Payroll Cycle

Lesson:

The payroll cycle manages the hiring of employees, the recording of time worked, the calculation of wages and taxes, and the distribution of paychecks.

Here are the key steps:

1. Personnel Authorization and Hiring - This step involves recruiting, interviewing, and onboarding employees, including verifying qualifications, completing hiring forms, and setting up personnel records with details like pay rates, classifications, and benefits to establish eligibility for compensation.
2. Timekeeping and Attendance Recording - Employees record their hours worked, overtime, and absences through time cards, electronic systems, or approvals from supervisors, ensuring accurate tracking of labor input for payroll computation.
3. Payroll Calculation - Gross pay is computed based on recorded hours, rates, and any incentives or deductions, followed by calculating net pay after withholdings for taxes, benefits, and garnishments to determine the total compensation due.
4. Payroll Review and Approval - Calculated payroll amounts are reviewed for accuracy and compliance with labor laws, then approved by authorized personnel, such as department heads or HR, to prevent errors or unauthorized payments.
5. Payroll Disbursement - Approved net pay is distributed to employees via checks, direct deposits, or payroll cards, with records maintained for the transaction to facilitate cash flow management and employee satisfaction.
6. Tax Withholding and Remittances - Deducted amounts for federal, state, and local taxes, as well as contributions to social security and benefits, are withheld from gross pay and remitted to the appropriate government or third-party entities on a timely basis.
7. Recording and Reconciliation - Payroll transactions are journalized in the accounting system, followed by reconciling payroll accounts, bank statements, and tax filings to ensure completeness and accuracy.

Answer:

Explanation:

Gross pay is computed based on recorded hours, rates, and any incentives or deductions, followed by calculating net pay after withholdings for taxes, benefits, and garnishments to determine the total compensation due.