Page 288 - Accounting Information Systems

C H A P TER 5 The Expenditure Cycle Part I: Purchases and Cash Disbursements Procedures 259

mail room, sales orders are passed to the sales personnel. requisition list of items that need to be replenished. The
GMD Consulting looked further into mail room proce- list is sent to the purchasing department and used to man-
dures and operations and made some interesting findings. ually prepare hard-copy purchase orders. Two purchase
Jonathan, the supervisor of the mail room, explained to orders are sent to the vendor, and one is filed in the
GMD Consulting that there are so many orders (due to department along with the requisition list.
the rapid growth of the business and the 6,000-plus cus- When the vendor receives the order from purchasing,
tomers) that they have trouble sorting through all of the it ships the goods along with a copy of New Born’s
mail and getting it to the appropriate department. Jonathan original purchase order and a formal packing slip to the
explained that people in the mail room have been working receiving department. There the purchase order and
considerable overtime to process the mail, but they still packing slip are used to assist the receiving clerk in
frequently fall behind. In talking with Suzanne, a veteran manually preparing three hard copies of a receiving
salesperson for New Born Candy Company, it was dis- report. The purchase order and packing slip are then
covered that sales orders often take several days to get filed in the department. One copy of the receiving report
from the mail room to the sales department. She also told is sent to the purchasing department, where it is filed;
GMD Consulting that during busy times, it is very diffi- another copy is sent to accounts payable, where it is
cult to process all of the daily orders. filed until the vendor’s invoice arrives. The third copy
After receiving the customer order, the sales person- accompanies the good to the stores area.
nel manually prepare several copies of a sales order and When accounts payable receives the vendor’s invoice,
perform a credit check. When completed, the credit the accounts payable clerk matches it to the filed copy of
copy of the sales order is filed along with the customer the receiving report. The clerk then manually prepares a
order. The billing copy of the sales order is sent to the cash disbursement voucher to authorize payment and
computer department, and the stock release, packing files the invoice in the accounts payable department. The
slip, shipping notice, and file copy are sent to the ware- disbursement voucher is sent to the computer depart-
house. The goods are picked and sent to shipping along ment, where it is used in a keystroke operation to create
with the supporting documents. Shipping then recon- an accounts payable record. Once the digital accounts
ciles the file copy, shipping notice, packing slip, and payable is created the hard-copy cash disbursement
stock release with the goods. The shipping clerk signs voucher is destroyed in the computer center.
the shipping notice, and manually prepares three hard At the end of the day the accounts payable clerk pre-
copies of a bill of lading. Two copies of the bill of lad- pares a hard-copy journal voucher that is sent to the
ing, along with a packing slip, are given to the carrier computer department and used to update the general
for shipment to the customer. The file copy, stock ledger computer file. The journal voucher is filed in the
release copy, and a copy of the bill of lading are placed computer department.
in a shipping file. It is important to note that in examin-
ing the shipping department, it was found that they have Cash Disbursements Process
been receiving an increasing number of complaints
At the end of the week the cash disbursement system (a
from customers. Some key documents (found on pages
batch computer application) scans the accounts payable
260–263) shed some light on this issue.
file for items that need to be paid. The system closes the
The billing copy that was generated by the sales
open accounts payable record and adds a new record to
department is now in the computer department. Here, via
the check register to record the payment. The system
a keystroke operation, a clerk produces a digital sales
then prints the check, which is sent to the vendor,
order file. The sales order file is then processed by a batch
and prepares a cash disbursement report that goes to
edit program to identify errors. After the edit run, the
management.
batch sales application posts the sales orders to the sales
journal, accounts receivable subsidiary file, the inventory Required
subsidiary file, and the control accounts in the general a. Create data flow diagrams of the revenue and
ledger file. The system then prepares various management expenditure procedures.
reports including sales and shipping reports. Also, the b. Create system flowcharts of the current revenue
customer invoice is printed and sent to the customer. and expenditure procedures.
c. Analyze the internal control and operational
Expenditure Cycle Description weaknesses in the system.
Twice each week, a computer program in New Born d. Prepare system flowcharts of a redesigned system
Candy Company’s computer department reviews the dig- that resolves the control and operational weaknesses
ital inventory file. From this review the computer prints a you have identified. Explain your solution.