Lecture 19 physical and manual system -revenue cycle - accounting information systesm james a....
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Transcript of Lecture 19 physical and manual system -revenue cycle - accounting information systesm james a....
05/01/2023
Lecture 19- :Physical and Manual System :Revenue
Cycle-AIS Chapter-4Habib Ullah Qamar
Govt. college of Commerce Gujranwala
In the last lecture we started introducing revenue cycle
We found the there are three main processes that are performed in completing revenue cycle
Sales Order Processing Sales Return Procedures Cash Receipt Procedures How we can make revenue cycle more reliable
ad accurate with different ICS checks and practices
Review
We will start with description of Physical System and why we still need it.
Manual system Models of previously discussed system
concepts Internal controls and segregation of duties In the end we will try to highlight the
inefficiencies of manual system Lets start…….
Today’s Topic
How can we describe a system in the best possible way?
Textual form Visual form Physical observation Three reason behind Manual System
1. serve as a visual training aid to promote a better under-standing of key concepts
2. flowcharts reinforce the importance of segregation of duties through clearly defined departmental boundaries
3. fundamental component of the framework for viewing technology innovations (shortcomings and failings of current generation technology be-come the design imperative for the next)
Physical System
How should one be trained? Manual System? Second Computerized System? Some instructors prefer to teach manual
systems before moving on to computer applications.
Others favor moving directly to computer-based systems.
We will start manual and then computerzied
Manual system Sales order processing Sales return processing Cash Receipt Procedures Now we will study the same concepts with
different viewpoint We will uses Document flowcharts for
manual systems which additional information than DFDs
Departments boundaries and documents
Sales Order Processing
Sales Department Credit Department Approval Warehouse Procedures The Shipping Department The Billing Department Accounts Receivable, Inventory Control, and
General Ledger Departments
SOP Departments
Sales Return Procedures Receiving Department Sales Department Processing the Credit Memo
Mail Room Cash Receipts Accounts Receivable General Ledger Department Controller’s Office
Cash Receipts Procedures
Do you observe anything different than conceptual system?
Inefficiencies and observations
DFD Cash Receipts Procedures
Transaction Authorization1. Credit Check2. Return Policy3. Remittance List (The cash prelist provides a means for
verifying that customer checks and remittance advices match in amount)
Segregation of Duties1. Transaction authorization should be separate from
transaction processing.2. Asset custody should be separate from the task of
asset record keeping3. The organization should be structured so that the
perpetration of a fraud requires collusion between two or more individuals
Revenue Cycle Controls
Supervision1. Some firms have too few employees to achieve an
adequate separation of functions. These firms must rely on supervision as a form of compensating control. By closely supervising employees who perform potentially incompatible functions, a firm can compensate for this exposure.
◦ Accounting Records1. Pre-numbered Documents2. Special Journals3. Subsidiary Ledgers4. General Ledgers5. Files. The revenue cycle employs several temporary
and permanent files that contribute to the audit trail.
Revenue Cycle Controls
Access Controls1. Limiting access Warehouse security, such as fences, alarms, and
guards. Depositing cash daily in the bank. Using a safe or night deposit box for cash. Locking cash drawers and safes in the cash receipts department.
2. Restricted access to AR Subsidiary ledger, sales order documents, Cash and General Ledger.
Independent Verification1. The shipping function verifies that the goods sent from the
warehouse are correct in type and quantity.2. The billing function reconciles the original sales order with the
shipping notice to ensure that customers are billed for only the quantities shipped
3. Prior to posting to control accounts, the general ledger function reconciles journal vouchers and summary reports prepared independently in different function areas
Revenue Cycle Controls
Overview of RC Three key processes Sales order Sales Return Cash Receipt RC Controls
Summary
Reading MaterialAccounting Information System..byJames a HallChapter 4http://theITedcuaiton.com/
05/01/2023
Thank you , take careSee you again in sha ALLAH