Accounting Information Systems, 13e (Romney/Steinbart)
Chapter 15 The Human Resources Management and Payroll Cycle
15.1 Describe the major business activities and related information processing operations
performed in the human resources management (HRM)/payroll cycle.
1) Which activity below is not performed by Human Resources management (HRM)?
A) compensation
B) training
C) discharge
D) recruitment and hiring
2) Which department should have the sole ability to provide information to the AIS about hiring,
terminations, and pay rate changes?
A) payroll
B) timekeeping
C) production
D) HRM
3) Which of the following is generally not a major sourceDifficulty : of input to a payroll
system?
A) payroll rate changes
B) time and attendance data
C) checks to insurance and benefits providers
D) withholdings and deduction requests from employees
4) Who does the payroll system issue checks to?
A) employees and to banks participating in direct deposit
B) a company payroll bank account
C) government agencies
D) All of the above are correct.
5) Experts estimate that, on average, the costs associated with replacing an employee are about
________ the employee’s annual salary.
A) one-quarter of
B) one-half of
C) one and one-half times
D) twice
6) For recording time spent on specific work projects, manufacturing companies usually use a
A) job time ticket.
B) time card.
C) time clock.
D) labor time card.
7) Which of the following statements is false regarding the use of incentives, commissions and
bonuses in the payroll system?
A) Using incentives, commissions, and bonuses requires linking the payroll system and the
information systems of sales and other cycles in order to collect the data used to calculate
bonuses.
B) Bonus/incentive schemes must be properly designed with realistic, attainable goals that can be
objectively measured.
C) Incentive schemes can result in undesirable behavior.
D) All of the above are true.
8) Identify the item below that is not a desired result of an employee bonus systems.
A) Employees may recommend unnecessary services to customers in order to exceed set sales
quotas and earn a bonus.
B) Employees may look for ways to improve service.
C) Employees may analyze their work environment and find ways to cut costs.
D) Employees may work harder and may be more motivated to exceed target goals to earn a
bonus.
9) ________ are used to transmit time and attendance data directly to the payroll processing
system.
A) Badge readers
B) Electronic time clocks
C) Magnetic cards
D) none of the above
10) Payroll deductions fall into the broad categories of ________ and ________.
A) payroll tax withholdings; voluntary deductions
B) unemployment; social security taxes
C) unemployment taxes; income taxes
D) voluntary deductions; income taxes
11) Which of the following is not classified as a voluntary deduction?
A) pension plan contributions
B) social security withholdings
C) insurance premiums
D) deductions for a charity organization
12) Which type of payroll report contains information such as the employees’ gross pay, payroll
deductions, and net pay in a multicolumn format?
A) payroll register
B) deduction register
C) employee earnings statement
D) federal W-4 form
13) Which type of payroll report lists the voluntary deductions for each employee?
A) payroll register
B) deduction register
C) earnings statement
D) federal W-4 form
14) Which type of payroll report includes the details of the current paycheck and deductions as
well as year-to-date totals?
A) payroll register
B) deduction register
C) earnings statement
D) federal W-4 form
15) An effective way an organization can eliminate paper paychecks while maintaining adequate
accounting records is to
A) pay in cash only.
B) pay with money orders.
C) use direct deposit.
D) use Electronic Funds Transfer.
16) Companies that specialize in processing payroll are known as
A) paycheck distribution companies.
B) payroll service bureaus.
C) professional employer organizations.
D) semi-governmental organizations.
17) Which organization provides payroll processing as well as other HRM services, like
employee benefit design and administration?
A) title companies
B) payroll service bureau
C) professional employer organization
D) paycheck distribution companies
18) Which of the following is not a benefit of using a payroll service bureau or a professional
employer organization?
A) freeing up of computer resources
B) increased internal control
C) reduced costs
D) wider range of benefits
19) Many companies offer their employees a “cafeteria” approach to voluntary benefits in which
employees can pick and choose the benefits they want. This plan is normally called a(n)
A) elective plan.
B) menu options benefit plan.
C) flexible benefit plan.
D) buffet plan.
20) Pay rate information should be stored in
A) employees’ personnel files.
B) employee subsidiary ledgers.
C) the payroll master file.
D) electronic time cards.
21) The payroll transaction file should contain
A) entries to add new hires.
B) time card data.
C) changes in tax rates.
D) All of the above are correct.
22) The document that lists each employee’s gross pay, payroll deductions, and net pay in a
multicolumn format is called
A) an employee earnings statement.
B) the payroll register.
C) a deduction register.
D) an employee time sheet summary.
23) As each payroll transaction is processed, the system should also
A) allocate labor costs to appropriate general ledger accounts
B) use cumulative totals generated from a payroll to create a summary journal entry to be posted
to the general ledger
C) both A and B above
D) The HRM system should not perform either activity A or B.
24) Direct deposit of employee paychecks is one way an organization can improve efficiency and
reduce payroll-processing costs. Which statement regarding direct deposit is false?
A) The cashier does not authorize the transfer of funds from the organization’s checking account
to a payroll checking account.
B) The cashier does not have to sign employee paychecks.
C) Employees who are part of a direct deposit program receive a copy of their paycheck
indicating the amount deposited.
D) Employees who are part of a direct deposit program receive an earnings statement on payday
rather than a paper check.
25) The employer pays a portion of some payroll taxes and employee benefits. Both the
employee and employer pay which benefit or tax listed below?
A) social security taxes
B) federal income taxes
C) state income taxes
D) none of the above
26) Identify the following item that should contribute to the efficiency of a payroll system.
A) segregation of check distribution from payroll duties
B) prompt redeposit of unclaimed paychecks
C) a separate payroll bank account
D) direct deposit of checks
27) Which of the following documents would be likely to yield the greatest cost saving by
converting from paper to electronic?
A) payroll register
B) earnings statement
C) deduction register
D) time card
28) Describe the basic activities in an HRM/payroll cycle.
29) Identify the two types of payroll deductions and give two examples of each type.
30) Why are accurate cumulative earnings records important?
31) Explain the functions of the payroll register, deduction register, and earnings statement.
32) What is the difference between a payroll service bureau and a professional employer
organization?
33) Discuss the various types and sources of input into the HRM/payroll cycle.
34) A growing number of companies require some of their upper level executives to spend time
performing job duties of rank-and-file employees. When the CEO of Loews Hotels assumed the
role of bellman, he discovered
A) that the company’s polyester uniform caused him to sweat a great deal.
B) evidence of fraud in several hotel locations.
C) instances where company employees fell asleep on the job.
D) situations where employees were not treating customers properly.
35) Executive immersion experiences are important because
A) CEOs often have no idea what rank-and-file employees do on a daily basis.
B) employees who have positive attitudes contribute to increasing company profits.
C) many employees feel upper management is out of touch.
D) it is important for organizations to take social responsibility seriously.
36) True or False: The HRM department should immediately delete records of employees who
quit to prevent other employees from assuming their identities.
37) Involving accountants in executive compensation plans is often especially helpful
A) in keeping track of the executive compensation plan.
B) in identifying the appropriate metrics to use when linking compensation to performance.
C) in reducing the total amount of compensation paid to executives.
D) in suggesting the appropriate amount of compensation executives should be paid.
38) Accountants can help executive compensation plan boards
A) comply with legal and regulatory requirements.
B) by identifying the best ways to keep the details of compensation plans out of the hands of
external parties.
C) avoid paying excessive amounts of “perks” to executives.
D) distribute information regarding how well each executive is performing their job.
39) Form 941
A) is filed each quarter to reconcile monthly tax payments with total tax liability for the quarter.
B) is used in preparing labor-related reports for government agencies.
C) is used for employee information and annual payroll reports.
D) is used to document compliance with applicable regulations.
40) A workforce inventory report
A) is filed each quarter to reconcile monthly tax payments with total tax liability for the quarter.
B) is used in preparing labor-related reports for government agencies.
C) is used for employee information and annual payroll reports.
D) is used to document compliance with applicable regulations.
41) Professional employer organizations (PEOs) are especially attractive to small and mid-sized
businesses for all of the following reasons except
A) reduced costs.
B) wider range of benefits.
C) freeing up computer resources.
D) improved service quality.
15.2 Discuss the key decisions to be made in the HRM/payroll cycle and identify the
information needed to make those decisions.
1) The sales department administrative assistant has been assigning phone order sales to her
brother-in-law, a company sales person. Company policy is to pay commissions only on orders
directly received by sales people, not on orders received over the phone. The resulting fraudulent
commission payments might best have been prevented by requiring that
A) sales commission statements be supported by sales order forms signed by the customer and
approved by the sales manager.
B) sales order forms be prenumbered and accounted for by the sales department manager.
C) sales orders and commission statements be approved by the accounting department.
D) disbursement vouchers for commission payments be reviewed by the internal audit
department and compared to sales commission statements and sales orders.
2) Because many HRM / payroll master databases typically contain only descriptive information
(such as which employees possess which skills), many firms have deployed ________ to more
effectively leverage employees knowledge and skills.
A) relational databases
B) knowledge management systems
C) Resources, Events, and Agents (REA) databases
D) cardinality systems