Chapter 5 The Expenditure Cycle Part 1: Purchases and Cash Disbursements Procedures
Accounting Information Systems, 5th edition James A. Hall
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Objectives for Chapter 5
• Tasks performed during purchases and cash disbursement processes • Departments involved in purchases and cash disbursement activities and the flow of these transactions through the organization • Documents, journals, and accounts that provide audit trails, promote the maintenance of records, and support decision making and financial reporting • Risks associated with purchase and cash disbursements activities
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performs routine accounting tasks. • Purchasing - a computer program identifies inventory requirements • The following methods are used for authorizing and ordering inventories:
– the system prepares POs and sends them to Purchases for review, signing, and distributing – the system distributes POs directly to the vendors and internal users, bypassing Purchases – the system uses electronic data interchange (EDI) and electronically places the order without POs
Computer-Based Purchases
• Other tasks performed automatically by the computer: – updates the inventory subsidiary file from the receiving
The company instead needs to change to a first in First out approach to keep inventory moving on shelves and develop a new enterprise resource system (Phillips, 2008). In addition to this change which would directly affect the floor employees since it is labor intensive and involves constant moving of product, the company would implement a sales tracking portable device that directly connects the store with the ecommerce site and the distributors. Under this method, store clerks can carry the portable tracker on their person and be able to directly engage with the customer by locating products faster as well as order products directly with the consumer if the product is out of stock or not carried at that location. In addition, the sales tracker will be an inventory tracker with a minimum quantity set with distributors that can automatically order additional product to keep stock or for the company to ship excess material at one location to another location in
Operations is separate from the accounting department. The employees in operations handle promoting the products. Also, Operations is in charge of making the products. The company’s accounting system is handled in-house by the cashier and the bookkeeper and by the accounting firm hired to handle the businesses’ financial reporting. The cashier handles all sales through the register. The register is balanced against the drawer each night by the bookkeeper and a deposit made the same day. The bookkeeper gives the accountant the drawer receipts and bank receipts for journal entries and later reports. The accountant checks all cash received and payments made against bank statements and collected paperwork. There is not a single person assigned to do all duties.
SMW’s current accounting information system is a cutting edge relational database system through Microsoft Access with internal controls set to adequately prevent and detect errors and fraud. This relational database system tracks sales orders, shipments, accounts receivable, cash receipts, purchases, accounts payable, cash disbursements, inventory levels and other relevant accounting information. The system’s output is compliant with Generally Accepted Accounting Principles (GAAP). The database processes currently in use at SMW are described below.
This assignment reviews basic accounting entries for a series of transactions, emphasizes the integration of journals to the financial statements, and introduces students to these journal entries in SAP ERP
The strength in the existing information system is that the modules that are installed reduce the manual data entry, thus eliminating unnecessary errors to the information, by allowing the modules to share information provided by the point-of sale machines. The POS system itself is a major benefit to the IT system as a whole, due to the number of transactions it is
Finally, the orders process systematically provides
Controls purchases and inventory by meeting with account representatives; negotiating prices and contracts; developing preferred supplier lists; reviewing and evaluating usage reports; analyzing variances; taking corrective actions.
ØChecking financial documents relating to purchasing of goods - making sure that goods have been delivered from people who have sent invoices.
The accounts payable system would include vendor master records. The user would be able to store information about the individual vendors to include contact information, order from and pay to addresses, vendor taxes, 1099 information, and vendor notes. The vendor master could also hold invoice information for them, if the same expense accounts were always used for every item purchased from that particular vendor. With this feature enabled, the user would be able to load information onto a new invoice or purchase order based on the vendor master file, thus lessening the data entry and ensuring greater accuracy in the system. If a purchase order system is being used, there would be an area for products to be stored. Within the product module, specific data about each item could be stored to include item details and price so that detailed and itemized purchase orders could be entered into the system. This would also be directly linked to the inventory system, so that when an item is purchased an received in, it would automatically update the inventory, much as when an item was sold, the inventory would automatically be decreased upon shipment to the customer.
point of sale system. The POS system is a perpetual inventory counting method that electronically records items immediately upon their point of sale (Stevenson, 2015, pg. 552). In other words, as a cashier scans a customer 's groceries, each scanned item is automatically recorded in the system and deducted from the store’s inventory. Implementing a point of sale would benefit a business’s inventory management function in several ways. First, the POS system will provide managers with a continuous flow of updated information (Stevenson, 2015, pg. 552). As a result, the information will provide more accuracy when used for sales forecasts and analysis, which substantially affect inventory decisions. Continuously, this inventory system would also allow greater flexibility in the sense that it can be wirelessly linked to the main company’s inventory system, creating a network of the company’s inventory systems. The POS system is capable of tracking many operations at once and can be modified according to management’s needs (MacCarthy, n.d.). This flexibility would undoubtedly benefit a large company like Wegman’s with many store locations. Lastly, the system is able to help businesses maintain a high level of customer service. Because the system gives customers a receipt with the price and quantity of each item purchased, the customer is able to see exactly what he or she purchased. This practice
Assuming that Wine Depot is a publicly traded company held under the provisions of Sarbanes- Oxley Act as directed by section 404 of the act adopting the rules is subject to reporting requirements of SEC to include in their annual reports a report of management on the company's internal control over their financial reporting. Management responsibilities are adopting accounting policies and establishing and maintaining internal controls system that will process, record and report transactions consistent with management assertions embodied in the financial statements. Internal audit is the role
Once this process is finished it is then up to the store manager to maintain general control. They must then oversee stock when it arrives, handle communications with headquarters and they must use a paper and clipboard system to track employee contact information, cash deposit logs and the arrival of goods.
The aim of this report is to discuss the various methods of reducing computer fraud and to find out whether the computer security measures is necessary. In the main body of this report discuss about whether the
Ahmed, A., McAnally, M., Rasmussen, S. & Weaver, C. (2010). How costly is the sarbanes oxley act? Evidence on the effects of the act on corporate profitability. Journal of Corporate Finance, 16, 352-369.