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ACCOUNTING INFORMATION SYSTEM I SEMESTER I 2010/2011

GROUP ASSIGNMENT

DOCUMENTATION TECHNIQUES

QUESTION 1 Recently, you have been accepted as a trainee in Al Ikhwan. Al Ikhwan is a regional wholesaler of sporting goods. You have been assigned with a task of documenting some of the information system procedures in Al Ikhwan. The following description presents Al Ikhwans cash disbursement system. The accounts payable department approves payment of all invoices for the purchase of inventory. Invoices are matched with purchase requisitions, purchase orders, and receiving reports. The accounts payable clerks check on vendor name and invoice number on these documents so that they will tally with the invoices. When all documents for an invoice are assembled, a two-copy disbursement voucher is prepared. The clerks will also prepare voucher register to record the transaction. The disbursement vouchers and all supporting documents are then filed alphabetically by vendors name. Based on the voucher register, a two-copy of journal voucher that summarizes each days entries is prepared daily. The first copy is sent to general ledger department and the second copy is filed in the accounts payable department by date. The vendor file is searched daily for the disbursement vouchers of invoices that are due to be paid. Both copies of disbursements vouchers that are due to be paid are sent to treasury department along with the supporting documents. The cashier prepares a check (that has a carbon copy) for each vendor, signs the check and records it in the check register. Copy 1 of the disbursement voucher is attached to the check copy and filed in check number order in the treasury department. Copy 2 and the supporting documents are returned to the accounts payable department and filed alphabetically by vendors names. A two-copy journal voucher that summarizes each days checks is prepared. First copy is sent to the general ledger department and second copy is filed in the treasury department by date. REQUIRED: a. Prepare the following documentation for the case above: i. Context diagram ii. Document flowchart (20 marks) b. Coding systems are used throughout accounting information systems. Describe some useful guidelines that will result in a better coding system. (5 marks)

ANSWER: (a) ENTITIES Account Payable Department

PARA 2

Account Payable Clerk Account Payable Clerk

3 3

Cashier

ACTIVITIES 1. Approved payment of all invoices. 2. Matched with purchase requisitions, purchase orders and receiving reports. 3. Check vendor name and invoice numbers. 4. Prepare two copy disbursement vouchers. 5. Prepare voucher register. 6. The disbursement vouchers and all supporting documents are filed alphabetically by vendors name. 7. Prepare a two copy of journal voucher. 8. Sent the first copy to general ledger department. 9. Filed the recon copy in the account payable department. 10. The vendor file that are done to be paid is searched. 11. Both copy of this disbursement vouchers sent to treasury department with the supporting department. 12. Prepare a check. 13. Sign a check. 14. Record it in the register. 15. Attach copy of this disbursement voucher to the check copy. 16. File in check number order in the treasury department. 17. Return copy 2 and the supporting document to the account payable department. 18. File alphabetically by vendors names. 19. Prepare two copy journal voucher. 20. Sent first copy to the general ledger department. 21. File in the second copy in the treasury department by date.

(i) Payment of invoices Account payable department Entries voucher register Stores treasury department Receive record and filed data

(ii)

ANSWER: (b) The following guidelines should be observed: The code should be consistent with its intended use, so make sure you know what uses need. Provide enough digits to allow room for growth. Keep it simple in order to: Minimize cost Facilitator memorization Insure employee acceptances Make sure its consistent with: The companys organization structure Other divisions of organization

QUESTION 2 Every Thursday, the timekeeping clerk sends employee time cards to the payroll department for processing. Based on the hours worked reflected on 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 and the paychecks to the cash disbursements department. The cash disbursement clerk reconciles the payroll summary with the paychecks and records the transaction in the cash disbursement journal. The clerk then files the payroll summary and sends the paychecks to the treasurer for signing. The signed checks are then sent to the paymaster, who distributes them to the employees on Friday morning. Required: a. Prepare a Data Flow Diagram (DFD) of the payroll procedures. b. Prepare a document flowchart of the payroll procedures. (12 marks) (13 marks)

c. Should an auditor wishing to assess the adequacy of separation of functions examine a dataflow diagram, a document flowchart or a system flowchart? Why? (5 marks)

ANSWER: (a)

ENTITIES Timekeeping clerk

PARA 1

Payroll Clerk

Cash Disbursement Clerk

ACTIVITIES 1. Sent employee time cards to the payroll department. 2. Employee pay rate. 3. Withholding information in the employee file. 4. Calculates gross pay with holdings and net pay. 5. Prepare paychecks. 6. Files copies in the payroll department. 7. Post the earning to the employee records. 8. Prepares a payroll summary. 9. Send payroll summary and paychecks to the cash disbursements department. 10. Reconciles the payroll summary with the paycheck. 11. Records in the cash disbursement journal. 12. Files the payroll summary. 13. Sends the paychecks to the treasurer. 14. Sent signed checks to the paymaster.

Time Keeping Clerk

Time Cards Calculate Gross Pay

1.0 Classifying and Batching

Recording payable

4.0 Signing Data

Paymaster

2.0 Filling, Summarizing Data

Send paycheck

Cash disbursement journal

3.0 Reconcile the Payroll

Cash disbursement department

(b)
Document flowchart
A Time card Time card B

Paycheck

Prepare payroll

Employee record

Payroll register

Record transact.

Employee paycheck

Payroll summary

Payroll register

Copy paycheck

General journal

Reconcile payroll summary and paycheck A

Paycheck

Treasurer sign & send to paymaster

(c) Document flowcharts Internal control flowcharts are document flowcharts used to evaluate the adequacy of internal controls, such as segregation of duties or internal checks. They can reveal weaknesses or inefficiencies such as: Inadequate communication flows Unnecessarily complex documents flows Procedures that cause wasteful delays Documents flowcharts are also prepared in the system design process. System flowcharts A system flowchart depicts the relationship among the inputs, processes, and outputs of AIS. The system flowchart begins by indentifying the inputs to the system. Each input is followed by a process, i.e., the steps performed on the data. The process is followed by outputs- the resulting new information. In the other words, its the same basic input- process- output pattern that we saw in the documents flowchart.