GREEN PRODUCTS GARDENSUPPLY (STAND-ALONE PC-BASEDACCOUNTING SYSTEM)Green Products Garden (GPG) Supply sells and distributesa wide range of garden products and equipmentincluding organic fertilizers, premium flowerand grass seeds, organic pesticides, and gardenspreaders. GPG’s headquarters and warehouse islocated in Hopewell, Virginia. Their customers areprimarily small garden centers and landscape companiesin the Mid-Atlantic States. Sales are oncredit.GPG’s current information system includes manualprocedures supported by independent (nonnetworked)PCs in each department. Communicationsbetween departments is entirely through hardcopydocuments. Recently, GPG has been receivingcomplaints from customers and suppliers about billing,shipping, and payment errors. Managementbelieves that these complaints stem, in part, fromtheir antiquated computer system. You have beenhired to assess GPG’s procedures and internal controls.The following is a description of GPG’s revenue cycle. Sales Procedures The revenue cycle begins when a customer places anorder with a sales representative by phone or fax. Asales department employee enters the customer order into a standard sales order format using a word processorinstalled on a PC to produce: three sales ordercopies, a stock release document, a shipping notice,and a packing slip. The accounting departmentreceives a copy of the sales order, the warehousereceives the stock release and a copy of the salesorder, and the shipping department receives a shippingnotice and packing slip. The sales clerk files acopy of the sales order in the department.Upon receipt of the sales order, the accountingdepartment clerk manually prepares an invoice andsends it to the customer. Using data from the salesorder, the clerk then enters the sale in the departmentPC and records the sale in the sales journal and inthe AR subsidiary ledger. At the end of the day theclerk prepares a hard-copy sales journal voucher,which is sent to the general ledger department.Upon receipt of the sales order and stock releasethe warehouse clerk picks the products and sendsthem to the shipping department, along with thestock release. The warehouse clerk then updates theinventory records on the warehouse PC and files thesales order in the warehouse. At the end of the daythe clerk prepares a hard-copy inventory accountsummary and sends it to the general ledgerdepartment. The shipping department clerk receives a shippingnotice and packing slip from the sales department.The clerk files the shipping notice and holds openthe packing slip until he receives the stock releaseand products from the warehouse. Upon receipt ofthe stock release, the shipping clerk prepares the twocopies of a bill of lading using a word processor. Thebills of lading and the packing slip are sent with theproduct to the carrier. The clerk then files the stockrelease in the department.The general ledger clerk posts the journal voucherand inventory summary to the general ledger, whichis stored on the department PC, and the clerk thenfiles these documents in the general ledgerdepartment. in the department. At the end of the day the clerkprepares an AR summary on the PC. A hard copyof the summary is sent to the general ledgerdepartment.The mail room clerk sends the checks to the cashreceipts department, where a clerk endorses eachcheck with the words “For Deposit Only.” Next,the clerk reconciles the checks with the remittancelist and records the cash receipts in the cash receiptsjournal on the department PC. Finally, the clerkprepares a deposit slip and sends it and the checksto the bank.The general ledger clerk posts the accounts receivablesummary to general ledger and files it in thegeneral ledger department. Required a. Create a data flow diagram of the current system.b. Analyze the physical internal control weaknessesin the system.
GREEN PRODUCTS GARDEN
SUPPLY (STAND-ALONE PC-BASED
ACCOUNTING SYSTEM)
Green Products Garden (GPG) Supply sells and distributes
a wide range of garden products and equipment
including organic fertilizers, premium flower
and grass seeds, organic pesticides, and garden
spreaders. GPG’s headquarters and warehouse is
located in Hopewell, Virginia. Their customers are
primarily small garden centers and landscape companies
in the Mid-Atlantic States. Sales are on
credit.
GPG’s current information system includes manual
procedures supported by independent (nonnetworked)
PCs in each department. Communications
between departments is entirely through hardcopy
documents. Recently, GPG has been receiving
complaints from customers and suppliers about billing,
shipping, and payment errors. Management
believes that these complaints stem, in part, from
their antiquated computer system. You have been
hired to assess GPG’s procedures and internal controls.
The following is a description of GPG’s revenue cycle.
Sales Procedures
The revenue cycle begins when a customer places an
order with a sales representative by phone or fax. A
sales department employee enters the customer order into a standard sales order format using a word processor
installed on a PC to produce: three sales order
copies, a stock release document, a shipping notice,
and a packing slip. The accounting department
receives a copy of the sales order, the warehouse
receives the stock release and a copy of the sales
order, and the shipping department receives a shipping
notice and packing slip. The sales clerk files a
copy of the sales order in the department.
Upon receipt of the sales order, the accounting
department clerk manually prepares an invoice and
sends it to the customer. Using data from the sales
order, the clerk then enters the sale in the department
PC and records the sale in the sales journal and in
the AR subsidiary ledger. At the end of the day the
clerk prepares a hard-copy sales journal voucher,
which is sent to the general ledger department.
Upon receipt of the sales order and stock release
the warehouse clerk picks the products and sends
them to the shipping department, along with the
stock release. The warehouse clerk then updates the
inventory records on the warehouse PC and files the
sales order in the warehouse. At the end of the day
the clerk prepares a hard-copy inventory account
summary and sends it to the general ledger
department. The shipping department clerk receives a shipping
notice and packing slip from the sales department.
The clerk files the shipping notice and holds open
the packing slip until he receives the stock release
and products from the warehouse. Upon receipt of
the stock release, the shipping clerk prepares the two
copies of a bill of lading using a word processor. The
bills of lading and the packing slip are sent with the
product to the carrier. The clerk then files the stock
release in the department.
The general
and inventory summary to the general ledger, which
is stored on the department PC, and the clerk then
files these documents in the general ledger
department. in the department. At the end of the day the clerk
prepares an AR summary on the PC. A hard copy
of the summary is sent to the general ledger
department.
The mail room clerk sends the checks to the cash
receipts department, where a clerk endorses each
check with the words “For Deposit Only.” Next,
the clerk reconciles the checks with the remittance
list and records the cash receipts in the cash receipts
journal on the department PC. Finally, the clerk
prepares a deposit slip and sends it and the checks
to the bank.
The general ledger clerk posts the
summary to general ledger and files it in the
general ledger department.
Required
a. Create a data flow diagram of the current system.
b. Analyze the physical internal control weaknesses
in the system.
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