Page 240 - Accounting Information Systems

CHAPT E R 4 The Revenue Cycle 211

orders go through a sales representative. The orders are The clerk then manually prepares a hard-copy deposit
faxed, mailed, or delivered in person to the sales depart- slip and sends the checks and deposit slip to the bank.
ment by the representative at the end of each day. At the end of the day the clerk prints a cash receipt jour-
In the sales department a sales clerk receives the nal voucher from the department PC and sends it to the
orders and manually prepares a three-part hard-copy general ledger department.
sales order. The clerk sends one sales order copy to the The general ledger clerk receives the sales journal
billing department, the stock release copy to the ware- voucher, cash receipts journal voucher, the accounts re-
house, and the packing slip copy to the shipping depart- ceivable summary, and the inventory summary. The
ment. The original customer order is filed in the sales clerk reconciles these documents and posts to the appro-
department. priate control accounts in the digital general ledger from
Upon receipt of the sales order, the billing clerk the department PC. Finally, the general ledger clerk files
records the sale in the digital sales journal using the the summaries and journal vouchers in the department.
department PC. The clerk then prints a hard-copy
invoice, which is sent to the customer. Next, the clerk Required
sends the sales order to the accounts receivable depart- a. Create a data flow diagram of the current system.
ment for further processing. At the end of the day the b. Create a system flowchart of the existing system.
clerk prints a hard-copy sales journal voucher from the c. Identify the internal control weaknesses in the sys-
PC and sends it to the general ledger. tem. Model your response according to the six cate-
The warehousing clerk uses the stock release copy to gories of physical control activities specified in SAS
pick the goods from the shelves and then updates the 78/COSO.
digital inventory subsidiary ledger using the warehouse d. Prepare a system flowchart of a redesigned com-
PC. Next the clerk sends the good and the stock release puter-based system that resolves the control weak-
to the shipping department. At the end of the business nesses you identified. Explain your solution.
day the clerk prints an inventory summary from the PC
and sends it to the general ledger department. 6. Premier Sports Memorabilia
The shipping clerk reconciles the packing slip
sent from the sales department with the stock release (Networks Computer System with Manual
and goods received from the warehouse. If all is correct, Procedures)
the clerk manually prepares a hard copy bill of lading. (Prepared by Chris Polchinski, Lehigh University)
He then attaches the packing slip and bill of lading to Premier Sports Memorabilia is a medium-sized, rapidly
the goods, which go to the carrier for delivery to the growing online and catalogue-based retailer centered in
customer. Finally, the clerk files the stock release in the Brooklyn, New York. The company was founded in
department. 1990 and specializes in providing its customers with
The accounts receivable clerk receives the sales authentic yet affordable sports memorabilia from their
order from the billing department and uses it to update favorite players and teams, past and present. Tradition-
the digital AR subledger from the department PC. The ally the company’s customers were located in the north-
sales order is then filed in the department. At the end of east region of the United States. Recently, however,
the day the clerk prints an AR summary from the PC Premier launched a successful ad campaign to expand
and sends it to the general ledger department. its customer base. This has increased sales, which has in
Customer payments come into the mail room where turn placed a strain on the organization’s operational
mail clerks open the envelopes and send the checks and resources. The company currently employs 205
remittance advices to the accounts payable department. employees who are spread out among its three ware-
The accounts receivable clerk reconciles the remittance houses and two offices in the tri-state area.
advice with the check and updates the customer’s account The firm purchases from a large number of manufac-
in the digital accounts receivable subsidiary ledger. The turers and memorabilia dealers around the country and
clerk then files the remittance advices in the department is always looking for additional contacts that have new
and sends the checks to the cash receipts department. As or rare items to offer.
previously mentioned, at the end of the day the accounts The company has a computer network installed,
receivable clerk prints a hard-copy accounts receivable which, until recently, has served it well. The firm is now,
summary from the department PC and sends it to the gen- however, experiencing operational inefficiencies and
eral ledger department. accounting errors. Your firm has been hired to evaluate
The cash receipt clerk receives the checks and Premier’s business processes and internal controls. The
records the payments in the digital cash receipts journal. revenue cycle is described in the following paragraphs.