When the goods arrive from the vendor the ware-house clerk reviews the packing slip, restocks the ware-house shelves, and updates the stock records from the Purchasing ProcessPC. At the end of the day the clerk prepares a hard-copy The purchasing agent monitors the inventory levelspurchases summary from the PC and sends it to the by reviewing the inventory subsidiary ledger fromtreasury clerk for posting to general ledger.The vendor's invoice is sent to the accounting clerk. to be replenished and selects a supplier. He then entersShe examines it for correctness and files it in a tempo- this information into the computer terminal to createrary file until it is due to be paid. The clerk reviews the a digital purchase order. The computer teminal gener-temporary file daily looking for invoices to be paid. ates three hard copies of the purchase order. The pur-Using the accounting department PC, the clerk prints a chasing agent sends one copy to the supplier, one copycheck and records it in the digital check register. She to the accounts payable department where it is filedthen files the invoice and mails the check to the supplier. temporarily, and files the third copy in the purchasingAt the end of the day she prints a hard-copy journalvoucher from the PC, which summarizes the day's cashdisbursements, and sends it to the treasury clerk for post- ment inspects and verifies them using the packing slip,ing to the general ledger.Using the department PC, the treasury clerk posts the manually prepares two hard copies of a receiving report.journal voucher and purchases summary information to One copy accompanies the goods to the warehouse forthe appropriate general ledger accounts.his department computer. He decides which items needdepartment.When the goods are received, the receiving depart-which is attached to the goods. The receiving clerkstorage. The receiving clerk sends the second copy tothe purchasing agent who uses it to update the inventorysubsidiary ledger and to close the open purchase order.The purchase agent then files the receiving report in thedepartment.Requireda. Create a data flow diagram of the current system.b. Create a system flowchart of the current system.c. Analyze the intemal control weaknesses in thesystem. Model your response according to the sixcategories of physical control activities specified inSAS 78/COSO.Accounts Payable and Cash 1. Smith's Market (Small Business CashSales Accounting System)In 1989 Robert Smith opened a small fruit and vegeta-ble market in Bethlehem, Pennsylvania. Originally chases of products for resale have continued to rise.Smith sold only produce grown on his family fam Although the company does not prepare auditedand orchard. As the market's popularity grew, however, financial statements, Robert Smith has commissionedhe added bread, canned goods, fresh meats, and a lim- your public accounting fim to assess his company'sited supply of frozen goods. Today Smith's Market is a sales procedures and internal controls. Smith's Marketfull-range farmers' market with a strong local customer expenditure cycle procedures are described below:base. Indeed, the market's reputation for low prices andhigh quality draws customers from other Pennsylvania Expenditure Cyclecities and even from the neighboring state of New The expenditure cycle begins in the warehouse adjacentJersey. Currently Smith's has 40 employees. These to the market where Smith's keeps their inventory ofinclude sales staff, shelf stockers, fam laborers, shiftsupervisors, and clerical staff. Recently Smith hasnoticed a decline in profits and sales, while his pur-250PART IITransaction Cycles and Business Processesnonperishable goods such as canned goods and paper Elizabeth, New Jersey. Spice Is Right currently employsproducts. They also maintain a one-day inventory of pro- over 100 people, has dozens of suppliers, and trades induce and other perishable products in the warehouse hundreds of ethnic and exotic foods from all over thewhere they can quickly restock the shelves when neces- world.sary. At close of business each evening the warehouseRecently, Spice Is Right has been receiving com-clerk reviews the market shelves for items that need to be plaints from customers and suppliers about billing, ship-replenished. The clerk restocks the shelves and adjusts ping, and payment errors. Management believes thatthe digital stock records accordingly from the warehouse these complaints stem, in part, from an antiquated com-PC. At this time the clerk takes note of what needs to be puter system. Spice's current information systemreordered from the suppliers and prints purchase orders includes manual procedures supported by independentfrom the PC. Depending upon the nature of the product (non-networked) PC in each department, which cannotand urgency of the need, the clerk either mails the pur- communicate with each other. Document flows betweenchase order to the supplier or orders by phone. Phoneorders are followed up by faxing the purchase order tothe supplier.the departments is entirely in hard-copy form. The fol-lowing is a description of their expenditure cycle at theBoston headquarters office.

Flowchart: A flowchart can be defined as a diagram which characterizes the process, workflow or an…

mines it for correctness and files it in a temp0- until it is due to be paid. The clerk reviews the ry file daily looking for invoices to be paid. ne accounting department PC, the clerk prints a nd records it in the digital check register. She

mines it for correctness and files it in a temp0- until it is due to be paid. The clerk reviews the ry file daily looking for invoices to be paid. ne accounting department PC, the clerk prints a nd records it in the digital check register. She

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter18: Accounting Periods And Methods

Section: Chapter Questions

Problem 1RP

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SMITH'S MARKET (SMALL BUSINESS CASH SALES ACCOUNTING SYSTEM) In 1989, Robert Smith opened a small fruit and vegetable market in Bethlehem, Pennsylvania. Originally, Smith sold only produce grown on his family farm and orchard. As the market's popularity grew, however, he added bread, canned goods, fresh meats, and a limited supply of frozen goods. Today Smith's Market is a full-range farmers' market with a strong local customer base. Indeed, the market's reputation for low prices and high quality draws customers from other Pennsylvania cities and even from the neighboring state of New Jersey. Currently Smith's has 40 employees. These include sales staff, shelf stockers, farm laborers, shift supervisors, and clerical staff. Recently, Smith has noticed a decline in profits and sales, while his purchases of products for resale have continued to rise. Although the company does not prepare audited financial statements, Robert Smith has commissioned your public accounting firm to assess…
Smith’s Market (Small Business Cash Sales Accounting System) In 1989 Robert Smith opened a small fruit and vegetable market in Bethlehem, Pennsylvania. Originally Smith sold only produce grown on his family farm and orchard. As the market’s popularity grew, however, he added bread, canned goods, fresh meats, and a limited supply of frozen goods. Today Smith’s Market is a full-range farmers’ market with a strong local customer base. Indeed, the market’s reputation for low prices and high quality draws customers from other Pennsylvania cities and even from the neighboring state of New Jersey. Currently Smith’s has 40 employees. These include sales staff, shelf stockers, farm laborers, shift supervisors, and clerical staff. Recently Smith has noticed a decline in profits and sales, while his purchases of products for resale have continued to rise. Although the company does not prepare audited financial statements, Robert Smith has commissioned your public accounting firm to assess his…
SMITH’SMARKET (SMALL BUSINESS POS ACCOUNTING SYSTEM) In 1989, Robert Smith opened a small fruit and vegetable market in Bethlehem, Pennsylvania. Originally Smith sold only produce grown on his family farm and orchard. As the market’s popularity grew, however, he added bread, canned goods, fresh meats, and a limited supply of frozen goods. Today Smith’s market is a full range farmers’ market with a strong local customer base. Indeed, the market’s reputation for low prices and high quality draws customers from other Pennsylvania cities and even from the neighboring state of New Jersey. Currently Smith’s market has 40 employees. These include sales staff, shelf stockers, farm laborers, shift supervisors, and clerical staff. Recently Smith has noticed a decline in profits and sales, while his purchases of products for resale have continued to rise. Although the company does not prepare audited financial statements, Robert Smith has commissioned your public accounting firm to assess his…
SMITH’S MARKET (SMALL BUSINESS ACCOUNTING SYSTEM)In 1989, Robert Smith opened a small fruit and vegetable market in Bethlehem,Pennsylvania. Originally, Smith sold only produce grown on his family farm andorchard. As the market’s popularity grew, however, he added bread, canned goods,fresh meats, and a limited supply of frozen goods. Today Smith’s Market is a full-rangefarmers’ market with a strong local customer base. Indeed, the market’s reputation forlow prices and high quality draws customers from other Pennsylvania cities and evenfrom the neighboring state of New Jersey. Currently Smith’s has 40 employees. Theseinclude sales staff, shelf Stockers, farm laborers, shift supervisors, and clerical staff.Recently, Smith has noticed a decline in profits and sales, while his purchases ofproducts for resale have continued to rise. Although the company does not prepareaudited financial statements, Robert Smith has commissioned your public accountingfirm to assess his company’s sales…
1. SMITH’SMARKET (SMALLBUSINESSPOS ACCOUNTING SYSTEM)In 1989, Robert Smith opened a small fruit and vegetablemarket in Bethlehem, Pennsylvania. Originally,Smith sold only produced grown on his family farmand orchard. As the market’s popularity grew, however,he added bread, canned goods, fresh meats, anda limited supply of frozen goods. Today, Smith’s marketis a full range farmers’ market with a strong localcustomer base. Indeed, the market’s reputation forlow prices and high-quality draws customers fromother Pennsylvania cities and even from the neighboringstate of New Jersey. Currently, Smith’s markethas 40 employees. These include sales staff, shelfstockers, farm laborers, shift supervisors, and clericalstaff. Recently, Smith has noticed a decline in profitsand sales, while his purchases of products for resalehave continued to rise. Although the company doesnot prepare audited financial statements, RobertSmith has commissioned your public accountingfirm to assess his company’s sales…
In 1989, Robert Smith opened a small fruit and vegetable market in Bethlehem, Pennsylvania. Originally, Smith sold only produced grown on his family farm and orchard. As the markets popularity grew, however, he added bread, canned goods, fresh meats, and a limited supply of frozen goods. Today, Smiths market is a full range farmers market with a strong local customer base. Indeed, the markets reputation for low prices and high-quality draws customers from other Pennsylvania cities and even from the neighboring state of New Jersey. Currently, Smiths market has 40 employees. These include sales staff, shelf stockers, farm laborers, shift supervisors, and clerical staff. Recently, Smith has noticed a decline in profits and sales, while his purchases of products for resale have continued to rise. Although the company does not prepare audited financial statements, Robert Smith has commissioned your public accounting firm to assess his companys sales procedures and controls. Smiths market revenue cycle procedures are described in the following paragraphs: Revenue Cycle Customers push their shopping carts to the checkout register where a clerk processes the sale. The market has four registers, but they are not dedicated to specific sales clerks because the clerks play many roles in the day-to-day operations. In addition to checking out customers, sales clerks will stock shelves, unload delivery trucks, or perform other tasks as demand in various areas rises and falls throughout the day. This fluid-work demand makes the assignment of clerks to specific registers impractical. At the beginning of the shift, the shift supervisor collects four cash register drawers from the treasury clerk in an office in the back of the market. The drawers contain 100 each in small bills (known as float) to enable the clerks to make change. The supervisor signs a log indicating that he has taken custody of the float and places the drawers into the respective cash registers. Sales to customers are for cash, check, or credit card only. Credit card sales are performed in the usual way. The clerk swipes the card and obtains online approval from the card issuer at the time of sale. The customer then signs the credit card voucher, which the clerk places in a special compartment of the cash register drawer. The customer receives a receipt for the purchase and a copy of the credit card voucher. For payments by check, the clerk requires the customer to present a valid drivers license. The license number is added to the check and the check is matched against a black list of customers who have previously passed bad checks. If the customer is not on the list, the check is accepted for payment and placed in the cash register drawer. The clerk then gives the customer a receipt. The majority of sales are for cash. The clerk receives the cash from the customer, makes change, and issues a receipt for the purchase. At the end of the shift, the supervisor returns the cash register drawers containing the cash, checks, and credit cards receipts to the treasury clerk and signs a log that he has handed in the cash drawers. The clerk later counts the cash and credit card sales. Using a stand-alone PC, he records the total sales amounts in the sales journal and the general ledger sales and cash accounts. The treasury clerk then prepares a deposit slip and delivers the cash, checks, and credit card vouchers to the local branch of the bank two blocks away from the market. Required a. Create a data flow diagram of the current system. b. Create a system flowchart of the existing system. c. Analyze the physical internal control weaknesses in the system. Model your response according to the six categories of physical control activities specified in the COSO internal control model. d. Describe the IT controls that should be in place in this system.
Your friend, Wendy Geiger, owns a small retail store that sells candies and nuts. Geiger acquires her goods from a few select vendors. She generally makes purchase orders by phone and on credit. Sales are primarily for cash. Geiger keeps her own manual accounting system using a general journal and a general ledger. At the end of each business day, she records one summary entry for cash sales. Geiger recently began offering items in creative gift packages. This has increased sales substantially, and she is now receiving orders from corporate and other clients who order large quantities and prefer to buy on credit. As a result of increased credit transactions in both purchases and sales, keeping the accounting records has become extremely time- consuming. Geiger wants to continue to maintain her own manual system and calls you for advice. Write a memo to her advising how she might modify her current manual accounting system to accommodate the expanded business activities. Geiger is…
Quiz: Role of Business Petite Palate is a gourmet baby food company founded in 2006 and was growing until the fall of 2008 when investors in the company pulled out because they were concerned about the weakening economy. The owners of the company had to then find a bank to lend them money to continue manufacturing and selling their products. Based on the information provided about the company, what type of organization was bu Petite Palate? O for-profit benefit corporation O nonprofit franchise
HASF & company sells paint and paint supplies carpet and wallpaper at a single store location in suburban Baltiomore Although the company has been very profitable over the year management has seen very profitable over the year management has seen a significant decline in wallpaper sales and earnings Much of this decline is attributable to the internet and to companies that advertise deeply discounted prices in magazines and offer customer free shipping and toll free telephone number recent figures follow : Paint and supplies Carpeting wallpaper Total sales 250,000 230,000 70,000 550,000 less variable cost 170,000 161,000 56,000 387,000 fixed costs 40,000 40,000 40,000 120,000 total cost 210,000 201,000 96,000 507,000 operating income 40,000 29,000 -26,000 43,000 Other Information Management is studying whether to drop wallpaper because of the changing market and accompanying loss if the line is dropped the following changes…
HASF & company sells paint and paint supplies carpet and wallpaper at a single store location in suburban Baltiomore Although the company has been very profitable over the year management has seen very profitable over the year management has seen a significant decline in wallpaper sales and earnings Much of this decline is attributable to the internet and to companies that advertise deeply discounted prices in magazines and offer customer free shipping and toll free telephone number recent figures follow Paint and supplies Carpeting wallpaper Total sales 250,000 230,000 70,000 550,000 less variable cost 170,000 161,000 56,000 387,000 fixed costs 40,000 40,000 40,000 120,000 total cost 210,000 201,000 96,000 507,000 operating income 40,000 29,000 -26,000 43,000 Other information: Management is studying whether to drop wallpaper because of the changing market and accompanying loss if the line is dropped the following changes are expected to occur…
Munabhai
Runway Discount ("Runway" or the "Company") is a privately held online retailer that sells discounted high-end fashion. In an effort to increase its sales and customer base, Runway implemented a customer referral marketing campaign (the "Refer-a-Friend Program") whereby existing customers can refer friends to Runway and receive a $25 credit towards the purchase of future merchandise. The terms of the program are as follows: Runway offers existing customers (the "Existing Customer") a $25 credit (the "$25 Referral Credit") if the Existing Customer refers a friend (the "New Customer") to Runway's Web site and the New Customer purchases merchandise from Runway. After a purchase is made by the New Customer, the Existing Customer receives a$25 credit to be applied to a future purchase from Runway. The $25 Referral Credit represents the fair value of the cost Runway would pay to acquire a new customer from an unrelated third party or marketing firm who is not a purchaser of its products.…