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Feature 
Aims 
Setting of wages and 
salaries

Employees
are 
only paid
for 
work
that they have 
done
. 

Gross pay
has been 
calculated correctly
and 
authorised
. 
Recording of wages and 
salaries

Gross
and 
net
pay
and 
deductions
are 
accurately
recorded
on the 
payroll. 

Wages
and 
salaries
paid
are 
recorded
correctly
in the 
bank
and 
cash
records
.

Wages and salaries are 
correctly recorded 
in the 
general ledger
. 
Payment of wages and 
salaries

The 
correct
employees
are 
paid.
Deductions

Statutory 
and 
non-statutory 
deductions
have been 
calculated
correctly
and are 
authorised
. 

The 
correct
amounts
are 
paid
to the 
taxation
authorities
. 
BPP Tutor Toolkit Copy

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CHAPTER 8
//
THE ROLE OF ACCOUNTING 
 
219 
6.1.5 Controls 
While in practice separate arrangements are generally made for dealing with wages and salaries, the 
considerations involved are broadly similar and for convenience the two aspects are here treated 
together. 
Responsibility for the preparation of pay sheets should be delegated to a suitable person, and adequate 
staff appointed to assist them. The extent to which the staff responsible for preparing wages and salaries 
may perform other duties should be clearly defined. In this connection full advantage should be taken 
where possible of the 
division of duties
, and checks available where automatic wage-accounting 
systems are in use. 
Setting of wages and salaries 

Staffing 
and 
segregation of duties

Maintenance
of personnel records
and regular checking of wages and salaries to details in 
personnel records 

Authorisation
required for: 
– 
Engagement and discharge of employees 
– 
Changes in pay rates 
– Overtime 
– 
Non-statutory deductions (for example pension contributions) 
– 
Advances of pay 

Recording
of 
changes
in 
personnel
and 
pay rates

Recording
of hours worked by 
timesheets
, 
clocking in and out
arrangements 

Review of hours worked

Recording
of 
advances
of 
pay

Holiday pay
arrangements 

Answering queries

Review
of 
wages against budget
Recording of wages and salaries 

Bases
for 
compilation
of payroll 

Preparation, checking
and 
approval
of payroll 

Dealing 
with 
non-routine matters 
Payment of cash wages 

Segregation of duties
– 
Cash sheet preparation 
– 
Filling of pay packets 
– 
Distribution of wages 

Authorisation 
of
 wage cheque

Custody
of cash 
– 
Encashment of cheque 
– 
Security of pay packets 
– 
Security of transit arrangements 
– 
Security and prompt banking of unclaimed wages 

Verification of identity

Recording
of distribution 
BPP Tutor Toolkit Copy

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PART C: ACCOUNTING AND REPORTING SYSTEMS, CONTROLS AND COMPLIANCE 
 
220
 
Payment of salaries 

Preparation 
and 
signing
of cheques and bank transfer lists 

Comparison 
of 
cheques 
and 
bank transfer list 
with payroll 

Maintenance
and 
reconciliation
of wages and salaries bank account 
Deductions from pay
 

Maintenance 
of 
separate employees' records
, with which pay lists may be compared as 
necessary 

Reconciliation 
of 
total pay 
and 
deductions 
between one pay day and the next 

Surprise cash counts

Comparison 
of actual pay totals with 
budget estimates 
or standard costs and the investigation of 
variances 

Agreement 
of 
gross earnings 
and 
total tax deducted 
with income tax returns to the HM Revenue 
and Customs 
Appropriate arrangements should be made for dealing with statutory and other authorised deductions 
from pay, such as national insurance, income tax, pension fund contributions and savings held in trust. 
A primary consideration is the establishment of adequate controls over the 
records
,
 
and 
authorisation 
of 
deductions. 
6.2 The purchases and sales cycles 
The purchases and sales systems will be the most important components of most company accounting 
systems.
6.2.1 Purchase and sales systems 
Purchasing is an important area to control, especially where items of high value are concerned. There 
are likely to be specific authorisation procedures for the purchase of non-current assets. 
6.2.2 Payables ledger system 
Businesses have to ensure that only 
properly authorised purchases
which are necessary for the business 
are made. All stages of the purchase process – ordering, receiving goods and being charged for them – 
should be documented and matched. In this way it can be ensured that the business gets what it 
ordered and only pays for what it orders and receives. The payables ledger makes it possible for the 
business to keep track of what it owes each supplier. 
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CHAPTER 8
//
THE ROLE OF ACCOUNTING 
 
221 
The most important aims of the control system relating to payables and purchases are: 
Feature 
Aims 
Ordering

All 
orders for
, and expenditure on, 
goods and services
are properly 
authorised
, 
and are for 
goods and services
that are actually 
received 
and are 
for the 
company
.
 

Orders
are only