. Identify six strengths in the Jem Clothes system for controlling sales transactions.
1. Internal Controls-Revenue Cycle
Jem Clothes, Inc., is a 25-store chain concentrated in the
northeastern United States that sells ready-to-wear
clothes for young men and women. Each store has a fulltime
manager and an assistant manager, both of whom
are paid a salary. The cashiers and sales personnel are
typically young people working part-time who are paid
an hourly wage plus a commission based on sales volume.
The accompanying flowchart for Problem 5 depicts
the flow of a sales transaction through the organization
of a typical store. The company uses unsophisticated
cash registers with four-part sales invoices to record each
transaction. These sales invoices are used regardless of
the payment type (cash, check, or bank card).
On the sales floor, the salesperson manually records
his or her employee number and the transaction
(clothes, class, description, quantity, and unit price),
totals the sales invoice, calculates the discount when
appropriate, calculates the sales tax, and prepares the
grand total. The salesperson then gives the sales invoice
to the cashier, retaining one copy in the sales book.
The cashier reviews the invoice and inputs the sale.
The cash register mechanically validates the invoice,
automatically assigning a consecutive number to the
transaction. The cashier is also responsible for getting
credit approval on charge sales and approving sales paid
by check. The cashier gives one copy of the invoice to
the customer and retains the second copy as a store copy
and the third for a bank card, if a deposit is needed.
Returns are handled in exactly the reverse manner, with
the cashier issuing a return slip.
At the end of each day, the cashier sequentially
orders the sales invoices and takes cash register totals
for cash, bank card, and check sales, and cash and bank
card returns. These totals are reconciled by the assistant
manager to the cash register tapes, the total of the
Jem Clothes, Inc., is a 25-store chain concentrated in the
northeastern United States that sells ready-to-wear
clothes for young men and women. Each store has a fulltime
manager and an assistant manager, both of whom
are paid a salary. The cashiers and sales personnel are
typically young people working part-time who are paid
an hourly wage plus a commission based on sales volume.
The accompanying flowchart for Problem 5 depicts
the flow of a sales transaction through the organization
of a typical store. The company uses unsophisticated
cash registers with four-part sales invoices to record each
transaction. These sales invoices are used regardless of
the payment type (cash, check, or bank card).
On the sales floor, the salesperson manually records
his or her employee number and the transaction
(clothes, class, description, quantity, and unit price),
totals the sales invoice, calculates the discount when
appropriate, calculates the sales tax, and prepares the
grand total. The salesperson then gives the sales invoice
to the cashier, retaining one copy in the sales book.
The cashier reviews the invoice and inputs the sale.
The cash register mechanically validates the invoice,
automatically assigning a consecutive number to the
transaction. The cashier is also responsible for getting
credit approval on charge sales and approving sales paid
by check. The cashier gives one copy of the invoice to
the customer and retains the second copy as a store copy
and the third for a bank card, if a deposit is needed.
Returns are handled in exactly the reverse manner, with
the cashier issuing a return slip.
At the end of each day, the cashier sequentially
orders the sales invoices and takes cash register totals
for cash, bank card, and check sales, and cash and bank
card returns. These totals are reconciled by the assistant
manager to the cash register tapes, the total of the consecutively
numbered sales invoices, and the return
slips. The assistant manager prepares a daily reconciliation
report for the store manager’s review.
The manager reviews cash, check, and bank card sales
and then prepares the daily bank deposit (bank card sales
invoices are included in the deposit). The manager makes
the deposit at the bank and files the validated deposit slip.
The cash register tapes, sales invoices, and return slips
are forwarded daily to the central data processing department
at corporate headquarters for processing. The data
processing department returns a weekly sales and commission
activity report to the manager for review.
Required
a. Identify six strengths in the Jem Clothes system for
controlling sales transactions.
b. For each strength identified, explain what problem(s)
Jem Clothes has avoided by incorporating the strength
in the system for controlling sales transactions.
Use the following format in preparing your answer.
1. Strength
2. Problem(s) Avoided
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