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Cost and Management Accounting · Employee Cost and Direct Expenses

Attendance and Payroll Procedure: Time Keeping, Time Booking and Payroll

Updated 4 October 2026 · Fact-checked

Attendance and payroll procedure is the system that records when employees are present, how their time is charged to jobs, and how wages are calculated and paid. Time keeping records attendance. Time booking records work done. Payroll computes wages. Cost accounting then charges the wages to jobs and overheads.

Understand Attendance and Payroll Procedure

Labour cost is a large part of total cost. To control it you need reliable records of who worked, for how long, and on what. The attendance and payroll procedure gives you those records.

There are two different time records. Time keeping records the attendance of each worker: arrival, departure and total hours in the factory. Its purpose is wage payment. Time booking records how that attended time was spent: on which job, process or work order, or on idle time. Its purpose is cost ascertainment and control.

The two must agree. Time shown by time keeping should equal time booked on jobs plus idle time. A gap means unrecorded idle time or booking errors, and it is a control signal.

After time is recorded, the payroll is prepared. The payroll department takes attendance and time records, applies the wage rates and incentive rules, deducts statutory and other items such as provident fund, ESI, tax deducted at source and advances, and arrives at the net pay. Payment is made, and the wage analysis is sent to cost accounts.

Several departments work together. The personnel (HR) department engages workers and fixes rates. The time keeping department records attendance. The production or shop floor supervisor approves time bookings. The payroll or wages department prepares the payroll. The cost accounts department analyses wages into direct and indirect labour. The cashier pays. Internal audit checks the process. Keeping these duties separate reduces the risk of fraud such as ghost workers.

Key rules to remember

Time keeping vs time booking reconciliation
Time keeping hours (attendance) = Time booked on jobs + Idle time
Any difference needs investigation. It may be unrecorded idle time or a booking error.
Gross wages
Gross wages = Basic wages + Dearness allowance + Other allowances + Overtime premium + Incentive/bonus
Components depend on the question. Include only what is stated.
Net wages payable
Net wages = Gross wages − Employee deductions (PF, ESI, TDS, advances, recoveries)
Employer contributions are not deducted from the employee. They are an extra cost to the employer.
Wages control entry
Wages Control A/c Dr. (gross wages, plus employer contributions if stated) to Bank/Cash (net wages paid) and the deduction payables (employee PF, ESI, TDS, advances recovered). If employer PF/ESI is given, the employer's share is also credited to the PF/ESI payable accounts.
Wages Control is then cleared by crediting it when direct labour is charged to Work-in-Progress (Dr.) and indirect labour is charged to Overhead Control (Dr.). Its balance should be nil once all wages are analysed.

How to solve Attendance and Payroll Procedure questions

Use this method for any descriptive or numerical question on attendance and payroll.

  1. 1Identify what is asked: a procedure, a difference, department functions, or a payroll computation.
  2. 2If asked about procedure, follow the flow: engagement, attendance recording, time booking, approval, payroll preparation, payment, cost analysis.
  3. 3For difference questions, compare on purpose, record used, who maintains it, and use of the result.
  4. 4For numerical payroll, work out gross wages component by component, then subtract deductions to get net pay.
  5. 5Split total wages into direct labour (traceable to jobs) and indirect labour (idle time, supervision and so on).
  6. 6Reconcile attendance hours with booked hours and identify idle time.
  7. 7State the accounting entry or cost treatment if the question asks for it.
  8. 8Add a one-line control point, such as separation of duties or surprise checks.

Quickest way: Flow-and-compare method

When to use it: Use it for theory answers and MCQs on this topic when time is short.

  1. Remember the flow: Keep time, Book time, Pay, Cost. Attendance is for payment, booking is for costing.
  2. In MCQs, if an option links time keeping to job costing or time booking to attendance for wages, eliminate it.
  3. For numericals, write attendance hours, booked hours and the gap first. The gap is idle time.
  4. In written answers, use a short heading per point (purpose, record, department, control) so each line earns a step mark.
  5. Finish with one control remark. It often completes the marking scheme.

Common mistakes in Attendance and Payroll Procedure

  • Treating time keeping and time booking as the same thing.

    Both deal with time, so they look alike.

    Fix: Time keeping is attendance for wages. Time booking is job-wise allocation for costing.

  • Forgetting idle time when reconciling hours.

    Students match only the job hours.

    Fix: Always use: attendance hours = booked hours + idle time.

  • Deducting employer's PF contribution from the employee's wages.

    Students confuse employee and employer contributions.

    Fix: Only the employee's share is deducted. The employer's share is an extra cost of the employer.

  • Charging all wages to jobs as direct labour.

    The wage bill is seen as one figure.

    Fix: Analyse wages into direct and indirect labour. Idle time and supervision go to overheads.

  • Listing departments without their functions.

    Students memorise names only.

    Fix: Write one function for each department, such as payroll prepares the wage sheet and cashier pays.

Worked examples

Example 1

Distinguish between time keeping and time booking.

Show the solution
  1. Meaning: time keeping records the attendance of workers in the factory. Time booking records how the attended time was spent on jobs, processes or idle time.
  2. Purpose: time keeping supports wage calculation. Time booking supports cost ascertainment and control of labour.
  3. Records used: time keeping uses attendance registers, clock cards or biometric records. Time booking uses job cards, daily or weekly time sheets and work tickets.
  4. Maintained by: time keeping is done by the time keeping department, often at the gate. Time booking is done by workers and approved by supervisors, and processed by cost accounts.
  5. Control link: total booked time plus idle time must equal attended time. A difference shows errors or unrecorded idle time.

Answer: Time keeping records presence for payment of wages. Time booking records the use of time for charging labour cost to jobs, and the two are reconciled.

Example 2

A worker was present for 48 hours in a week. Job cards show 40 hours on Job A and 5 hours on Job B. Wage rate is ₹120 per hour. The employee's PF deduction is ₹300. Find the net wages, the labour cost charged to each job, and the idle time cost.

Show the solution
  1. Booked hours = 40 + 5 = 45 hours.
  2. Idle time = 48 − 45 = 3 hours.
  3. Gross wages = 48 × ₹120 = ₹5,760.
  4. Net wages = ₹5,760 − ₹300 = ₹5,460.
  5. Job A = 40 × ₹120 = ₹4,800.
  6. Job B = 5 × ₹120 = ₹600.
  7. Idle time cost = 3 × ₹120 = ₹360, charged to overheads.
  8. Check: ₹4,800 + ₹600 + ₹360 = ₹5,760, which equals gross wages.

Answer: Net wages are ₹5,460. Job A is charged ₹4,800, Job B ₹600, and idle time of ₹360 goes to overheads.

Exam tips

  • Theory questions often ask for the difference between time keeping and time booking. Use a point-wise comparison with at least four headings.
  • For payroll questions, show the gross-to-net working clearly. Step marks are given for each component.
  • Always cross-check that job cost plus idle cost equals gross wages.
  • In MCQs, read carefully whether the question asks about attendance, costing, or payment. This decides the answer.

Practice questions from Employee Cost and Direct Expenses

Attendance and Payroll Procedure in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Attendance and Payroll Procedure: frequently asked questions

What is the difference between time keeping and time booking?

Time keeping records attendance, meaning when a worker comes and leaves, and it is used for wages. Time booking records what the worker did during that time, and it is used for costing. Their totals are reconciled.

What are the functions of the time keeping department?

It records arrival and departure of workers, maintains attendance records, and records late coming and early leaving. It supplies attendance data to the payroll department. It also helps prevent ghost workers and proxy attendance.

Which departments are involved in payroll?

The personnel department, time keeping department, production supervisors, payroll department, cost accounts department, cashier and internal audit all play a part. Each handles a separate step to keep control strong.

How is payroll cost charged in cost accounting?

Gross wages are first debited to Wages Control Account. They are then analysed into direct labour charged to jobs or work in progress, and indirect labour charged to overheads.