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1. The job ticket is used to allocate each labor hour of work to specific WIP accounts.
These job tickets are very important for cost accounting. The job tickets are completed by production workers as they capture the total amount of time that they spend on each production job. Upon completion, they route these to the cost accountants who use them to post the labor costs to specific WIP accounts such as direct labor, indirect labor and overhead. The cost accountant prepares a labor distribution summary which contains the information for the general ledger clerk to make the necessary entries to the general ledger accounts.
2. Payroll costs such as wages to workers accrue each minute, hour or day that they work. However, these costs are not recorded as a liability during the time between when the workers earn their wages and when they are paid. These time lags typically average from half a week to a week. This time lag is of no concern until the firm is closing its books or preparing interim financial statements. At these points, however, estimates or accruals of the amounts owed should be made and the books should be adjusted.
3. In a mobile and/or distributed workforce environment in which employees directly enter time and attendance data into the system, the organization is at risk from data entry errors and payroll fraud. Input controls reduce these risks. For example, limit tests are used to detect excessive hours reported per period. Also, check digits detect transcription errors in employee identification numbers. Finally, the use of biometric scanners, swipe cards, and PINs reduce the risk of payroll fraud by ensuring that the individuals clocking into the system are valid employees.
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4. The primary advantage of payroll outsourcing is cost savings. By transferring this function to a third party, the client organization avoids the salaries and benefit costs of running an in-house payroll department. Also, the cost of continuing education for payroll staff is a financial burden. An in-house payroll department needs to be up to date on an ever-changing array of legal and technical matters. Such training is disruptive, costly, and can be avoided by outsourcing the payroll function.
5. One example is the reduction in the time it takes to record the receipt of inventory into the inventory records. Further, the automated system will be less likely to pay an invoice early, while at the same time not missing the discount period. Thus, cash management is improved.
6. Law firms require their employees to log the amount of time spent on each client for billing purposes. Accounting firms also require that their employees keep job tickets for the time they spend on each client. Car repair shops are another example. The mechanic must keep track of how much time he/she spends working on each automobile.
7. The risks associated with outsourcing are nontrivial. One is that an outside organization will have access to extremely confidential employee data and to the client firm’s financial resources. Another risk is that the service provider will have poor internal controls and/or act incompetently in a way that causes material errors or fraud. A client organization may outsource any function it chooses, but it cannot outsource its responsibility for implementing adequate internal controls.
