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
Accounting Information Systems
10th Edition
ISBN:9781337619202
Author:Hall, James A.
Publisher:Hall, James A.
Chapter5: The Expenditure Cycle Part I: Purchases And Cash Disbursements Procedures
Section: Chapter Questions
Problem 1ICC: SMITHS MARKET (SMALL BUSINESS ACCOUNTING SYSTEM) In 1989, Robert Smith opened a small fruit and...
Related questions
Question

Transcribed Image Text: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 Process
PC. At the end of the day the clerk prepares a hard-copy The purchasing agent monitors the inventory levels
purchases summary from the PC and sends it to the by reviewing the inventory subsidiary ledger from
treasury 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 enters
She examines it for correctness and files it in a tempo- this information into the computer terminal to create
rary 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 copy
check and records it in the digital check register. She to the accounts payable department where it is filed
then files the invoice and mails the check to the supplier. temporarily, and files the third copy in the purchasing
At the end of the day she prints a hard-copy journal
voucher from the PC, which summarizes the day's cash
disbursements, 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 for
the appropriate general ledger accounts.
his department computer. He decides which items need
department.
When the goods are received, the receiving depart-
which is attached to the goods. The receiving clerk
storage. The receiving clerk sends the second copy to
the purchasing agent who uses it to update the inventory
subsidiary ledger and to close the open purchase order.
The purchase agent then files the receiving report in the
department.
Required
a. 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 the
system. Model your response according to the six
categories of physical control activities specified in
SAS 78/COSO.
Accounts Payable and Cash

Transcribed Image Text:1. Smith's Market (Small Business Cash
Sales 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 audited
and orchard. As the market's popularity grew, however, financial statements, Robert Smith has commissioned
he added bread, canned goods, fresh meats, and a lim- your public accounting fim to assess his company's
ited supply of frozen goods. Today Smith's Market is a sales procedures and internal controls. Smith's Market
full-range farmers' market with a strong local customer expenditure cycle procedures are described below:
base. Indeed, the market's reputation for low prices and
high quality draws customers from other Pennsylvania Expenditure Cycle
cities and even from the neighboring state of New The expenditure cycle begins in the warehouse adjacent
Jersey. Currently Smith's has 40 employees. These to the market where Smith's keeps their inventory of
include sales staff, shelf stockers, fam laborers, shift
supervisors, and clerical staff. Recently Smith has
noticed a decline in profits and sales, while his pur-
250
PART II
Transaction Cycles and Business Processes
nonperishable goods such as canned goods and paper Elizabeth, New Jersey. Spice Is Right currently employs
products. They also maintain a one-day inventory of pro- over 100 people, has dozens of suppliers, and trades in
duce and other perishable products in the warehouse hundreds of ethnic and exotic foods from all over the
where they can quickly restock the shelves when neces- world.
sary. At close of business each evening the warehouse
Recently, 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 that
the 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 system
reordered from the suppliers and prints purchase orders includes manual procedures supported by independent
from the PC. Depending upon the nature of the product (non-networked) PC in each department, which cannot
and urgency of the need, the clerk either mails the pur- communicate with each other. Document flows between
chase order to the supplier or orders by phone. Phone
orders are followed up by faxing the purchase order to
the supplier.
the departments is entirely in hard-copy form. The fol-
lowing is a description of their expenditure cycle at the
Boston headquarters office.
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