LA SALLE UNIVERSITY

COLLEGE OF ACCOUNTANCY
OZAMIZ CITY

PROPOSED
Accounting Information System
FOR BUSINESSES

IN THE

PRINTING PRESS INDUSTRY

Submitted by:

BUGAS, JOHNLERY S.
PANGCA, NASIBAH S.
PONCE, MARILLAC P.
ROXAS, SHAREN LYNNE B.
ZETA, ALEXA DAME B.

Submitted to:

MR. LOWELLE CIELO PACOT, CPA

Instructor

April 30, 2016

 RATIONALE
OVERVIEW AND INTRODUCTION

I. About the Study

In this study, the researchers aim to provide feasible recommendations by designing and
implementing an appropriate Accounting Information System to minimize the control
risks and improve the accuracy of data especially in determining revenue and expenses
for more effective and efficient business operations.

II. Printing Press Industry

As technology took over almost all of our daily transactions, either personal or not,
businesses providing printing services and the like has also emerged. This is because the
demand is unsurprisingly increasing as time passes by.

In Ozamiz City, few establishments have been answering the growing need of the
people of these kinds of services. However, with the lack of automated systems for
record keeping, most of these establishments resort to the manual system. One of these
establishments is the Alcon Enterprises and Printing Services.

Alcon Enterprises & Printing Services is a sole proprietorship established on January

1991 by Rosauro S. Alcontin, along with his wife, Cecilia B. Alcontin who acts as the
manager, eight regular employees and a support staff of three members from the
immediate family. The business is located at Rizal Avenue, Ozamiz City and initially
operated as a printing service provider and supplier of printing materials to other local
printing companies. Its traditional business model is based on providing timely and best
outputs through innovation and advanced technology, thus building long-term business
relationships to its customers.

III. The Situation

To realize the groups objective, the group, through inquiry, interview and visitation of
the firm, has gathered data on the current situation regarding the firms transaction
cycles such as sales, cash receipts, purchasing, cash disbursement, payroll and fixed
assets. Also, the group was able to pinpoint specific problems in each transaction cycle.

IV. The Main Problem

After gathering necessary data on the current situation regarding the firms transaction
cycles and pinpointing problems in each cycle, the group was able to come up with five
general problems true to the firms operations as a whole.
 V. The Expected Solution

Analysis on both the specific and general problems was made to properly make
recommendations on the appropriate Accounting Information System that should be
designed and implemented by the firm.

THE SITUATION

Sales and Cash Receipts

Alcon Enterprises & Printing Services uses the manual system in recording their sales and cash
receipts transactions. In their sales transaction, only few people, like their relatives and long
time loyal customers, have the privilege to purchase on credit. The manager decides whether or
not these people are qualified for credit transactions. For small transactions, a customer goes
to their office and gives a soft copy of their documents to be processed to the manager. The
manager then relays the instructions to his employees and the employees print their
documents and give the output back to the manager. If the customer has no complaints with
regard to their output, the customer pays and the manager issue an official receipt. If the
customer is not satisfied with the output, the company reprocesses the document and the
expense is charged to their employees salaries if the employees are at fault but if not, they just
reprocess it without any alterations to their records.

For transactions involving a larger amount of money, the customer gives the company a
purchase order and the manager or any of the employees who received the purchase order
creates a job order and records this in their company logbook. The job order then signals the
employees to start working on the specific job. When the output is finished, they are now ready
to receive payment from the customers in the form of cash or check. Their cash on hand is
deposited daily by the manager or any of the employees authorized by the manager.

Purchasing and Cash Disbursement

Alcon Enterprises & Printing Services purchases supplies such as papers and chemicals from
Cebu and Manila. Normally, they have stocks reserved for their daily operations but as soon as
there are customers with voluminous order, they immediately contact their trusted suppliers.
Purchase Order is only given to some chosen transactions such as the buying of chemicals. The
rest are ordered verbally.

Usually, an agent from their supplier will deliver their ordered goods in their store. The
manager or any of their personnel can receive the goods and sign the delivery receipt. The
checking of the quality and quantity of the received goods follows afterwards. Receiving a
wrong item happens rarely. If it occurs, they do not return it to the supplier because they still
utilize them for their operations.

Payment of ordered goods is done through the issuance of a post-dated check made and signed
by the manager. Only upon the notification of the supplier's agent, the payment is made. Thus,
they do not avail discounts. Meanwhile, the delivery receipt is the sole basis for establishing the
amount in the check. The payment of their credit shall be recorded in their logbook by the
manager.

Payroll

The payroll system of Alcon Enterprises and Printing Services starts with the determination of
hours worked by each employee in a day. This is evidenced by a logbook where the employees
manually write the time of their arrival and departure. The manager then calculates each
employees wage with a minimum of forty pesos per hour and distributes it weekly. Mode of
payment is through cash only. Once the employees receive their wages, they affix their
signatures on a payroll table prepared by the company as their official record for their payroll
distribution.

Fixed Assets

Since Alcon Enterprises and Printing Services is a family business, most of its operations are run
by the family and close relatives. This includes decision making in acquiring new fixed assets.
The managers son is responsible for recognizing the need to obtain a new asset or replace the
old one and authorizing the purchase as well. The process of paying and receiving the fixed
assets is similar to that of the purchasing and cash disbursement.

In maintaining the fixed assets, the company does not take the assets depreciation into
consideration. Physically, these are inspected by a technician once a month either sent by the
company where the asset was bought or their selected technician who comes to Ozamiz all the
way from Davao.

Lastly, the decision on disposing a fixed asset is done still by the managers son through the
recommendation of a technician. These then are brought to their house for them to make use
of them for personal use.

THE MAIN PROBLEM

The current business operations of Alcon Enterprises and Printing Services contain some
loopholes such as improper segregation of duties, incomplete recording of transactions,
unrestricted access to pertinent files, lack of back up files and improper & incomplete
documents used that might lead to incorrect determination of their revenue and expenses.
Considering that the system used by the business is manual, these problems might also lead to
fraud for worst cases.

THE EXPECTED SOLUTION

To solve the above mentioned drawbacks, the group will help Alcon Enterprises and Printing
Services by designing and implementing an appropriate Accounting Information System that
will minimize the business control risks and improve the accuracy of their data especially in
determining their revenue and expenses for more effective and efficient business operations.
Sales

The company's sales cycle does not involve the use of sales orders for small transactions and
utilizes a logbook for bigger transactions for efficiency purposes. To enhance the current
practices of the company with their sales cycle, the group would like to recommend the
following:

1. The company should have a separate ledger account where they will post their sales
from the official receipts issued to have a record on how much they have earned in
total.
2. The company's back orders or sales returns are not properly documented and recorded
in their books thus, the company must issue a return slip before reprocessing the order
to properly maintain record keeping.
3. Proper segregation of duties must also be observed. The company must limit access of
the logbook since the company allows anyone to edit, update and delete information
written on it.

Cash Receipts

Cash, itself, is inherently risky. That is why transactions involving cash like the cash receipts
transaction cycle are prone to risk and are in great need of strong internal control. For small
firms which do not follow the ideal flow of cash receipts, below are the proposed actions of the
group.

1. Since the company grants credit to customers who transact with large amount of
money, the company should maintain records of their accounts receivables with
subsidiary ledgers pertaining to the customers who owe the company. Through this, the
company would be able to keep track of the accounts to be collected. Also, maintaining
records can help in the accuracy of the amounts to be collected in case of sales returns
and other factors.
2. The company allows payment by cash or check which is good. However, the company
should restrict the job of receiving payments to only one or two entrusted employees to
minimize risks and fraud.
3. Proper segregation of duties is highly recommended. Authorization of payments (by
verifying the amounts being collected) should be separate from recordkeeping and
custody of cash.

Purchasing

For better improvement, the purchasing cycle of the entity should ensure that purchased goods
are ordered under proper authority using proper procedures. Since the entity has their
exclusive and approved supplier from the beginning of their operations, the need to have a
purchasing agent to evaluate appropriate suppliers is not necessary.

1. Based on their practice, with the power vested by the CEO, only the purchase of
chemicals (ink) is supported with a written purchase order. For proper
 documentation, the entity should support all their purchasing transactions with a
written purchase order. This can be helpful for accurate reconciliation of financial
records.
2. Upon the arrival of the goods purchased, the inspection of the goods follows after
the manager or any of their personnel can receive the goods and sign the delivery
receipt. To be certain that the goods received are inspected for quality, quantity and
description, the entity should prepare a blind copy of the purchase order and should
assign a specific personnel for the checking of the goods.
3. They should implement the three-way match: purchase order, suppliers invoice and
receiving report so that all transactions related to purchases such as suppliers
invoices, credit notes and adjustment should be accurately recorded in the
accounting records.
4. There should be payables ledger control account that should be maintained and
regularly checked by an employee who is independent of receiving of goods, invoice
authorization and payment routines.

Cash Disbursement

For cash disbursements, the entity should ensure that cash is disbursed only upon proper
authorization of management, for valid business purposes, and that all disbursements are
properly recorded. It is the practice of the entity that only the delivery receipt is the basis for
the payment of the ordered goods which is done through the issuance of a post-dated check
made and signed by the manager upon the notification of the suppliers agent that the balance
is due.

1. To assure that they are paying the right amount, the purchase order, suppliers
invoice and receiving report should be reconciled.
2. To avoid paying additional interest, their logbook where disbursements are recorded
should be regularly checked.
3. There should be a limited access to the logbook.
4. Aside from the manager, there should be an employee who will have an
independent verification and review of the check made by the manager to prevent
unauthorized payment.
5. It might be more useful to require two signatures on checks to deliberate decisions
made about who to pay, how much to pay, and when to pay bills.

Payroll

For improvement in the payroll system of the business, the team would like to recommend the
following:

1. The payroll distribution should only be assigned to one person, preferably the manager.
2. Since employees can manually write the time of their arrival and departure, this could
be a threat to the entity and be a disadvantage on their part because there could be a
probability that these people can commit fraud through manipulating the time they
have entered. It would be better if the firm invests in time cards which are to be
 inserted in a bundy clock during log in and log out. It would be a worthy investment
since its price is reasonable and the company will greatly benefit from it.
3. Since the receipt of the employees salaries is properly documented in their payroll table
with the employees affixed signatures, access to this document should be restricted to
only the manager.

Fixed Assets

For the improvement of the fixed assets of the entity, the team would like to propose the
following recommendations:

1. Currently, the managers son frequently decides on when to buy new assets for the
company. For strong internal control, proper authorization by the manager should be
secured before the entity purchase new machines and equipments.
2. The custodian must maintain a depreciation table or record for the assets through
acquiring information like the useful lives and salvage values of the assets from their
suppliers experts.
3. Besides from the assets depreciation, the fixed asset's location and repairs and
maintenance should be properly recorded and accounted for.
4. The disposal must be approved by the management and be properly recorded in their
books.

In general, through the groups mentioned recommendations, the entity can adopt an
Accounting Information System by improving their manually operated transactions that will
minimize the control risks and improve the accuracy of data especially in determining revenue
and expenses for more effective and efficient business operations by considering the cost-
benefit constraints of implementing it.
 THE FRAMEWORK
THE INFORMATION SYSTEM: AN ACCOUNTANTS PERSPECTIVE

The Information System: An Accountants Perspective is applicable in identifying the process of

generating information. From the gathered data, we were able to determine the situation of
the business particularly how the information is relayed in each transaction that has a potential
impact in its environment. In line with this, since the business is using a manual system, we
were able to see the importance of implementing an information system that can further
support the stewardship function, decision making and day-to-day operation of the
management.

TRANSACTION CYCLES AND BUSINESS PROCESSES

For transaction cycles, we were able to recognize the types of transactions present in their
business and the source documents supporting these transactions. With the knowledge of the
appropriate documents that should be available for efficient recording and reporting of
transactions, the group was able to identify the loopholes that may affect some specific areas in
the business which needs to be addressed or improved.

For instance, we were able to determine risks associated in the revenue cycle from
understanding the flow of their revenue transaction and knowing the documents they use such
as purchase order and job order which helps in promoting the maintenance of historical
records, support internal decision making, and sustain financial reporting. We can also consider
the fact that the business is applying a mixed of batch and real-time data processing methods,
which can influence us in designing our system. Furthermore, the idea of the different data
coding schemes and its advantages and disadvantages can help us identify the right data coding
to achieve more efficient data processing.

On the other hand, the group was able to have an understanding if the business implements an
effective control and the persons involve in their operation have strong ethical perspectives in
their operation. Having these considerations, we found out that there is an improper
segregation of duties, incomplete recording of transactions, unrestricted access to pertinent
files, lack of back up files and improper and incomplete documents used that might lead to
inaccuracy and worst, fraud.

With these, it will enable the group to decide on what are the actions and recommendations to
be made to increase the strength of their controls and minimize risks.
 PROJECT ACTION PLAN
TITLE: PROJECT MARRELAND: PROPOSED ACTION PLAN FOR THE IMPLEMENTATION OF
ACCOUNTING INFORMATION SYSTEM FOR ALCON ENTERPRISES AND PRINTING
SERVICES

OBJECTIVES:

To provide recommendations in properly recording the sales of the entity.

To provide recommendations in properly recording the purchases of the entity.
To provide recommendations in properly recording the cash receipts of the entity.
To provide recommendations in properly recording the cash disbursements of the
entity.
To provide recommendations in properly recording the payroll of the entity.
To provide recommendations in properly recording the fixed assets of the entity.
To provide recommendations in minimizing the control risks faced by the company that
could affect the business daily transactions.

My Who What to
Activities Sub-Activities When What support
Role else measure
Successfully
chose a
business
Choosing a Sharen Successfully
type of Lynne Established made an
business Roxas connections appointment
February
Planning Making an NONE with the Segregated
12, 2016
appointment Nasibah owner of the the duties
Segregating Pangca business among the
the tasks members
properly

ACHIEVED
MILESTONE
The group was able to have a detailed plan as to the means to come up with the study. Segregation of duties
was made so that each member will be able to focus on their assigned tasks. The group was also able to
secure an appointment for an interview with one of the reliable person of our chosen entity which is in line
with the printing press industry.
Sharen
Formulating Searched Created the
Lynne
questions for resources questions
Roxas
Obtaining and the interview Mr. such as the successfully
February
Understanding Conducting an Roland internet and Conducted the
Nasibah 17, 2016
the Business interview Alcontin books as interview on
Pangca
Reviewing the basis for the time
facts gathered interview Accomplished
Marillac
 from the Ponce questions in
interview Brought documenting
Visiting the Johnlery necessary all the
entity Bugas materials for necessary
Observing the documentati documents in
entity on the entity
Taking
pictures of the
entitys ACHIEVED
documents
MILESTONE
After the interview with Mr. Roland Alcontin, the group decided to visit the office. Verification and
confirmation of the transaction cycle processes were made by observing their actual operations and
interviewing some of their other employees for additional information that would widen our understanding of
their entity. Their source documents and available relevant papers were also checked to ensure its existence.
Sharen
Lynne
Providing the
Roxas
necessary
recommendati Seek Successfully
Nasibah
ons in helping information provide the
Pangca
the entitys from the necessary and
recording of management realizable
Marillac April 23, MANAG
Design sales, for recommendati
Ponce 2016 EMENT
purchases, verification of ons
cash receipts, their
Johnlery
cash transaction
Bugas
disbursements cycle ACHIEVED
, payroll and
Alexa
fixed assets
Dame
Zeta
MILESTONE
The group has successfully drawn some recommendations for the recording of their sales, purchases,
cash receipts, cash disbursements, payroll and fixed assets that could improve the day to day
operations of the business.
Johnlery Seek for
Bugas approval
Presenting the Accepted the
approved from the proposed
Nasibah adviser for
recommendati April 30, MANAG recommendati
Implementation Pangca the
ons to the 2016 EMENT on
management recommen
Sharen dations
Lynne ACHIEVED
made
Roxas
 MILESTONE
After the presentation and approval of the groups proposal by the instructor, the group will present
the same proposal to the management of Alcon Enterprises & Printing Services which will be
properly documented as well. The success of the proposal will depend on the managements
feedback and comment alongside the instructors assessment.