FAKULTI PERAKAUNAN

UNIVERSITI TEKNOLOGI MARA

ACCOUNTING INFORMATION SYSTEMS

AIS 615

LEARNING PACKAGE: CASES

PBL Session 1
PBL Session 2
PBL Session 3

SEMESTER:
MARCH 2019

BY
ZALILA @ AZALILAH HJ KASSIM
UiTM SARAWAK
PBL 1: REVENUE CYCLE (Sales Order Processing and Cash Receipt System 1.)

Rapid Electronics Company is a supplier of electronic components. It involves

performing the basic tasks of the Sales Order Procedures manually. The following
describes the revenue cycle procedures of the company.

Customer orders are received by the sales department and are transcribed by a clerk
onto a six-part sales order. Copies of the source document are distributed to various
departments.

Copies 1, 2 and 3 are sent to the shipping department. The shipping clerk, who picks
the goods from the shelves and ships them to the customer. The clerk sends Copy 1
of the sales order along with the goods to the customer. Copy 2 is sent to the billing
department and Copy 3 is filed in the shipping department. Copies 4, 5 and 6 are
sent to the billing department, where they are temporarily filed by the billing clerk.

When the billing clerk receives Copy 2 from the shipping department, she pulls the
other copies from the temporary file and completes the documents by adding prices,
taxes and freight charges, which she obtains from reference files. The billing clerk
then makes an entry in the sales journal, sends Copy 4 (customer bill) to the
customer and sends Copies 5 and 6 to the accounts receivable (AR) and inventory
control (IC) departments, respectively.

Upon receipt of the documents from the billing clerk, the AR and IC clerks post the
transactions to their respective subsidiary accounts. They then file the document in
the department. On the payment due date, the customer sends a check for the full
amount and a copy of the bill (the remittance advice) to the company. These
documents are received by the mailroom clerk, who distributes them as follows:

 The check is sent to the cash receipts clerk, who records it in the cash
receipts journal and prepares two deposit slips. One deposit slip and the
check are sent to the bank and the other deposit slip is filed in the cash
receipts department.

 The remittance advice is sent to the AR clerk, who posts to the subsidiary
accounts and then files the document.

Required:

a. Discuss briefly any FOUR (4) basic tasks performed manually in the Sales Order
Procedures.
(4 marks)

b. Explain the consequences of the company to have a “check credit” procedure.

(2 marks)

c. Discuss on whether the point-of-sale system that uses bar coding and a laser
light scanner provides hundred percent accurate updates?
1
Adapted from Accounting Information System by James A. Hall; 4 th Edition; 2004; – Discussion questions and
problems.
 (2 marks)

d. Prepare a document flowchart of Rapid Electronics Company.

(32 marks)
(TOTAL: 40 MARKS)

PBL 2: REVENUE CYCLE (Cash Receipts System)

The following describes the procedure of handling cash receipts in B&C Company
specialize in baking bread and cakes. The company has substantial sales, which are
billed and collected locally.

The process at B&C Company begins with, cash collections over the sales counter
and cash on delivery (COD) sales are received from the customer or delivery service
by the cashier. Upon receipt of cash, the cashier stamps the sales ticket ‘paid’ and
files a copy for future reference. The only record of COD sales is a copy of the sales
ticket, which is kept and held by the cashier until the cash is received from the
delivery service.

Every morning, the secretary to the credit manager opens the mail and forward the
remittance received to the credit manager for his review. When checks are received
as payment for accounts due, a remittance slip is included with payment. The credit
manager then places the remittances together with the remittance slip in a tray on the
cashier’s desk. At the daily deposit cut-off time, the cashier delivers the checks and
cash in hand to the assistant credit manager, who prepares remittances lists and
makes up the bank deposit slip, which she also takes to the bank.

The assistant credit manager also posts remittances to the accounts receivable
ledger and verifies the cash discount allowable. Every week, a cash receipts report
and an aging customers report are generated from the data in the accounts
receivable ledger. The reports are then forwarded to the credit manager for his
review as he is responsible to write-off uncollectible accounts at B&C Company.

Required:

a. Explain the purpose of the following documents:

i. Deposit slip
ii. Aging customers report
(4 marks)

b. Discuss FOUR (4) internal security weaknesses in B&C Company and suggest
FOUR (4) relevant controls to improve the current procedures. Your answers
should be written in the following format.

Weaknesses Control Procedures

(16 marks)
(TOTAL: 20 MARKS)

PBL 3: EXPENDITURE CYCLE (Purchasing System)

HD Company is a manufacturer of high quality shoes. The accounting and the
internal control procedures relating to the purchases of materials by the company are
described in the following terms.

Production department supervisor verbally informed the purchasing department to

purchase new raw materials. The purchasing supervisor immediately, informs the
clerk to prepare two copies of pre-numbered purchase order and directly sent to the
respective vendors. The first copy of the purchase order is sent to the receiving
department. The other copy is filed in the purchasing department.

The materials, upon received are placed at the storeroom in the receiving
department. The supervisor at the storeroom issued copies of the informal report
(attached copies of the purchase order) and sent to the purchasing department and
the accounting department.

Vendors’ invoices for material purchased, received in duplicate in the mail-room, are
sent to the purchasing department and directed to the employee who placed the
related order. The employee then compares the invoices with their copy of the
purchase order. The employee checks on the quantity, the price, the terms and
compares the invoice quantity received based on the informal report issued by the
supervisor from the storeroom. The employee also checks on discounts, after which
she initials the invoices to indicate approval for payment.

The invoices are then submitted to the accounting department, where they are
entered in the voucher register and filed according to payment due date.

Required:

a. An objective of internal control is to mitigate the risk from errors and fraud.
Identify FOUR (4) primary risks associated with expenditure cycle transactions.

(4 marks)

b. Discuss FOUR (4) weaknesses in the existing system and recommend FOUR (4)
relevant controls to improve the current procedures. Your answers should be
written in the following format.

Weaknesses Control Procedures

(16 marks)
(TOTAL: 20 MARKS)

PBL 4 : EXPENDITURE CYCLE (Payroll system2.)

2
Adapted from Accounting Information System by James A. Hall; 4 th Edition; 2004; – Discussion questions and
problems.
The following describes the payroll procedures for Cozy Clothing Company.

Every end of the month, the timekeeping clerk sends the employee time cards to the
payroll department for processing.

In the payroll department, based on the hours worked as indicated by the time cards,
the employee pay rate and withholding information in the employee file and the tax-
rate reference file, the payroll clerk calculates gross pay, withholdings and net pay for
each employee. The clerk then prepares paychecks for each employee, files copies
of the paychecks in the payroll department and posts the earnings to the employee
records. Finally, the clerk prepares a payroll summary and sends it together with the
paychecks to the cash disbursement (CD) department.

In the CD department, the cash disbursement clerk reconciles the payroll summary
with the paychecks and records the transaction in the cash disbursements journal.
The clerk then files the payroll summary and sends the paychecks to the treasurer for
signing.

The treasurer later then signed the paychecks. The signed checks are then sent to
the paymaster, who distributes them to the employees.

Required:

a. Prepare a document flowchart of Cozy Clothing Company.

(14 marks)

b. Discuss FOUR (4) weaknesses in the existing system and recommend FOUR (4)
relevant controls to improve the current procedures. Your answers should be
written in the following format.

Weaknesses Control Procedures

(16 marks)
(TOTAL: 30 MARKS)

PBL 5: CONVERSION CYCLE

Moore Style Company is a manufacturer of fabrics and textiles. The company is

reviewing the advantages of activity-based costing, the benefits to initiate automated
production and the prospect of becoming a world class company. The following
describe parts of the Company’s production cycle procedures.
The process begins with the storekeeping clerk, Dean Nelson controlling the
inventory and maintain the inventory records for both raw materials and finished
goods in the storekeeping department. He checks on the inventory control files daily
and assess the store room to check on the raw materials required for the production
process. He then sends the inventory status report to the production, planning and
control department.

John Smith is the manager in the production, planning and control department. Upon
receiving the inventory status report and the sales forecasts report from the
marketing department, he takes a copy of the bill of materials, route sheet and begins
to assess the inventory requirements. If inventory materials are adequate, John
prepares a production schedule, work order and move tickets which he sends to the
work centers. If inventory needs to be ordered, John would then prepare two copies
of material requisition document and send it to the purchasing department and
another copy to the storekeeping departments.

When Dean Nelson receives the material requisition, he releases the raw materials to
the work centers. He then files a copy of the materials requisition, updates the
inventory records, creates a journal voucher and send to the cost accounting
department

John Smith also heads the various work centers. All supervisors of the work centers
report to him. These supervisors, upon receipts of the above documents, initiate the
production process.

Required:

a. Discuss FOUR (4) characteristics of a world class company.

(8 marks)
b. How does automation help in achieving manufacturing flexibility?
(2 marks)
c. Discuss any FOUR (4) advantages of activity-based costing.
(4 marks)

d. Discuss FOUR (4) weaknesses in the existing system and recommend FOUR (4)
relevant controls to improve the current procedures. Your answers should be
written in the following format.

Weaknesses Control Procedures

(16 marks)
(TOTAL: 30 MARKS)