## **Learning Outcomes**

After reading this article, you will be able to identify the required payroll records for ACCA FA1, understand how to document hours worked using timesheets, explain the purpose and format of payslips, and recognize employer obligations for maintaining statutory payroll records. You will also be able to apply these concepts when processing and controlling payroll transactions.

## **ACCA Recording Financial Transactions (FA1) Syllabus**

For ACCA Recording Financial Transactions (FA1), you are required to understand key documentation and records relating to payroll, including their preparation, control, and statutory compliance. The following syllabus points are covered in this article:

- The function and use of timesheets and clock cards to record hours worked
- The purpose, contents, and format of payslips
- The requirement to maintain statutory payroll records for compliance and audit
- Understanding employer responsibilities for deductions and reporting
- The need for authorization and security in payroll documentation

## **Test Your Knowledge**

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision._

1. Which payroll document provides employees with details of gross pay, deductions, and net pay?
2. True or False? All hours worked by hourly paid employees must be recorded using timesheets or clock cards.
3. Which of the following is a statutory deduction from employee pay?
   a) Charitable donations  
   b) Staff canteen charges  
   c) Income tax  
   d) Travel loans
4. Briefly explain why employers must retain payroll records for several years.

## **Introduction**

Payroll is a significant operational area for most businesses, involving recording employees' working time, calculating pay, deducting specified amounts, and reporting to tax authorities. Accurate payroll records are legally required and are essential for both internal control and external compliance. This article addresses the main payroll records: timesheets and clock cards for attendance, payslips for wage reporting, and statutory documentation for employer obligations.

> **Key Term: payroll**
> The list of employees and the detailed record of the wages or salaries, deductions, and net pay due to each worker.

## TIMESHEETS AND CLOCK CARDS

### Recording Hours Worked

Employers must have reliable systems for recording the time employees have worked, especially for those paid by the hour or by output. Common methods include timesheets (manual or electronic) and clock cards.

> **Key Term: timesheet**
> A document completed by an employee or recorded automatically, detailing the hours worked during a period.
>
> **Key Term: clock card**
> A card inserted into a time recording machine to record an employee's start and finish times for each workday.

Timesheets are often used in offices or with professional staff, while clock cards are typical in factories or where manual time tracking is needed. These records form the basis for payroll calculations and are essential evidence in case of disputes about pay or attendance.

### **Worked Example 1.1**

An employee works from 8:30 am to 5:00 pm with a one-hour break on Monday to Friday. Using a clock card, they clock in and out at the start and end of each working period.

> **Answer:**  
> The payroll will count 7.5 hours per day as time worked (8:30-17:00 minus 1 hour), totaling 37.5 hours in the week, as evidenced by the clock card’s stamped times.

## PAYSLIPS: CONTENTS AND PURPOSE

Payslips are a key document in the payroll process. Every employee must receive a payslip, which itemizes their earnings and deductions for each pay period.

> **Key Term: payslip**
> A document provided to employees showing gross earnings, deductions, and net pay for a wage or salary period.

Payslips must include at least:

- Gross pay (total earnings before deductions)
- Itemized deductions (statutory and voluntary)
- Net pay (the amount actually paid)
- The pay period covered

Payslips may show additional information such as tax code, employer reference, hours worked, or year-to-date totals.

### **Worked Example 1.2**

A payslip is issued to an employee for the month. It shows gross pay of \$2,500, income tax of \$350, social security deductions of \$180, and a charitable deduction of \$20.

> **Answer:**  
> Net pay = \$2,500 – \$350 – \$180 – \$20 = \$1,950. Statutory deductions are income tax and social security; the charitable deduction is voluntary.

## STATUTORY PAYROLL RECORDS

Employers have a legal obligation to maintain comprehensive payroll records. These must detail:

- Each employee’s gross pay
- All statutory (e.g., tax, national insurance) and voluntary deductions
- Employer contributions to state benefits or pensions
- Dates and amounts of payments made

Statutory records must be accurate, complete, and securely stored for the period specified by law (typically at least 3-6 years). They may be audited by tax or employment authorities.

> **Key Term: statutory deduction**
> A deduction that employers are legally required to withhold from an employee’s pay, such as income tax and social insurance.
>
> **Key Term: payroll record**
> The complete set of documents and data maintained by the employer to evidence the details of pay, deductions, and compliance for all employees.

Regular checks must be conducted to ensure authorizations on all payroll documentation, with access restricted to authorized personnel. Security and confidentiality are critical.

### **Worked Example 1.3**

A business is inspected and must provide payroll information for the last 4 years. They present timesheets, payslips, and deduction records for each employee.

> **Answer:**  
> By keeping these statutory records, the business fully demonstrates compliance with payroll legislation and is able to respond to regulatory checks without issue.

### **Exam Warning**

Mistaking non-statutory deductions (e.g., union dues, charity) for statutory deductions can cause payroll calculation errors. Only amounts required by law count as statutory.

## **Summary**

Payroll records—including timesheets, clock cards, and payslips—are essential for accurate pay calculation and legal compliance. Statutory records are legally required and must be maintained, with deductions clearly documented and payslips provided each pay period.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- Identify timesheets and clock cards as primary records of hours worked
- Explain the purpose and required content of payslips
- Distinguish between statutory and voluntary deductions
- Recognize the employer’s duty to maintain payroll records for legal compliance
- Understand the need for authorization, control, and security of payroll information

## **Key Terms and Concepts**

- payroll
- timesheet
- clock card
- payslip
- statutory deduction
- payroll record

Payroll records and obligations - Timesheets, payslips, and statutory records