Page 242 - Accounting Information Systems

CHAPT E R 4 The Revenue Cycle 213

much interdepartmental communication continued to be hard-copy invoice, which is immediately mailed to the
via hard-copy documents. customer. After mailing the invoice, the clerk goes to
Revenue increased sharply during the four years after his terminal and updates the accounts receivable subsid-
the implementation of the computer system. In spite of iary ledger and general ledger from the information on
this, Roberts had some questions about the quality of the stock release. After the records are updated, the
processes, as many of the subsidiary accounts did not clerk files the stock release and shipping notice in the
match the general ledger control accounts. This didn’t accounts receivable department.
prove to be a material problem, however, until recently Cash Receipts Procedures
when the computers began listing supplies on hand that
were not actually on the shelves. This created problems Customer payments come directly to the general mail
as customers became frustrated by stock-outs. Roberts room along with other mail items. The mail clerk sorts
knew something was wrong, but he couldn’t put his fin- through the mail, opens the customer payment enve-
ger on it. lope, removes the customer’s check and remittance
You have been hired by Roberts to evaluate Bait ’n advice, and reconciles the two documents. To control
Reel’s processes and internal controls and make recom- the checks and remittance advices the clerk manually
mendations for improvement. Bait ’n Reel’s revenue prepares two hard copies of a remittance list. He sends
cycle relating to the credit-based wholesale portion of one copy to the accounts receivable department along
the business is described in the following paragraphs. with the corresponding remittance advices. The other
copy of the remittance list accompanies the checks to
Revenue Cycle the cash receipts department.
Sales Order Processing Procedures Once the checks and remittance list arrive in the cash
receipts department, the treasurer reconciles the docu-
Wholesale customer orders are mailed or faxed to the
ments, signs the check, and manually prepares three
sales department. When the order is received the sales
hard copies of the deposit slip. He then updates the cash
clerk checks the customer’s creditworthiness from a
receipts journal and the general ledger on his computer
computer terminal. After the customer’s credit is veri-
terminal. Next the treasurer sends checks and two cop-
fied, the clerk then keys in the sales orders into his com-
ies of the deposit slip are sent to the bank. Finally, he
puter terminal. A digital copy of the order is distributed
files the third copy of the deposit slip and the remittance
to the warehouse and the shipping department terminals
in the department.
for further processing. The computer system automati-
When the accounts receivable clerk receives the
cally records the sale in the sales journal. Finally, the
remittance list and remittance advices from the mail
clerk files the hard copy of the customer order in the
room, he reconciles the two documents. Then, from his
sales department.
terminal, he updates the accounts receivable subsidiary
Prompted by receipt of the digital sales order, the
ledger and the general ledger. Finally, the two docu-
warehouse manager prints out two copies of it: the stock
ments are filed in the department.
release and a shipping notice. Using the stock release
copy, the warehouse clerk picks the selected goods from Required
the shelves. The goods, accompanied by both docu- a. Create a data flow diagram of the current system.
ments, are sent to the shipping department. The man- b. Create a system flowchart of the existing system.
ager then updates the inventory subsidiary ledger and c. Analyze the internal control weaknesses in the sys-
the general ledger from his computer terminal. tem. Model your response according to the six cate-
Once the shipping clerk receives the goods, the stock gories of physical control activities specified in SAS
release, and the shipping notice, he matches them to the 78/COSO.
corresponding digital sales order from his terminal. d. Prepare a system flowchart of a redesigned com-
Assuming everything matches, he prints out three hard puter-based system that resolves the control weak-
copies of the bill of lading and a packing slip. Two of nesses you identified. Explain your solution.
the bill of lading copies and the packing slip are sent,
along with the goods, to the carrier. The stock release 8. Green Mountain Coffee Roasters, Inc.
copy and the shipping notice are sent to the accounts re- (Manual Procedures and Stand-Alone PCs)
ceivable department. The third bill of lading copy is (Prepared by Ronica Sharma, Lehigh University)
filed in the shipping department. Green Mountain Coffee Roasters, Inc., was founded in
When the accounts receivable clerk receives the 1981 and began as a small cafe in Waitsfield, Vermont,
stock release and shipping notice he manually creates a roasting and serving premium coffee on the premises.