Accounting Information Systems Project Assignment (25%-50%)

PROGRAM STUDI : Akuntansi

PROJECT TITLE : Evaluating the current internal control system and accounting
information system and recommend for improvement

Learning Objectives
After doing the PROJECT students are expected to be:
1. able to work in a team
2. having a good communication skill both oral and written
3. having strong character, attitude and integrity (religious, nationalist, ethically and moral
responsible, socially responsible, self-confidence, and independent)
4. able to adapt current and future issues in information system technology
5. be able to design the simple relational database table
6. be able to design the main component AIS
7. be able to implement of internal control concepts to transaction processing systems
8. be able to prepare the reports suit to the decisions making
9. be able to design procedure for each business tasks
10. be able to understand and prepare the basic system documentation
11. be able to participate as system development team member.

Project Description
Students are required to create their own project or choose from the list of available project
to evaluate the current internal control system and accounting information system of an
organization..
Project Assignment Requirements
In group of 3 or 4, students are required to:
1. Prepare a statement of objectives for an accounting information system relevant to the
organization.
2. Prepare the organizational chart and job description of the organization.
3. Prepare the list of available current computer facilities.
4. Prepare Context Diagram of current systems.
5. Identify the sub system of business process and prepare the documentation of current
system:
a. Flowcharts
b. Workflow table
6. Evaluate the current internal control system (identify the control point and weakness)
7. Prepare recommendation to improve AIS and Internal Control Systems
 8. Prepare the documentation for the recommended new systems
9. Design the structure of financial statement and general leger files.
10. Prepare List of hardware and software needs for new systems
11. Presentation and report submitting
OUT PUT
1. Documentation of current systems
2. Recommendation to improve the internal control and AIS
3. Documentation of the recommended systems
GRADING POLICY:
a. System Documentation and evaluation (60%)
b. Report writing (30%)
c. Presentation (10%)
Time Schedule
No. Task Week
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

1. Prepare a
statement of
objectives for an
accounting
information
system relevant to
the organization.
2. Prepare the
organizational
chart and job
description of the
organization.
3. Prepare the list of
available current
computer facilities
4. Prepare Context
Diagram of
current systems
5. Identify the sub
system of business
process and
prepare the
documentation of
current system.
a. Flowcharts
b. Workflow table.
6. Evaluate the
current internal
control system
(identify the
 control point and
weakness)
7. Prepare
recommendation
to improve AIS
and Internal
Control Systems.
8. Prepare the
documentation for
the recommended
new systems.
9. Design the
structure of
financial
statement and
general leger files.
10. Prepare List of
hardware and
software needs for
new systems.
11. Report/Presentatio
n Preparation
12. Class
Presentation.
References and resources
1. Hall, James A. (2008). Accounting Information Systems, 6th Edition, South
Western Cengege Learning, Mason (H) or newer editon. (compulsory)
2. Wilkinson Joseph W, et.al (2000) Accounting Information System, 7th Ed. John
Wiley & Son (W)
3. Capron, H. L. and Johnson, J. A (2002) Computers tools for an Information Age 7
th Ed, Prentice Hall, New Jersey
4. Jones and Rama, Accounting Information Systems: A Business Process
Approach, 2nd edition
5. Lecture Notes (LN) can be downloaded from amsaldjunid.orgfree.com
6. Lecturing video
https://www.youtube.com/playlist?list=PLJs5uiq1Hpixd97LFvw_YxsR4dPHrm_ib
You may use this Case
Fizzy Cola Bottling Company
REGIONAL DISTRIBUTOR OF SOFT DRINK PRODUCTS

Industry and Company Background

Fizzy Cola Bottling Company of Georgia, Inc. (FCBCG), a regional distributor of nonalcoholic beverage
products, serves most of Georgia and the eastern part of Alabama. The company began operations in
1961, with an exclusive franchise from the rapidly expanding Fizzy Cola Company (FCC) of Fort Worth,
Texas. The Texas Company, in keeping with industry practice in the 1930s and 1940s, originally supplied
a relatively small local market. However, with the growing popularity of these products following World
War II, FCC began to expand its horizons and set its sights on national-and later internationaloperation.
The strategy for achieving this goal was for the company to focus its energies on the production of
beverage concentrates and syrups, leaving franchisees to handle the packaging and distribution
responsibilities. The Coca-Cola Company and PepsiCo, Inc., moved toward consolidation of their bottling
firms into larger and larger units that were either partially or completely owned by the parent
companies, but FCC allowed its bottlers to remain small and independent, and many of them are still
family-run operations. FCC always envisioned possible vertical integration of the beverage production
and distribution functions, but such steps have not yet been taken and the relationships between FCC
and its franchiseedistributors have grown progressively stronger.

Fizzy Cola Bottling Company of Georgia, Inc., was founded by Alfred J. Johnson II and Bob K. Geronimo.
Johnson had experience in the soft drink industry through various positions in production and
management at the Coca-Cola headquarters in Atlanta. Geronimo had general administrative experience
and substantial personal wealth (essential for the success of the new company) from a family textile
business in West Georgia. The two men decided to go into business together, with Johnson as president
and Geronimo as vice-president. Twenty employees were hired to perform all the functions of
marketing, production, delivery, and administration. The fledgling company rented a warehouse in
Columbus, Georgia, to serve as its production plant, leased the necessary bottling equipment, and
bought three delivery trucks. From these modest beginnings, FCBCG has grown to be Fizzy Cola
Company's largest bottling franchisee in the Southeastern United States. Its corporate headquarters and
main bottling plant are still in downtown Columbus, but distribution centers are located in Albany,
Atlanta, Milledgeville, and Rome, Georgia, as well as Huntsville, Alabama. The total payroll, down
somewhat from its peak in 1982 as a result of increasing automation of the packaging and handling
processes, numbers 750 people, including about 150 drivers who deliver beverage products to the
customers.

Fizzy Cola Company's original product was a cola drink that competed directly with Pepsi-Cola and Coke.
It is still the company's cash cow, generating 30 percent of total revenue and 45 percent of operating
income, but the product line has been expanded over the years to include diet and decaffeinated colas
and orange and lime sodas. Ten years ago, FCC bought out a small Tennessee firm that produced a
chocolate cola, similar to the beverages sold in neighborhood drug stores before World War II. The
chocolate cola has made a surprising comeback and now sells well among teenagers and young adults,
as well as among older people who remember the beverage from their childhood. FCBCG distributes the
whole line of FCC's eight products.

The term "bottling company" persists in the beverage industry. However, a large percentage of the total
worldwide output of soft drinks is now packaged in aluminum cans. FCBCG currently sells roughly 40
percent of its output in 8- and 12-oz. cans, 20 percent in 10-oz. glass bottles, and most of the remainder
in 16-oz., one-liter, or two-liter plastic bottles. The company is currently experimenting with 3-liter
plastic bottles, but the associated volume is still small. In addition, the company sells about 5 percent of
its total beverage output in bulk, mostly in fountain cans and 55-gallon drums.

The company's traditional customer base consists of supermarkets, convenience stores, restaurants,
bars, and transportation companies, including two of the major airlines. However, since the early 1980s,
vending machines have provided a substantial and growing segment of the market. FCBCG's vending
machines now operate in shopping malls, service stations, schools, and other businesses, alongside
machines dispensing products of the "Big Two" soft drink firms. Most of the vending machines are
rented, and FCBCG is liable for servicing the machines as well as for replenishing them.

Fizzy Cola Bottling Company of Georgia's franchise agreement requires it to buy all its cola syrup, fruit
concentrate, labels, and promotional material from FCC. However, the company is free to purchase
bottles, cans, carbon dioxide (C02) gas, and miscellaneous supplies from other vendors. The franchiser
takes the responsibility for all institutional advertising and much product advertising, particularly the
expensive commercials on national television. FCBCG pays for product promotion throughout its own
sales territory, mostly in the form of local television commercials and billboard advertising. It also sets
prices in its territory.

Price competition is fierce in the beverage bottling industry.

Although an 8-oz. drink that once sold for 5 cents now sells for about 50 cents, prices have not kept pace
with general inflation. In fact, average wholesale soft-drink prices declined by 6 percent between 1986
and 1989, largely because of price wars. Price wars have erupted every few years among the competing
bottling companies in an attempt to gain market share. Lately, however, the bottling companies have
realized that the deep discounts may have been self-defeating. Profits have been squeezed and a few
outdated production plants have been closed in an industry shakeout, but consumer preferences for the
various brands have not materially shifted. Particularly worrisome for the bottling companies, the
market has become increasingly resistant to the regular prices. Customers who have been able to buy a
six-pack of soft drinks on special for $1.25 resent having to pay the regular price of more than twice that
much. Some industry analysts believe that the companies have learned their lesson and that greater
price stability can now be anticipated.

Management Style

Fizzy Cola Bottling Company of Georgia is organized on functional lines, and management is highly
centralized. Geronimo is now retired and Johnson deceased, but the company is still run by a small
management team, consisting mostly of long-term employees who worked under the founders. The
current president is Johnson's daughter Molly, affectionately known throughout the company as "Miss
Molly." Johnson's son Stephen and two of Geronimo's relatives serve on the Board of Directors. Three
vice-presidents report to Miss Molly: the Vice-

President for Operations, Rod L. Bunion; the Vice-President for Marketing, Alice T. Hayes; and the Vice-
President for Finance, Alan C. Williams. Johnson and her three vice-presidents make all of the larger
decisions and many of the smaller ones that, in other companies, might be delegated to middle
management. The managers at the Columbus headquarters who are in charge of purchasing,
production, sales, and shipping, and the managers of the local distribution centers nominally have
autonomy in their areas of responsibility. However, their autonomy is largely ceremonial and upper
management keeps them on a short leash. The previous Sales Manager quit his job after a dispute with
upper management in which he complained about bearing all the responsibility for sales, but having no
authority to back it up.

Production and Distribution

Fizzy Cola Bottling Company of Georgia and its competitors have responded to the pressure on profits by
trying to reduce raw materials costs, cut inventories, and automate production. The trend toward plastic
containers was an important effort to reduce materials costs. While glass and aluminum prices have
steadily risen over the last several years, the cost of the resin used to make plastic containers has fallen.
Unfortunately, any savings in this area may be more than offset by a recently announced 4 percent
increase in the price FCC charges for its syrup and concentrates. This increase is expected to hurt FCBCG
and its sibling franchisees, at least in the short run.

The company has never achieved the ideal "just-in-time" inventory system, but over a ten-year period it
has managed to reduce its inventories or syrup concentrate, carbon dioxide, containers, and labels from
ten days' to every day's supply. To accomplish this feat, the company entered into long-term
relationships with a small number of loyal vendors, guaranteeing demand for delivery goods and sharing
with them its long-run purchasing expectations. The vendors in return, guarantee consistent quality and
on-schedule delivery. Fast-moving items are delivered daily, or in some instances even more than once
per day. To meet production needs. Although restricting purchases to just a few vendors reduced
competition and may have resulted in somewhat higher raw-materials prices, FCBCG has benefited from
the relationship with its vendors through lower inventories and fewer rejects. For example, ten years
ago, nearly one percent of the cans received from vendors were rejected; today, the rejection rate is less
than one-hundredth of one percent.

Efforts have also been made to reduce finished-product inventories. No more than one day's output
normally is kept on hand at the Columbus production plant, and no more than two days' sales are
retained at the local distribution centers. Whenever possible, the trucks are loaded as production is
completed and they leave either the same day or early the following day. Reducing finished goods
inventory to such low levels is relatively easy if demand can be predicted accurately or, better still,
controlled. Demand for soft drink products is seasonal. However, fifty years' data are available, both
from industry and company sources, documenting demand fluctuations from month to month, and even
from week to week. To help smooth out seasonal and random week-by-week demand fluctuations,
FCBCG offers incentives to customers to contract for the delivery of soft drinks at a steady rate over an
extended time period. Most of the larger customers are willing to do this. A supermarket chain may
contract for the delivery of 5,000 cases of Fizzy Cola each week for the next six months. Although most
of the smaller customers could not make such a commitment, the large number of customers ensures
good overall uniformity of demand. In turn, uniform demand permits the production and prompt
distribution of large batches of each beverage product.

In addition, FCBCG has tried to find ways of minimizing finished-good inventory, even with small
production batches. The two keys to success are a "demand-pull" strategy, in which production is geared
closely to current orders, and flexible, efficient production methods. Over the last ten years, FCBCG has
invested over $50 million in automated processing, bottling, and handling equipment. Production of
each beverage product consists of mixing the syrup or concentrate with water, pumping in carbon
dioxide to create the effervescence, filling the can or bottle, affixing the appropriate label, and packing
the cans or bottles into cases or crates. Eight separate production lines are maintained, one for each
product. However, in an emergency, the equipment producing the regular, diet, and decaffeinated colas
can be used interchangeably. Each production line can handle all sizes of cans or glass or plastic bottles,
and switching from one type of container to another requires no more than ten minutes of set-up time.
The equipment can run continuously, and product quality is monitored in real time by electronic and
chemical sensors. Typically, however, the equipment is stopped every fifteen hours for cleaning and
further inspection. Company inspectors try to detect any processing problems and verify compliance
with government hygiene standards. They maintain an inspection log that is examined by state health
inspectors who visit the plant on a monthly basis.

Old-time employees remember the back-breaking tasks of moving raw materials from inventory storage
to the production plant and transporting cases or crates of bottles to the loading bays. Now virtually all
of these tasks are performed by automated handling equipment. Containers of syrup and concentrate
and cases of empty cans or bottles are loaded directly from incoming trucks onto gantries that run into
the production building. Carbon dioxide tankers remain outside the building and simply hook up to
hoses that transfer the gas into large holding tanks. Cases of finished product are moved on conveyer
belts directly to the loading bays and onto the trucks. Only if there is a snag in the availability of trucks-
which typically happens about once per week-is it necessary to offload the cases onto the floor of the
loading sheds and subsequently loads the trucks by hand.

Existing Accounting System

The present accounting system was instituted in the early 1970s. It was designed by a project team
composed largely of personnel from the CPA firm that performed FCBCG's external audit. The system
was implemented on a mainframe computer installed at the Columbus headquarters, but was intended
to serve the needs of the whole organization. The computer system supports multitasking, operating in
a batch mode. A printer terminal serves as the system console, and eight interactive terminals provide
for on-line data entry and file maintenance. Two 60-MB hard disk drives and a 1,600 b.p.i. (bits per inch)
tape drive provide for secondary and tertiary data storage. Communication between the distribution
centers and Columbus is restricted to remote job entry and very limited remote output that can be
accommodated on teletype machines. Each distribution center has two teletype machines which
communicate with the mainframe through multiplexing modems and the telephone lines.

Initially, the purchasing, production, sales order processing, and related inventory control functions
were computerized. The cost accounting, billing and collections, general ledger, and payroll applications
were added two years later. All the applications software was written in COBOL.

Sales are solicited both from Columbus and also from the local distribution centers, each of which has a
small sales force. Sales orders originating from the distribution centers are keyed into teletype machines
and transmitted to headquarters. Upon arrival, these sales orders and others originating at Columbus
are initially written to a scratch file. Twice per day, a batch program is run that automatically assigns
order numbers and writes the sales records to the master sales file. The term master file reflects the
terminology used at FCBCG. The reader will note that some of esc files should more accurately be
referred to as transaction files.

When a single sales order calls for multiple deliveries, it is broken up into multiple orders, each with a
different sales order number. Thus, each sales order number corresponds to a single delivery to the
particular customer; however, a cross reference is made to related sales order numbers.

The records in the master sales file are divided into two sub records, designated as types A and B. Each
record includes one A sub record, containing data relating to the order as a whole, and one or more B
sub records, containing data on the individual products ordered (Exhibit 1). Here, a product refers both
to a soft drink product line for example, cola or orange soda-and to the size and type of container. A
beverage sold in 8-oz. cans has a different product number than the same beverage sold in 12-oz. cans.
Every day, clerks in the production control office run a second batch program that accesses the sales file,
identifies sales orders due for delivery within three working days, and copies the records in question
into a temporary sales order file. Daily sales order reports are printed in the same operation. The
temporary files are edited from on-line video display terminals to make any necessary changes. The
clerks scan through the records in the temporary order files and can manually deselect any orders that
are to be excluded from the following day's production. Deselection of order records, which may be
done for a variety of reasons such as a customer credit-hold, requires written authorization by the
production supervisor.

After editing, the temporary files are run through another batch program that sorts the orders by
product line. When a sales order is written for several product lines, it is divided into several related
production orders. Production order numbers are assigned and records are automatically written to a
master production file. The type B sub records in this file are similar in content and forma to those in the
master sales file; however, the type A sub records contain only data relating to production (Exhibit 2).

The edited temporary order files are run through a fourth batch program that identifies raw materials
requirements: syrup or concentrate, water, carbon dioxide, bottles or cans, and labels. The formula for
each product, which specifies the proportion of syrup or concentrate, water, and carbon dioxide to be
used, is stored in a formula master file that is accessed by this program (Exhibit 3). A materials
requirements report that lists the materials needed for the next three days' production is prepared for
use by the inventory control and purchasing clerks. The clerks review the report and check that the
materials are either on hand or are due for delivery in time for production. Reference is made to the
master purchases file in which are recorded all purchase orders that have been placed, together with
the target delivery dates. The company makes a considerable effort to preserve uniform rates of
production, in turn guaranteeing uniform rates of materials deliveries. However, a "glitch" sometimes
occurs, and the clerks must make an urgent telephone call to the vendor requesting an adjustment in
the quantities to be delivered either the next day or for the next several days.

One of the major accounting applications is a standard process costing system. The consulting firm that
designed the accounting system stressed the attractiveness of standard costing because of the
continuous production of standardized products. The per-unit standards for each product are stored in a
standard cost master file. This file contains the materials' quantity and price, the labor hour allowance
and rate, and the overhead rate based on direct labor costs. Unfortunately, the documentation on the
formula master file and standard cost master files has been lost.

Production cost reports are prepared on a monthly basis for the mixing bottling, and packing operations.
For each operation and product, the reports show the number of equivalent units of production with
respect to:
▪ costs transferred in from the previous operation;
 ▪ costs of the major materials categories (syrup, concentrate, bottles, cans, labels, and
miscellaneous items such as packing materials); and
▪ conversion costs (labor and overhead).
Costs are assigned to the actual equivalent units on the basis of standard costs per equivalent unit. The
layout of the production cost report is reproduced from the original design documentation in Exhibit 4.
Along with the production cost reports, monthly standard cost variance reports are prepared for the
materials categories, labor, and overhead (see Exhibit 5). Both sets of reports are available by the tenth
of the month following the end of the reporting period.

The master sales file provides the basis for preparing Loading Reports that list both the products to be
loaded onto each truck and the customers that have ordered them. Each Loading Report then serves as
a driver's manifest, indicating the goods for which the driver is responsible until delivery is completed.
The master sales file also provides the basis for customer billing. High-volume customers, particularly
those placing ongoing orders, are billed from the corporate headquarters, typically on thirty-day terms.
However, smaller customers often are expected to pay for beverages upon delivery, and the drivers
have the responsibility of collecting the cash. Accordingly, drivers must not only account for the cases of
soft drinks on their trucks but also provide a proper accounting of cash received. A Driver's Daily Report
(Exhibit 6) must be turned in by each driver upon his or her return to the distribution point. The front
side of the report lists the deliveries made, cash collected, and expenses incurred. Drivers carry
company credit cards with which to buy fuel for the trucks, and they are reimbursed for incidental cash
expenses. The back side of the report reconciles the number of units of each product loaded and
delivered. Any remaining units stay on the trucks until the following day and are recorded by the driver
on that day's Daily Report, along with the number of new units loaded.

Possible New Accounting System

The present accounting system works reasonably well, although there is increasing concern that it has
not kept pace with the advances made in production and materials-handling technology. The batch
processing system based on conventional files is cumbersome and slow, and communication with the
distribution" centers is primitive. The manager of the computer center has recommended that a new
computer system be installed and that new software be acquired that could interface with a data base
management system.

There is another concern with regard to the standard cost system. With the large-scale automation of
the company's production plant, the continued relevance of the standard cost system has been called
into question more than once. The Vice-President for Operations attended a Rotary Club meeting at
which an expert on computer-integrated manufacturing expressed the opinion that standard costing is
now as dead as a dodo. Control is required on a minute-by-minute basis, and variance reports, which
may not be available until several weeks after something goes wrong, are obviously useless. The vice-
president returned that afternoon and posed some penetrating questions to the controller, which she
was hard put to answer. Later the same month, one of the external auditors inform the controller that
many firms had abandoned standard costing systems after their factories had been automated.

Last month, the controller suggested that a consulting firm be called in to perform a systems analysis.
The firm would be asked to develop an overall plan for the accounting system that would address the
various concerns mentioned earlier; to evaluate the existing system; and to make appropriate
recommend actions for an improved system. Some improvements might be relatively minor, such as
providing additional management reports. Others might be more radical, such as replacing the present
computer hardware and software with more modern technologies. Upper management was receptive
to the idea and has retained a consulting firm to perform the study. You are the senior
consultant, in charge of the engagement.