Question

In 250 Words, write a reflective journal entry about what you have specifically learned in class this week about payroll transaction

Answer 1

Payroll transaction refers to the accounting of employee benefit expense of the organisation. It is generally accounted at the end of every month. It is one of the major part of the accounting because as per materiality concept, it incurs significant importance. Payroll transaction working are generally carried out by the human resource department of the company basis which the accounting/finance department accounts such transactions in the system.

The net amount which is paid by the company under payroll transaction is affected by multiple factors such as

o Pay Policies

o Leave and Compensatory data

o Attendance data

o Allowances and Perquisite data

o Other data such as Loans to employees, arrears, bonuses, etc.

Therefore firstly inputs of all the employees on the above factors are gathered and verified by the human resource department. There may be classification of employee basis grade, function, department, skills, etc by the organisation. After validating the above data, the actual payroll processing occurs and necessary adjustments and deductions are being carried out to derived at net salary.

Before final accounting, statutory compliance/deductions had been carried out. There are mandatory contribution to be deducted by employer as per rules such as provident fund, ESI, TDS, etc as applicable to each country and then the net salary had been accounted in the name of employee. Other compliances and deductions are also accounted in the system. And finally the net pay due to the employee and government are paid by the company.