In this case, the professional goal to take the role of Human Resource Direction. More often, organizations have a challenging of coordinating a good working relationship between the finance and accounting department and HR department. It is important to note that these two positions are interdependent ( Flamholtz, 2012) . As an HR director to perform their task responsively, I need financial information. Therefore, if I use inaccurate financial information on projection models such as personal programs, it may be difficult to offer data that is viable to return on investment.
In my daily activities in the HR department, I undertake several financial transactions:
Payroll Report: It is the responsibility of the human resource director to dispense the payroll. However, in large companies, this task may be in a separate division compared to the small businesses.
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Insurance and Benefits Scheme Transactions: As an HR director, it is my responsibility to ensure the employees’ information such as commissions, benefits, and bonuses are accurate. Also, where employees’ salary and commissions depend on task rate, it is the HR managers record the total payment per employee.
Master employees’ database: HR maintains database relating to the tax and payroll forms and then records them in the Payroll system. The HR manager understands the key duties of the employees in the organization and therefore, should oversee all the transactions in the payroll report.
A common goal for every business is to minimize expenses and maximize incomes. These transactions relating to the HR department ensures controls of the labor costs. Further, they help in ensuring there are neither “ghost workers” nor duplication of duties in the organizations. Since the transactions relating to the HR departments are expenses, they impact the income statement (Drury, 2013) . In other words, they are offset against the revenue in the income statement. On the other hand, payroll expenses if accrued are recorded as liabilities in the balance sheet. Also, the salary paid to employees is an outflow of cash and it reduces the cash account in the balance sheet. For example, assume an employee works for 8hrs per week and the labor rate is $72 per hour. The annual impact of this payroll expenses would be recorded as:
Balance Sheet
Cash Account
|
Labor/Payroll/Salary (72 x 8 x 52) = $29,952 |
Income Statement
Expenses Account
|
Labor/Payroll/Salary (72 x 8 x 52) = $29,952 |
If this expenses accrued, it is recorded as:
Liability Account
|
Accrued Salary (72 x 8 x 52) = $29,952 |
Scenario: In cash basis, the expenses are only recorded on the financial statement after they have been paid. And since such bills cannot be indicated in the books, errors and misinformation may exist as due to accumulated cash reserves. In order to resolve such errors especially while recorded expenses relating to payroll, I would implement accrual cash basis accounting system. To investigate these errors, I would recommend a reconciliation between the cash account and bank statements of the organization. The best internal controls in such a cash would to enquire approved documents which supported all the checks issued.
References
Drury, C. M. (2013). Management and cost accounting . Springer.
Flamholtz, E. G. (2012). Human resource accounting: Advances in concepts, methods, and applications . Springer Science & Business Media.
