Page 241 - Accounting Information Systems
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212     PART II       Transaction Cycles and Business Processes

                 Revenue Cycle Procedures                          Finally, at the end of each day the system prepares
                                                                batch totals of all sales and cash receipts transactions
                 Premier’s revenue process is initiated when a customer
                                                                and posts them automatically to the control accounts in
                 places an order either online, by mail, or through a tele-
                                                                the digital general ledger.
                 phone representative. The order is then manually
                 entered into the computer system for mail or telephone
                 orders, while online orders are automatically entered  Required
                 upon arrival. When the customer order is entered, the  a. Create a data flow diagram of the current system.
                 system automatically performs an online credit check. If  b. Create a system flowchart of the existing system.
                 credit is approved, the sales process continues. If credit  c. Analyze the internal control weaknesses in the sys-
                 is denied, the process ends and the customer is notified  tem. Model your response according to the six cate-
                 of the automatic rejection.                       gories of physical control activities specified in SAS
                   For approved order, the clerk manually prepares four  78/COSO.
                 hard copies of each sales order. One copy is entered into  d. Prepare a system flowchart of a redesigned com-
                 the terminal in the sales department and filed. The  puter-based system that resolves the control weak-
                 approved sale is automatically posted to the digital sales  nesses you identified. Explain your solution.
                 journal. A second copy is sent to the billing department,
                 where it is further processed. A third copy is sent to  7. Bait ’n Reel Superstore
                 the warehouse. A final copy is sent to the customer as  (Combination Networked
                 a receipt stating that the order has been received and
                 processed.                                     Computers and Manual System)
                   At the warehouse, the sales order is used as a stock  (Prepared by Matt Wisser, Lehigh University)
                 release, authorizing a warehouse clerk to physically  Bait ’n Reel was established in 1983 by Jamie Roberts,
                 pick the requested items from the shelves. The clerk  an avid fisherman and environmentalist. Growing up in
                 then manually prepares a bill of lading and packing slip,  Pennsylvania’s Pocono Mountains region, Roberts was
                 which accompany the goods to the carrier. The ware-  lucky enough to have a large lake right down the road,
                 house clerk then accesses the computer terminal and  where he found himself fishing throughout the year.
                 creates a digital shipping notice for the billing depart-  Unfortunately, he had to drive more than 15 miles to
                 ment. Finally, the clerk files the stock release hard copy  purchase his fishing supplies, such as lines, hooks, and
                 in the warehouse.                              bait, among other things. Throughout his early adult-
                   From a terminal, the billing department clerk recon-  hood, Roberts frequently overheard other fishermen
                 ciles the hard-copy sales order and the digital shipping  vocalizing their displeasure at not having a local fishing
                 notice and prints two hard copies of an invoice. One  store to serve their needs. Because of this, Roberts
                 copy is sent to the customer as a bill and the other is  vowed to himself that he would open his own store if he
                 sent to the accounts receivable department. The clerk  could ever save up enough money.
                 then files the sales order copy in the department.  By 1983, he had sufficient funds and the opportunity
                   Upon receipt of the hard-copy invoice, the accounts  arose when a local grocery store went up for sale. He
                 receivable clerk creates a digital record in the accounts  purchased the building and converted it into the ‘‘Bait
                 receivable subsidiary ledger from his terminal. The  ’n Reel’’ fishing store. His early business involved cash-
                 clerk then files the invoice copy in the department.  only transactions with local fishermen. By the mid-
                   Customer payments and remittance advices come  1990s, however, the building expanded into a superstore
                 into the mail room. A clerk separates the documents  that sold a wide range of sporting products and camping
                 and sends the remittance advice to accounts receivable  gear. People from all over the county shopped at Bait ’n
                 and the checks to the cash receipts department.  Reel as Roberts increased his advertising efforts,
                   Upon receipt of the remittance advice, the accounts  emphasizing his ability to provide excellent service and
                 receivable clerk accesses the customer’s account in the  the wide range of products. Roberts moved away from a
                 accounts receivable subsidiary ledger from a terminal  cash-only business and began offering store credit cards
                 and adjusts the balance accordingly. The clerk files the  to consumers and became a regional wholesaler to many
                 remittance advices in the department.          smaller sporting goods stores.
                   The cash receipts clerk receives the checks and posts  With the help of a friend, Roberts also installed a
                 them to the cash receipts journal from her terminal. The  computer network. Although these computers did help
                 clerk then manually prepares a hard-copy deposit slip  to automate the company’s business processes and
                 and sends it with the cash to the bank.        facilitated the sharing of data between departments,
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