Strategic Information Systems for Business and Enterprise: Case Study-Bell Studio
Executive Summary:
This report is about the Bell Studio company. Bell Studio is a wholesaler of art supplies which is located in Adelaide. The company sources its supplies from Australia, China, New Zealand, and Japan. The report shows the Data Flow Diagrams and systems flowcharts for the Expenditure cycle procedure of Bell Studio. The Flowchart for these systems and the data flow diagrams are shown in detail with explanations with changes for recommendations in it. The centralized accounting system of the company is used through the networked terminals on various locations for accounting purposes. The centralized accounting system includes the Cash disbursement system, the payroll system, and the purchases system. The inventory control system, the cashier, and accounting assistant are also shown for the same purpose wherever required.
The expenditure cycle procedure used in the centralized accounting system by Bell Studio is found to have some minor weaknesses in the form of increased dependence on manual work from workers. This has been shown to result in higher human errors causing increased costs and miscalculations. The company is thus advised on improving its system by using automatic time attendance machines, automated notification system for the inventory quantity low detection, due dates for the payments, and other such matters. The dependence on the human factor in the accounting system should be reduced, however, human supervision of all the systems is also important, and therefore it should be ensured as well.
Introduction:
This report shows the Data Flow Diagrams and systems flowcharts for the Expenditure cycle procedure of Bell Studio. Bell Studio is a wholesaler of art supplies which is located in Adelaide. The company sources its supplies from Australia, China, New Zealand, and Japan. The centralized accounting system is used through the networked terminals on these locations for accounting purposes. The centralized accounting system includes the Cash disbursement system, the payroll system, and the purchases system. The Flowchart for these systems and the data flow diagrams are shown below with explanation:
Purchase System
The process of the purchase system starts with the purchasing clerk who checks the inventory ledger on his or her computer. For the items whose quantity is deemed low, the vendor is selected from the valid vendor file, and a digital purchase order is initiated. After printing it, two copies are made. One of these copies is sent to the purchasing department while the other is sent to the vendor. The digital purchase order is then added to the purchase order file (Romney et al., 2012).
The receiving department receives the goods when it arrives. He inspects and reconciles it against the digital purchase order information and the packing slip. Then two hard copies of the receiving reports are prepared manually. One of the copies is sent alongside the goods to the warehouse where the inventory ledger is updated in the terminal of the computer. The receiving report is then filed in the department (Gelinas and Dull, 2009). While the other copy is sent in the accounts payable department in which it is filed until the receiving of the supplier invoice. After the invoice from the supplier is received, the temporary file in which the receiving report is filed is taken out, the purchase order is printed, and all three documents; receiving the report, purchase order and the supplier invoice are reconciled. The digital accounts payable is updated. The inventory control and account payable control accounts are also updated. The invoice, purchase order, and the receiving report copies are sent to the cash disbursement department (Hall, 2015).
Data Flow Diagram of Purchases
Cash Disbursement Systems
In the cash disbursement system, after receiving the documents from the department of accounts payable, the cash disbursements of all the Bell Studio is filed by the clerk until the payments are due. On the arrival of the due date, the clerk is then assigned the job to prepare the cheque for the payment of the invoiced account and is sent to the official treasurer for signing it. This cheque is then mailed to the vendor of the company in its respective location.
After doing this, the clerk of the cash disbursement department updates the register for cheques. Along with this, the accounts payable ledger and the control account for the accounts payable at the terminal computer are also updated. The receiving clerk then finally files the invoice along with the receiving report, the purchase order, and the copy of the cheque in the department (Mancini, Vaassen and Dameri, 2013).
Data Flow Diagram of Cash Disbursement Systems
Payroll System:
The Payroll system of the Bell studio records the hours worked by each of the workers on the time cards every day. The supervisors are to review these time cards for the correctness. These supervisors then submit it to the payroll department each week at its end. The computer terminal connected with the central payroll system is used for the next process. This is located however in the data processing department. The payroll clerk is appointed to input the data from the time cards and print the hard copies of the pay cheques. Along with these, the payroll register is also printed for its two copies, and the details are posted in the digital employee record. The clerk in the payroll department then files the time cards in the payroll department and then sends the cheques of the payroll to the employees via their various supervisors for review and then consequent distribution to their respective employees of the department. The clerk in the payroll department sends the copy of the payroll register to the accounts payable department as well. While another copy of the payroll register is submitted to the payroll department along with the time cards which are filed (Bragg, 2004).
The clerk of the Accounts payable department reviews the payroll register and then prepares the disbursements voucher manually. The voucher is then sent by the accounts payable department clerk along with the payroll register to the general ledger department. The clerk of the accounts payable department then writes the cheque for the entire payroll and then deposits in the account imprest at the bank. The clerk is then finally able to file the copy of the cheque in the department of the accounts payable. After the clerk of the general ledger department has received the payroll register and the voucher, the clerk posts these to the general ledger of the computer terminal located in the department. This helps in the filing of the voucher and payroll register in the department of the general ledger.
Data Flow Diagram of Payroll System
System Flowchart of Purchases System
For the system flow chart of the purchasing department, the flowchart shows the following details;
The purchasing department, the inventory control department, the receiving department and the accounts payable department combined shows the system flowchart for the purchasing department. In the purchasing department, the purchasing requisition is raised which leads to purchase order preparation. The purchase order is then sent to the vendor from which the supplies are purchased (Bragg, 2003). The purchased inventory along with the packing slip is received in the inventory control department. The receiving is prepared, and then the receiving report is sent to the receiving department. The packing slip and the PO copy are filed in the inventory control department. The receiving department receives the receiving report and files it along with with the Accounts payable file (Perry, 2001). The vendor sends the supplier to involve in the accounts payable department of the company which leads to the Accounts payable update. The sub-ledger for accounts payable is first updated, and then the General ledger is also updated.
System Flowchart of Payroll System
For the payroll system, all the working hours are noted on the time cards by the supervisors of each of the department. The payroll system is pretty much simple that it already holds the employee details. The hours worked, and the hourly rate is used for the calculation of the gross pay. Further, as per the payroll calculated, the cash or cheque is disbursed to each of the employees through supervisors. The supervisors then distribute and reconcile it with the actual pay. The next step is the filing of the entire payroll amount to the account of the company and then posting of it in the general ledger (Simkin, Norman and Rose, 2014).
System Flowchart of Cash Disbursement System:
The system flow for the cash disbursement system shows that the accountant assistant of TT, the Cashier, and the accounting and finance department are involved. The Account payable file is opened and then receiving the report, supplier report, and purchase orders are sent. These are reviewed and submit for the payments. These are sent to the Cashier. The Cashier prepares the check and posts it in the check register. The check, its copy, and copies for PO, receiving the report, and supplier profile are checked for signs and then are sent to the supplier. One of the check copies is filed in the department. The check is also posted in the journal voucher which is posted to General Ledger and reconciled with the voucher (Turner and Weickgenannt, 2008). The receiving report, PO and Supplier, and check copy are sent from the cashier to the Account Assistant which leads to updating of the Accounts payable. The account payable ledger is updated, and the summary is sending. The accounts payable file is closed.
Description of Internal Control Weaknesses in each system and Risks Associated with the identified weaknesses
Purchase System
The purchase system of Bell Studio shows the weakness of the use of a manual check of inventory quantity. The manual check shows that the clerk can make a mistake on the actual count of the inventory required or is present. This can lead to disruption in the cycle as the shortage of inventory will cease further processes as well. Furthermore, the receiving copies are prepared manually by the receiving clerk in the receiving department which also shows room for human error. The manual preparation of the receiving report can raise problems. This error can lead to a wrong entry in the digital record of the accounts payable ledger. The reconciliation is also done manually which is another problem which can create human error (Hall, 2015).
Payroll System
The hours worked by the employees are recorded in the time cards each day manually. This recording of time manually is a boring routine work which often can go wrong. This may lead to lower wages for the workers or even increased if the wrong time is recorded. The automatic time machines for attendance should be installed which automatically collects the worker’s data on their attendance and work hours and time-offs, and time-on to calculate the payroll for each of the worker.
Cash Disbursement System:
The cash disbursement system seems to have minor weaknesses as well which can be improved. The clerk files the documents until the due date of the payment. This shows that the payment is not going to start unless the clerk will initiate it himself. Therefore, cash disbursement is dependent on the human ability of the clerk. There is therefore room for human error. Any notifications set automatic for the due dates in the system could work on improving this fault. As per the cash disbursement system is shown by Bell Studio, the system does not check the signs for the cheques. This is a crucial point which is needed to be checked several times. This will ensure that no fraudulent cheques or activities go unnoticed.
Conclusion
The expenditure cycle procedure used in the centralized accounting system by Bell Studio is found to have some minor weaknesses in the form of increased dependence on manual work from workers. This has been shown to result in higher human errors causing increased costs and miscalculations. The company is thus advised on improving its system by using automatic time attendance machines, automated notification system for the inventory quantity low detection, due dates for the payments, and other such matters. The dependence on the human factor in the accounting system should be reduced; however human supervision of all the systems should be incorporated in the system.
List of References:
Bragg, S.M. (2003) Essentials of Payroll: Management and Accounting, John Wiley & Sons.
Bragg, S.M. (2004) Accounting for Payroll: A Comprehensive Guide, John Wiley & Sons.
Gelinas, U. and Dull, R. (2009) Accounting Information Systems, Cengage Learning.
Hall, J.A. (2015) Accounting Information Systems, Cengage Learning.
Hurt, R. (2015) Accounting Information Systems, 1st edition, McGraw-Hill Higher Education.
Mancini, D., Vaassen, E.H.J. and Dameri, R.P. (2013) Accounting Information Systems for Decision Making, 2nd edition, Springer Science & Business Media.
Perry, G.M. (2001) Sams Teach Yourself Beginning Programming in 24 Hours, Sams Publishin.
Romney, M., Steinbart, P., Mula, J., McNamara, R. and Tonkin, T. (2012) Accounting Information Systems Australasian Edition, Pearson.
Simkin, M.G., Norman, C.S. and Rose, J.M. (2014) Core Concepts of Accounting Information Systems, John Wiley & Sons.
Turner, L. and Weickgenannt, A.B. (2008) Accounting Information Systems: Controls and Processes, John Wiley & Sons.
