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In-house Computerized Payroll

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Creating a Payroll System

Introduction
This chapter* provides an overview of how the payroll process typically functions, using a payroll supplier, an in-house payroll process assisted by computer systems, or an in-house system that is entirely processed by hand. These descriptions also include flowcharts of each process and coverage of the exact controls that are most useful for each situation. Additionally, the chapter covers the types of documents used to set up a new employee in the payroll system, how to organize this information into a personnel folder, and how to process changes to employee information through the payroll system. As noted in the summary, the information in …show more content…

11. Print paychecks. Print paychecks, either manually on individual checks or, much more commonly, through a computer printer, with the printouts using a standard format that itemizes all wage calculations and deductions on the remittance advice. If direct deposits are made, a remittance advice should still be printed and issued. 12. Enter payroll information in general ledger. Use the information in the payroll register to compile a journal entry that transfers the payroll expense, all deductions, and the reduction in cash to the general ledger (see Chapter 13, “Payroll Journal Entries”). 13. Send out direct deposit notifications. If a company arranges with a local bank to issue payments directly to employee accounts, then a notification of the accounts to which payments are to be sent and the amounts to be paid must be assembled, stored on tape or other media, and sent to the bank (see Chapter 10, “Payments to Employees”). 14. Deposit withheld taxes. The employer must deposit all related payroll tax deductions and employer-matched taxes at a local bank that is authorized to handle these transactions. The IRS imposes a rigid deposit schedule and format for making deposits that must be followed in order to avoid penalties (see Chapter 8, “Payroll Taxes and Remittances”). 15. Issue paychecks. Paychecks should, at least occasionally, be handed out directly to employees, with proof of identification required; this is a useful control point in larger

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