BP35103 ACCOUNTING INFORMATION SYSTEM 1

SEMESTER 1 SESSION 2021/2022

TUTORIAL CHAPTER 4

GREEN POND NURSERY (STAND-ALONE PC-BASED ACCOUNTING SYSTEM)

Green Pond Nursery Supply (GPNS) is a garden center wholesaler in eastern Pennsylvania that
sells and distributes a wide range of garden products and equipment including organic
fertilizers, premium flower and grass seeds, organic pesticides, and garden spreaders. GPNS's
customers are primarily small garden centers and landscape companies in the Mid-Atlantic
States. Sales are on credit. GPS's current information system includes manual procedures
supported by independent (nonnetworked) PCs in each department. Communications between
departments is entirely through hard-copy documents. Recently, GPS has been receiving
complaints from customers and suppliers about billing, shipping, and payment errors.
Management believes that these complaints stem, in part, from their antiquated computer
system. You have been hired to assess GPS's procedures and internal controls. The following is
a description of GPS's revenue cycle.

Sales Procedures

The revenue cycle begins when a customer places an order with a sales representative by
phone or fax. A sales department employee enters the customer order into a standard sales
order format using a word processor installed on a PC to produce: three sales order copies, a
stock release document, a shipping notice, and a packing slip. The accounting department
receives a copy of the sales order, the warehouse receives the stock release and a copy of the
sales order, and the shipping department receives a shipping notice and packing slip. The final
sales order copy is sent to the inventory control department. Upon receipt of the sales order,
the accounting department clerk manually prepares an invoice and sends it to the customer.
Using data from the sales order, the clerk then enters the details of sale in the department PC
and records the sale in the sales journal and in the AR subsidiary ledger. At the end of the day,
the clerk prepares a hard copy of sales journal voucher, which is sent to the general ledger
department.

Upon receipt of the sales order and stock release, the warehouse clerk picks the products and
sends them to the shipping department, along with the stock release. The warehouse clerk then
updates the internal inventory stock records on the warehouse PC and files the sales order in
the warehouse. The shipping department clerk receives a shipping notice and packing slip from
the sales department. The clerk files the shipping notice and holds open the packing slip until
he receives the stock release and products from the warehouse. Upon receipt of the stock
release, the shipping clerk prepares the two copies of a bill of lading using a word processor.
The bills of lading and the packing slip are sent with the product to the carrier. The clerk then
files the stock release in the department. Upon receipt of the sales order copy, the inventory
control clerk updates the inventory subsidiary ledger and files the sales order in the
department.

At the end of the day, the clerk prepares a hard-copy inventory account summary and sends it
to the general ledger department. The general ledger clerk posts the journal voucher and
inventory summary to the general ledger, which is stored on the department PC, and the clerk
then files these documents in the general ledger department.

CASH RECEIPTS PROCEDURE

Mail room employees open cash receipts from customers and reconcile the amounts on the
checks and remittance advices and send remittance advices to the accounting department,
where a clerk records each remittance advice on a remittance list. The remittance list is then
sent to the cash receipts department. Using the remittance advices, the accounting clerk
updates the customer accounts receivable on the department PC and files the advice in the
department. At the end of the day, the clerk prepares an AR summary on the PC and sends a
hard copy of the summary to the general ledger department. The mail room clerk sends the
checks to the cash receipts department, where a clerk endorses each check with the words "For
Deposit Only." Next, the clerk reconciles the checks with the remittance list and records the
cash receipts in the cash receipts journal on the department PC. Finally, the clerk prepares a
deposit slip and sends it and the checks to the bank. The general ledger clerk posts the
accounts receivable summary to general ledger AR Control and Cash account and files it in the
general ledger department.

Required:
(a) Create a data flow diagram of the current system.
(b) Create a system flowchart of the existing system.
(c) Analyze the physical internal control weaknesses in the system.