Page 236 - Accounting Information Systems

CHAPT E R 4 The Revenue Cycle 207

the local branch of the bank two blocks away from the the clerk then enters the sale in the department PC and
market. records the sale in the sales journal and in the AR sub-
sidiary ledger. At the end of the day the clerk prepares a
Required hard-copy sales journal voucher, which is sent to the
a. Create a data flow diagram of the current system. general ledger department.
b. Create a system flowchart of the existing system. The warehouse receives a copy of the sales order and
stock release. A warehouse employee picks the product
c. Analyze the internal control weaknesses in the
system. Model your response according to the and sends it to the shipping department along with the
six categories of physical control activities stock release. A warehouse clerk updates the inventory
specified in SAS 78/COSO. records on the warehouse PC and files the sales order in
the warehouse. At the end of the day the clerk prepares
a hard copy AR account summary and sends it to the
2. Spice Is Right Imports (Stand-Alone general ledger department.
PC-Based Accounting System) The shipping department receives a shipping notice
Spice Is Right was established in 1990 in Boston where and packing slip from the sales department. The ship-
they began importing exotic spices and cooking sauces ping notice is filed. Upon receipt of the stock release,
from India and China. They distribute these specialty the shipping clerk prepares the two copies of a bill of
foods to ethnic food shops, cafes, and restaurants across lading using a word processor. The bills of lading and
the country. In addition to their Boston headquarters the packing slip are sent with the product to the carrier.
and warehouse, the company has a distribution center in The clerk then files the stock release in the department.
Elizabeth, New Jersey. Spice Is Right currently employs The general ledger clerk posts the journal voucher and
over 100 people, has dozens of suppliers, and trades in inventory summary to the general ledger, which is stored
hundreds of ethnic and exotic foods from all over the on the department PC, the clerk then files these docu-
world. ments in the general ledger department.
Recently Spice Is Right has been receiving com-
plaints from customers and suppliers about billing, ship- Cash Receipts Procedure
ping, and payment errors. Management believes that
these complaints stem, in part, from an antiquated com- The mail room has five employees who open and sort
puter system. Spice’s current information system all mail. Each employee has two bins, one for remit-
includes manual procedures supported by independent tance advices and one for checks. Before separating the
(non-networked) PCs in each department, which cannot two documents and putting them in their respective
communicate with each other. Document flow between bins, the clerks reconcile the amounts on the checks and
the departments is entirely in hard-copy form. The fol- remittance advices.
lowing is a description of their revenue cycle at the Bos- The remittance advices are sent to the accounting
ton headquarters office. department where a clerk records each remittance
advice on a remittance list. The remittance list is then
sent to the cash receipts department. Using the remit-
Sales Procedures tance advices, the accounting clerk updates the cus-
Spice Is Right’s revenue cycle begins when a customer tomer accounts receivable on the department PC and
places an order with a sales representative by phone or files the advice in the department. At the end of the day
fax. A sales department employee enters the customer the clerk prepares an account summery on the PC. A
order into a standard sales order format using a word hard copy of the summary is sent to the general ledger
processor installed on a PC to produces six documents: department.
three copies of sales orders, a stock release, a shipping The mail room clerk sends the checks to the cash
notice, and a packing slip. The accounting department receipts department, where a clerk endorses each
receives a copy of the sales order, the warehouse check with the words ‘‘For Deposit Only.’’ Next the clerk
receives the stock release and a copy of the sales order, reconciles the checks with the remittance list and records
and the shipping department receives a shipping notice the cash receipts in the cash receipts journal on the
and packing slip. The sales clerk files a copy of the department PC. Finally, the clerk prepares a deposit slip
sales order in the department. and sends it and the checks to the bank.
Upon receipt of the sales order, the accounting The general ledger posts the accounts receivable
department clerk manually prepares an invoice and summary to general ledger and files it in the general
sends it to the customer. Using data from the sales order ledger department.