Page 200 - Accounting Information Systems

CHAPT E R 4 The Revenue Cycle 171

to accommodate both teaching styles. Following is a review of manual systems. You may, however, with-
out loss of technical content, bypass this material and go directly to computer-based accounting systems
located on page 177.

Manual Systems

The purpose of this section is to support the system concepts presented in the previous section with mod-
els depicting people, organizational units, and physical documents and files. This section should help you
envision the segregation of duties and independent verifications, which are essential to effective internal
control regardless of the technology in place. In addition, we highlight inefficiencies intrinsic to manual
systems, which gave rise to modern systems using improved technologies.

SALES ORDER PROCESSING
The system flowchart in Figure 4-12 shows the procedures and the documents typical to a manual sales
order system. In manual systems, maintaining physical files of source documents is critical to the audit
trail. As we walk through the flowchart, notice that in each department, after completion of the assigned
task, one or more documents are filed as evidence that the task was completed.

Sales Department
The sales process begins with a customer contacting the sales department by telephone, mail, or in per-
son. The sales department records the essential details on a sales order. This information will later trigger
many tasks, but for the moment is filed pending credit approval.

Credit Department Approval
To provide independence to the credit authorization process, the credit department is organizationally
and physically segregated from the sales department. When credit is approved, the sales department clerk
pulls the various copies of the sales orders from the pending file and releases them to the billing, ware-
house, and shipping departments. The customer order and credit approval are then placed in the open
order file.
Warehouse Procedures
The next step is to ship the merchandise, which should be done as soon after credit approval as possible.
The warehouse clerk receives the stock release copy of the sales order and uses this to locate the inven-
tory. The inventory and stock release are then sent to the shipping department. Finally, the warehouse
clerk records the inventory reduction in the stock records.
The Shipping Department

The shipping clerk reconciles the products received from the warehouse with the shipping notice copy of
the sales order received earlier. As discussed previously, this reconciliation is an important control point,
which ensures that the firm sends the correct products and quantities to the customer. When the order is
correct, a bill of lading is prepared, and the products are packaged and shipped via common carrier to the
customer. The clerk then enters the transaction into the shipping log and sends the shipping notice and
stock release to the billing department.

The Billing Department
The shipping notice is proof that the product has been shipped and is the trigger document that initiates
the billing process. Upon receipt of the shipping notice and stock release, the billing clerk compiles the
relevant facts about the transaction (product prices, handling charges, freight, taxes, and discount terms)
and bills the customer. The billing clerk then enters the transaction into the sales journal and distributes
documents to the AR and inventory control departments. Periodically, the clerk summarizes all transac-
tions into a journal voucher and sends this to the general ledger department.