ACCT341, Chapter 8, Questions
In Ch. 7, we covered the two main cycles of sales and purchases. In Ch. 8, we cover the remaining
processes in an accounting information system (including HR, fixed asset, production and financing).
In addition, we lightly touch on unique AIS needs in certain industries and re-engineering business
processes.
Human Resource Process
1. How does the objective/purpose of a personnel department differ from that of a payroll
department?
2. (A) What is the purpose of Form W-4?
(B) When should you consider filing a new Form W-4 with your employer?
(C) If not enough income tax is withheld from your check (and you end up owing mega
bucks come April 15), is it your fault or the employer’s fault?
(D) Why is it not particularly wise to get a large income tax refund every spring?
3. In order to better understand a payroll system, this step requires you to review flowcharts of
the payroll system shown at the end of this document. Seventeen flowchart shapes have had
their text descriptions (words inside the shape) removed and replaced with Quest 1-17
(Questions 1- 17). You need to list what text should appear inside for each of the 17
questions. For example, Quest 1 is Form I-9, and Quest 2 is form W-4, etc.
4. For most small businesses, payroll is a big challenge. It is complex, must be done right (or the
IRS will be calling), and it ties you down. For these reasons, many small businesses choose to
outsource payroll. Two of the biggest payroll service providers are ADP and
Intuit/QuickBooks.
(A) T or F: ADP, Inc., the world’s largest payroll service provider, processes more than 1 in
every 6 private sector paychecks in the U.S. (see Case-in-Point 8.3).
(B) Skim through the article at the end of this document and record which company, ADP or
Intuit, won the contest, according to the author. Why did the author come to this conclusion?
Fixed Asset Process
5. (A) What information about fixed assets should be included in a fixed asset management
database (e.g. think of at least two fields other than purchase date and amount, etc.)?
(B) Why might a police officer, fireman, or insurance adjustor be interested in the data in your
fixed asset database? Why might having a video of your business office and buildings be
helpful?
(C) How many records do you think exist in the fixed asset database at WWU: hundreds,
thousands, or tens of thousands?
(D) Do you think QuickBooks has the ability to track fixed asset information?
Production Process
6. When a business manufactures its own products, keeping track of cost data can become very
complex. Costs include direct materials, direct labor, and overhead such as indirect labor
(shop janitor) and materials (grease to keep machines running) and other overhead
(electricity).
(A) Explain the difference between job costing and process costing.
(B) Determine if job costing (J), process costing (P), or a hybrid thereof (H), would be most
appropriate for the production of each of the following:
(1) yogurt
(2) wedding cake
(3) Ford Taurus
(4) Rolls Royce
(5) accounting textbook.
7. (A) What are the benefits of JIT? (B) How is JIT highly dependent on an AIS? (C) How did
JIT initially complicate Dell’s AIS?
8. What is lean manufacturing? Give an example.
9. What is lean accounting? (hint: it’s not the work done by a lean accountant or accounting
teacher.)
10. Suppose you’re making a piece of furniture. What documents (inputs) would you gather to
support the cost of (A) direct materials and (B) direct labor?
11. What specific technologies are available to track, monitor and enter data regarding the
quantity and location of raw material inventory in production?
Financing Process
12. (A) What are the objectives of an AIS in the financing process?
(B) How does a lockbox system help achieve effective cash management? Do you think
lockboxes are becoming more or less important over time?
AIS’s in Special Industries
13. (A) What is the most important function of an AIS in a professional service organization, such
as a law or accounting office?
(B) How can time/billing technology with the billing for phone, copy, and computer usage?
(C) Some law firms and accounting firms bill time in 6-minute increments (create a decimal).
How much do you think law firms and accounting firms typically charge for six minutes of
work?
(D) Does QuickBooks include a time-tracking system?
14. Why do not-for-profit (NFP) or government organizations use fund accounting in their AISs?
15. (A) T or F: In the health care industry, paperwork has been a major bottleneck in delivering
efficient health care.
(B) Why is the effectiveness of output especially difficult to measure in health care?
(C) In healthcare, why do accountants need to understand the codes for medical diagnosis and
procedures?
(D) T or F: In health care, special AIS needs relate mostly to third-party billing.
Business Process Re-engineering
16. (A) What must happen if BPR is to succeed?
(B) In what tangible ways did BPR helped Mutual Benefit Life?
(C) How can doctors and patients benefit from BPR?
PAYROLL CYCLE DECRIPTION
Departments involved: Employee, Information Services, Human Resources, Payroll
Documents involved: I-9, W-4, PDF, Timecard, Paycheck, Tax Check, BMCU Check, 941, OQR, 6part W-2, W-3, 4-part 1099-MISC, Form 1096, 3-part 1040, 2-part Form 40
Processes involved: Assume new employee (EMP) who lives in Oregon is hired by WWU
Information Services Dept. (IS). New employee goes to the Human Resources Dept. (HR) and
completes Forms I-9, which requires the prospective employee to prove she is authorized to work in
the U.S. She also completes Form W-4 and also a payroll deduction form (PDF) which authorizes
$200 to be withheld from paycheck and sent to her savings account at Blue Mtn. Credit Union
(BMCU). HR files these documents.
Employee (EMP) submits timecard to IS which authorizes hours worked and passes along
authorized timecard to Payroll Dept. which files timecard by date (use the symbol C for
chronologically).
Payroll Dept. processes payroll and sends pay check to employee. Payroll Dept. withholds taxes
from employee check and sends check for taxes to IRS (in reality, it’s usually done through electronic
payment). Payroll Dept. withholds $200 from employee paycheck and sends funds (through a check)
to BMCU.
Payroll Dept. prepares quarterly payroll tax Form 941 to IRS and Oregon Quarterly Report (OQR)
to OR State.
After year-end (before end of Jan.), Payroll Dept. prepares 6-part Form W-2 (Copy A for Social
Security Administration-SSA, Copy B to employee for her federal tax return, Copy C to employee for
her records, Copy D for file by date, Copy 1 to OR State, Copy 2 to employee for state tax return,).
By end of Feb., Payroll Dept. prepares form W-3 and sends along with W-2 Copy A to SSA.
After year-end (before end of Jan.), Payroll Dept. prepares 4-part Form 1099-MISC for all
independent contractors paid $600 or more during year. (Copy A to IRS, Copy B to independent
contractor-IC, Copy 1 to OR State, Copy C to file by date). By end of Feb., Payroll Dept. prepares
Form 1096 and sends along with 1099-MISC Copy A to IRS.
By April 15, employee prepares 3 copies of Federal Form 1040. Copy 1 of Form 1040 goes to
IRS along with Copy B of W-2. Copy 2 of Form 1040 goes to OR State along with Copy 1 of W-2.
Copy 3 of Form 1040 is filed by employee.
By April 15, employee prepares 2 copies of Oregon Form 40 (Copy 1 to OR along with Copy 2 of
W-2 and Copy 2 of 1040; Copy 2 for file by date.)
PAYROLL DEPT PROCESSES FOR HIRING AND PAYING EMPLOYEES
Employee
IS
HR
Payroll
From
Employee
Completes I9, W-4 &
Payroll Ded.
Form
Quest 8
From IS
C
I-9
W-4
PDF
Quest 1
Process
payroll,
withholds
tax
Quest 2
Quest 3
Authorizes
employment
Paycheck
Quest 9
To HR
State & Fed
Checks
To Gov’t
Completes
Timecard
Check
I-9
Quest 10
W-4
Quest 4
Quest 7
Reviews &
authorizes
timecard
Prepare
Payroll Tax
Forms
From
Payroll
A
Timecard
Quest 6
Quest 11
To
IRS
Quest 5
OQR
To OR
EMPLOYEE’S INCOME TAX AND EMPLOYER’S W-2 PROCESSES
Employee
Prepares
1040
Payroll
Quest
12
Prepares 6part W-2 &
W-3
Quest 13
1040 Copy 1
1040 Copy 2
W-2 Copy A
To
SSA
1040 Copy 3
W-2 Copy B
W-2 Copy C
W-2 Copy B
W-2 Copy C
C
W-2 Copy 2
W-2 Copy D
Quest 14
Prepares OR
40
40 Copy 1
W-2 Copy 2
To
OR
40 Copy 2
C
A
To
OR
EMPLOYER’S PROCESS FOR FORM 1099-MISC (INDEPENDENT CONTRACTORS OR
VENDORS)
Payroll (1099-MISC)
Prepares 4-part
1099-MISC &
1096
Quest 15
1099-MISC Copy
A
To
IRS
1099-MISC Copy
B
To
Vendor
1099-MISC Copy
C
A
Quest 16
Quest
17
Payroll services in the cloud: Intuit vs.
ADP
Eric Geier | @eric_geier
Contributor, PCWorld
Sep 26, 2012 3:30 AM
Nobody pays attention to your payroll system unless it's not working. When you're running a
small business, it's no small task to please your staffers every payday and satisfy Uncle Sam at
tax time. Larger companies employ payroll personnel to calculate taxes and withholdings, and to
manage IRS forms correctly. But if you're responsible for cutting the checks at a smaller
company, online services can automate most of the payroll chores.
Both Intuit Online Payroll and RUN by ADP can help you better understand and track the forms
and filings required for your employees. Each service lets you access payroll information from a
Web browser, smartphone, or tablet. These cloud-based tools also offer employees online
access to paycheck details, W2 downloads, and even paid-time-off balances and 401(k)
specifics. Which service is better for your business? We took a closer look to find out.
Intuit Online Payroll
Pros: Affordable; simple setup; easier for payroll beginners; live tech support by phone
Cons: Fewer features than ADP RUN; no 24/7 help
Intuit Online Payroll is a great option for small businesses—especially those without prior payroll
experience. It starts at $25 per month to manage paying employees and contractors, and rises
to $39 per month to support federal and state tax forms. Under either subscription, Intuit charges
an additional $1.50 monthly fee for each employee you pay. On top of that, Intuit Online Time
Tracking, at a cost of $3 per month per employee, will track hours either via online timesheets
that employees can edit, or through a multiuser online time clock.
To better compare its pricing with that of ADP’s RUN, I calculated the estimated cost for Intuit
Online Payroll for 15 employees. It added up to about $61 per month for the subscription that
includes the tax forms, or about $106 per month with employee time-tracking. Intuit Online
Payroll starts as a 30-day free trial period, which begins when you run the first pay period.
Intuit Online Payroll Plus ($39 a month) can also help you manage and track your federal, state,
and local payroll taxes. It even supports electronic filings and a separate workers' compensation
service.
Intuit's wizard-style setup interface asks about your pay schedule, direct deposit information,
and vacation/sick-time policies. You can also input older payroll data if you’ve used another
payroll system in the past.
When setting up individual employees, you can configure federal, state, and local tax
withholding. Intuit provides the required tax forms, such as the W-4 (Employee Withholding
Certificate), I-9 (Employment Eligibility Verification), and new-hire state forms. Supported
deductions include insurance, retirement plans, flexible spending accounts, HSA plans,
garnishments, and other items such as cash-advance and loan repayments. You can even add
custom after-tax deductions. In addition to regular pay, it supports commissions, bonuses,
holiday pay, overtime, reimbursements, allowances, tips, and other miscellaneous earnings and
compensation.
For employee payments, Intuit supports free direct deposits, preprinted QuickBooks-compatible
check stocks, blank check stocks, and plain paper stubs that can accompany handwritten
checks.
Like ADP’s RUN, Intuit Online Payroll offers employees online access to view their information,
including paycheck details, as well as to download W2s. Intuit also supplies free apps
for iPhone and Android that let you perform most payroll-management tasks, but it doesn't
provide mobile access for employees.
Overall, Intuit Online Payroll is sufficiently user-friendly and feature-rich for most small
businesses. It offers additional help and tips for many topics and fields while you’re inputting
data. For instance, during the initial setup it gives tips on the employer ID numbers you need
and how to obtain them. And when you're entering employee data, it explains how to verify
Social Security numbers. Intuit also provides a to-do list showing required and recommended
tasks, and its email reminders can help keep you on your toes.
ADP RUN
Pros: More employee payment methods; mobile access for employer and employees; live 24/7
phone help
Cons: More expensive and complex to set up than Intuit Online Payroll
RUN, from payroll giant Automatic Data Processing, offers three main online services for small
and medium-size businesses: Essential Payroll, Enhanced Payroll, and Complete Payroll and
HR 411. The first subscription is the most comparable to Intuit’s, whereas the remaining two
subscriptions offer additional payroll and HR information and services. RUN is a good option for
any small business, but those without payroll experience may need to call for assistance.
For the sake of my example, I once again calculated the pricing for 15 employees: The cost
totaled about $284 per month for Essential Payroll and $370 per month for Enhanced Payroll.
For employee time-tracking, the EZLaborManager service costs $57 per month for a 15employee operation. Though the pricing is much higher than Intuit’s, RUN offers additional
features and services. The RUN interface and configuration process aren’t as wizard-like as
Intuit’s, but they're still fairly user-friendly.
RUN keeps all of the company configuration and global settings in a Company section, for
contact and direct-deposit account information. You can also define default policies for pay
frequency, taxes, earnings deductions, paid time-off, and workers' compensation.
When you're setting up employee records, you can configure federal, state, and local
withholding. You can also set up direct deposit and customize items such as earnings
deductions, paid time-off, and workers' compensation data. In addition to regular pay, RUN
supports commissions, overtime, and 1099-MISC forms, plus reimbursement, vacation, sick,
personal, bonus, and earning and compensation types. And it provides help with 401(k) and
insurance plans, federal student loans, garnishments, and other deductions.
EMPLOYERS AND STAFFERS CAN SEE THEIR DATA WITH RUN'S MOBILE APP.
As for employee payment methods, all RUN subscriptions include free direct deposit and
printing, as well as delivery of paper checks and payroll reports to your business on payday.
Additionally, you can print your own checks with a microprinter or a regular printer with check
stock, or on plain paper for stub printing only if you want to handwrite the paychecks. Enhanced
Payroll allows you to have paychecks printed on official ADP checks and delivered signed by
ADP, or to offer reloadable Visa debit cards to employees.
Just like Intuit Online Payroll, RUN works with QuickBooks, QuickBooks Online, Zero, and other
accounting software products with a generic file output.
Unlike the Intuit competitor, however, RUN gives both employers and employees access to
payroll information via online access and mobile apps.
Overall I found RUN to be feature-rich and user-friendly. But it could use some improvement
with the help function, such as more tooltips on data fields so you don’t have to consult the
separate help section for an explanation of tax lingo. However, since it has 24/7 payroll support,
if you’re in a bind at midnight you can talk to a person to get assistance.
The winner
Intuit Online Payroll delivers what most small businesses need: help with automating the payroll
basics. Its economical and user-friendly service is great for anyone without prior payroll
experience. ADP’s RUN, by contrast, costs much more and could improve its documentation.
That said, RUN is a fine choice if you have enough money in the budget to afford its higher fees.
Although RUN offers more features for midsize companies, I recommend Intuit Online Payroll for
the majority of small and medium-size businesses due to its ease of use and affordability.