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Expenditure cycle : Payroll processing and fixed asset procedures

5 important questions on Expenditure cycle : Payroll processing and fixed asset procedures

What are the differences between the purchase system and the payroll system?

A lot of differences between different employees (wage, education level)
General expenditures: payroll expenses are discrete events; they only happen once
every week or month
High risk of fraud

How does an integrated HRM system differ from a simple automated system?

The various departments transmit transactions to data processing via terminals (For example a change in a file concerning a new employee is uploaded)
Direct access files are used for data storage
Many processes are now performed in real time

What is the fixed asset system and how does it differ from the expenditure cycle?

Fixed assets are the property, plant and equipment used in the operation of a business. The fixed assets system shares some characteristics with the expenditure cycle presented in chapter 5, but two important differences distinguish these systems.
Routine vs. non-routine purchases (raw materials vs. building) – this difference can for example be seen in the different levels of authorization.
Fixed asset accounting systems include cost allocation and matching procedures that are not part of routine expenditure systems.

What are the steps of the fixed asset system?

Asset acquisition usually begins with the departmental manager recognizing the need to obtain a new asset or replace an existing one
Asset maintenance involves adjusting the fixed asset subsidiary account balances as the assets depreciate over time or with usage, but also records increase in value due to investment to upgrade the assets. A depreciation schedule helps to assist with the depreciation plan.
Asset disposal, the process and reporting to remove the asset from the ledger and to record the possible amount of residual value.

Which are the three different areas that differ from the expenditure cycle in the fixed asset system?

Authorization: fixed asset acquisition should be formal and explicitly authorized.
Supervision controls: Because capital assets are widely distributed throughout the organization, they are more susceptible to theft and misappropriation than
inventories in secured warehouses.
Independent verification controls: Periodically, the internal auditor should review the
asset acquisition and approval procedures to determine the reasonableness of factors used in the analysis.