounts for items 11 through 14 preceding
19. Pay-period end date
20. Date of check (employees are paid on Wednesday for the week ended the
previous Friday)

Required:

For each numbered item, indicate the immediate (versus ultimate) source of the item. For instance, the
immediate source of the number of exemptions for an employee would be the employee master file as
opposed to the ultimate source which is the W-4 form filed by the employee. Some items may have
more than one source, as in the case of item 1. You have the following choices:

E = Employee master file
T = Time clock cards (these are in machine-readable form and show for each
employee for each day the time punched in the morning, out at lunch,
in after lunch, and out in the evening)
H = "Table" file of hourly wage rates (i.e., wage rate "class" and hourly rate for each class)
W = "Table" file of state and federal income tax withholding amounts plus FICA tax rate
and annual "cutoff" amount for FICA wages.
CG = Computer generated (such as a date or time of day supplied by the system)
CC = Computer calculated
CO = Console operator (such as batch totals or a date to be used)

Arrange your answer as follows:

Item Source
1 T, E
2 ?
etc.

ANS:
Solution:
Item No. Description Source

1. Employee identification number T, E
2. Social security number E
3. Employee name T, E
4. Employee address E
5. Regular hours worked T, CC
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6. Overtime hours worked T, CC
7. Pay rate classification E
8. Hourly pay rate H
9. Regular earnings CC
10. Overtime earnings CC
11. Total earnings CC
12. Deduction for Federal Income Tax W, CC
13. Deduction for State Income Tax W, CC
14. Deduction for FICA tax W, CC
15. Union dues withheld (flat amount based on E, CC
length of service)
16. Net pay CC
17. Check number (same number is also preprinted CG, CO
on each check form)
18. Year-to-date amounts for items 11 through 14 E, CC
above
19. Pay period ending CG, CO
20. Date of check (employees are paid on CC, CO
Wednesday for the week ended the previous
Friday)