ACCOUNTING

SYSTEMS
REPORT

Compiled by:
Munira Ebrahimji – 201500015
Shaikha AlBinKhalil – 201400736
Mohamed Al Mansoor – 201501398
Mansoor Al Mansoor - 201501397
 Assessment Cover Sheet
Complete and attach this cover sheet to your assessment before submitting

Assessment Title Assessment 3 – Accounting Systems

Learning Outcomes:

Programme Title: Bachelor of Business

BU7402
Course No.:

Course Title: Accounting Systems

Munira Ebrahimji, Shaikha AlBinKhalil, Mohamed Al Mansoor,

Student Name: Mansoor Al Mansoor

201500015, 201400736, 201501398, 201501397

Student ID:

Ms Najla Srour
Tutor:

21 January 2018 20 January 2018

Due Date: Date submitted:

By submitting this assessment for marking, either electronically or as hard copy, I confirm the following:

 This assignment is my own work

 Any information used has been properly referenced.
 I understand that a copy of my work may be used for moderation.
 I have kept a copy of this assignment

Do not write below this line. For Polytechnic use only.

Assessor: Date of Marking:

Grade/Mark:

Comments:
Table of Contents

QUESTION 1 5
INTERNAL CONTROL 5
1.1. STRENGTHS AND PRINCIPLES BEING FOLLOWED 5
1.2. WEAKNESSES AND PRINCIPLES VIOLATED 6
1.3. CHANGES THAT WOULD RESULT IN GOOD CONTROL 6

QUESTION 2 7
BANK RECONCILIATION STATEMENT 7
2.1. RECONCILING THE CASH BALANCES 7
2.2. JOURNAL FOR ADJUSTING ENTRIES 8

QUESTION 3 9
SAGE 50 9
3.1. CONTROL FEATURES IN SAGE 50 9

QUESTION 4 10
BUSINESS PROCESS CYCLES 10
4.1. CONTEXT DIAGRAM FOR ORDERING PROCESS: 10
4.2. PREPARATION OF: 11
4.2.1. LEVEL 0 DFD – ORDER PROCESS 11
4.2.2. LEVEL 1 DFD – CREDIT REVIEW PROCESS 12
Question 1

INTERNAL CONTROL

1.1. Strengths and principles being followed

1. Independent internal verification - When Classic Musical Distributors (CMD) receives

sales orders through its marketing department, the sale order goes through their
automated system, which is connected to a credit rating website to check the
customer’s credit worthiness and whether it is within CMD’s credit bracket. This
ensures that the company is likely to receive payment from these new customers
after billing has been issued due to their acceptable credit rating. Not to mention, all
this process is happening in real-time thereby providing the customer with quick
services and sales orders could be issued at hand.
2. Documentation procedures - After sales orders has been issued, multiple copies of
the sales order are generated by the system. As part of their procedure, two copies
of the sales order along with the customer’s goods are sent from the warehousing
department to the shipping department. One copy would be sent to the customer as
a packing slip, and the other would be sent to the billing department so that the
customer could be billed for the sale.
3. Independent internal verification - The credit manager carries out monthly checks
on the accounting receivables aging report to detect over-due, slow paying and
customers who are expected to pay their amounts shortly so that counteractive
actions could be taken to guarantee payment.
4. Establishment of Responsibility and Segregation of Duties - Issuing credit memos is
another responsibility of the credit manager, credit memos are issued whenever
requested by customers that have returned goods. However, the accounting
department receives the credit memos electronically so that they could update the
customer’s account. Thus, the credit manager is not obligated to record the
customer’s account.
5. Establishment of Responsibility and Documentation Procedures - One of the
responsibilities of the warehouse staff is to check the availability of inventory to fill
sales orders from customers, in addition to establishing back-orders for sales orders
 that cannot be completed because there is not enough current stock available. This
shows the company has certain procedures to carry out whenever there is not
enough stock in the warehouse.
6. Establishment of responsibility and Segregation of Duties - When the billing
department receives a copy of sales order from shipping the billing clerk is
responsible for preparing an invoice for the customer, which is then sent
electronically to the account receivable clerks who are responsible for updating the
customer’s accounts. Therefore, each of the clerks has a responsibility to carry out.

1.2. Weaknesses and principles violated

1. Independent internal verification - A risk that the company may face is the theft of
goods. This is because the company does not carry out inventory checks throughout
the process of receiving goods from suppliers and delivering goods to customers.
Thus, not carrying out these inventory checks gives the warehouse workers the
opportunity to conduct fraud.
2. Documentation procedure - Another risk that the company could face is the issuance
of credit memos for goods that have not yet been received or have been received but
are damaged by the customer. This occurs when the credit manager issues credit
memos without being notified by the shipping department that the goods have
reached their department and are of good condition. Thus, contributing to the
outflow of resources from the company.
3. Establishment of responsibility - The company may face inventory shrinkage due to
the fact the warehouse personnel are responsible for updating the records for
purchases, sales and returns. This would cause a surplus in the quantity of inventory
in the accounting records, however it does not exist in the inventory of the company
due to theft, and miscounting.

1.3. Changes that would result in good control

1. The company should establish an internal verification procedure to that would

eliminate the opportunity of misconduct by the warehouse personnel. This could be
 achieved by carrying thorough inventory checks when the goods have been received
by the company from the suppliers, when they are kept in the warehouse, when they
are sent to the shipping department and when the shipping department sends the
goods to the customers. This will ensure that the goods have not been stolen before
they reach the customers.
2. To off-set the violation of the documentation procedure arising from the issuance of
credit memos without inspecting the goods returned from customers, the shipping
department should send the credit manager a reimbursement report that indicate
the goods in question have been received and are of good condition.
3. The company should establish responsibilities of the personnel’s, one worker should
be responsible for updating the inventory records for sales and purchases, however,
he will only update the records after receiving confirmation from the Shipping
department that the goods have been received. In addition, another warehouse
personnel would be responsible for returns, the employee would also only be
required to update the inventory records after the shipping department confirms
that they have received the goods.

Question 2

BANK RECONCILIATION STATEMENT

2.1. Reconciling the Cash Balances

WHITE SAILING COMPANY

BANK RECONCILIATION AT SEPTEMBER 30
CASH BALANCE PER BANK BD 700,000
ADD: Deposit in-transit (1) BD 33,900
LESS: Outstanding Checks (4) (BD 60,000)

ADJUSTED BALANCE PER BANK BD 673,900

 CASH BALANCE PER BOOKS BD 545,900
LESS: Check Printing charges (2) (BD 100)
LESS: Non-sufficient Funds (6) (BD 36000)
ADD: Check no 138 incorrectly recorded (5) BD 8100
ADD: Notes collected by bank and Interest BD 156,000
(7)

ADJUSTED BALANCE PER BOOKS BD 673,900

NOTES:

1. BD 49000 – BD 40,900 = BD 8100

2. BD 150,000 + BD 6000 = BD 156000
3. (3) cannot be used in reconciliation

2.2. Journal for Adjusting Entries

JOURNAL FOR ADJUSTING ENTRIES

DATE EXPLAINATION DEBIT CREDIT

September 30 Cash BD 8100

Accounts Payable BD 8100

September 30 Cash BD 156,000

Notes Receivable BD
150,000
Interest Revenue BD 6000

September 30 Check Printing Expense BD 100

Cash BD 100

September 30 Accounts Receivable (NSF) BD 36000

Cash BD 36000
Question 3

SAGE 50

3.1. Control Features in Sage 50

There are many features that are available in Sage 50 that strengthen the internal controls of
an organization, and some of these controls could be enforced by company policies and
guidelines that would ensure the compliance of the employees and thus maintain good
control over their operations.

 Documentation procedure is one of the most important controls that we

experienced in Sage 50, it is essentially one of the core features that the software has
to offer. For example, companies could set documentation procedures such that
whenever a customer places an order, they employees would have to create a new
quote, then convert to a sales order if the customer is content with the quote and
want to go ahead with the contract, then a sales invoice will be issued. Another
example would be entering the suppliers’ information into the system so that when
the company wants to write a new check, they could search the suppliers much easily
through the Vendor ID section and thus the procedure runs much quicker. As
students in the accounting systems course, we were engaged with Sage 50 and were
taught how to go through the documentation procedure by making a new quote,
converting it into a sales order and then issuing an invoice.
 Sage 50 also provides good opportunity for Independent internal verification. One of
the main features provided in the software is bank reconciliation, which could be
done by the assistant treasurer to ensure that the cash at bank equals the cash
written in the accounting records. Another feature that could be used for
independent internal verification in the aging report provided for the account
receivables, this would help credit managers know over-due customers or take note
of customers whom are behind in their payment, so they could be proactive and
contact those customers. As for our experiences, as students were able to experience
reconciling bank statements first hand by entering general ledger entries and then
carrying out a bank reconciliation for specific month.
 Question 4

BUSINESS PROCESS CYCLES

4.1. Context Diagram for Ordering Process:

Order Packing Slip

Customer Invoice Order Warehouse
Process Shipping Notice
Rejected
Orders

Receivable
Notice

Accounting
Department
4.2. Preparation of:

4.2.1. Level 0 DFD – Order Process

Customer

Order Rejected
Orders

(Details in Store)
1.0
Credit File
Credit Review
Process

Accepted
Orders

2.0 (Details in Store)

Customer Entry Customers File
Process
Open Orders File

(Details in Store)
3.0 Inventory
Inventory and
Pay Slip Process Packing Slip
Warehouse

4.0
Preparation of
Invoice Process (Details in Store)
Invoice

Accounting
Department
 4.2.2. Level 1 DFD – Credit Review Process

Customer

Order Accepted
Orders

1.0
(Details in Store) Credit Files
Exceeded Credit

Credit - Check
Limit Notice

Process

Rejected
Orders Credit Application

1.2
Customer Files
Credit Limit Check
Process – Current
Order

Accepted
Credit

1.3
Preparation and
Application of Credit
Process