icides, and garden spreaders. GPNS’s customers are primarily small garden centers and landscape companies in the Mid-Atlantic States. Sales are on credit. GPNS’s current information system includes manual procedures supported by independent (nonnetworked) PCs in each department. Communications between departments is entirely through hard-copy documents. Recently, GPNS 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 GPNS’s procedures and internal controls. The following is a description of GPNS’s revenue cycle. Sales Procedures The revenue cycle begins when a customer places an order
2. GREEN POND NURSERY (STAND-ALONE PC-BASED ACCOUNTING SYSTEM)
Green Pond Nursery Supply (GPNS) is a garden center wholesaler in eastern Pennsylvania that sells and distributes a wide range of garden products and equipment including organic fertilizers, premium flower and grass seeds, organic pesticides, and garden spreaders. GPNS’s customers
are primarily small garden centers and landscape companies in the Mid-Atlantic States. Sales are on credit.
GPNS’s current information system includes manual procedures supported by independent (nonnetworked) PCs in each department. Communications between departments is entirely through hard-copy documents. Recently, GPNS 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 GPNS’s procedures and internal controls. The following is a description of GPNS’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 final sales order
copy is sent to the inventory control 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 details of 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 of 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 internal inventory stock records on the warehouse PC and files the sales order in the arehouse. 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 eceives 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. Upon receipt of the sales order copy, the inventory control clerk updates the inventory subsidiary ledger and files the sales order in the department. At the end
of the day, the clerk prepares a hard-copy inventory account summary and sends it to the general ledger department. The general
documents in the general ledger department.
Cash Receipts Procedure
Mail room employees open cash receipts from customers and reconcile the amounts on the checks and remittance advices and send remittance advices to the accounting department, where a clerk records each remittance advice on a remittance list. The remittance list is then sent to the cash receipts department. Using the remittance advices, the accounting clerk updates the customer
a. Analyze the physical internal control weaknesses in the system and describe the risks associated with these control weaknesses.
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