POSAVEK REMODELING AND BUILDING SUPPLY COMPANY (CENTRALIZED SMALL BUSINESS ACCOUNTING SYSTEM)
Posavek is a wholesale supplier of building supplies to building contractors, hardware stores, and home-improvement centers in the Boston metropolitan area. Over the years, Posavek has expanded its operations to serve customers across the nation and now employs over 200 people as technical representatives, buyers, warehouse workers, and sales and office staff. Most recently, Posavek has experienced fierce competition from the large online discount stores. In addition, the company is suffering from operational inefficiencies related to its archaic information system. Posavek’s expenditure cycle procedures are described in the following paragraphs.
Expenditure Cycle
Posavek uses a centralized
Purchasing
The process begins in the purchasing department. Each morning the purchasing agent reviews the inventory levels from his department terminal and searches for items that have fallen to their reorder points and need to be replenished. The purchasing agent then selects the vendors and creates digital purchase orders in the purchase order file. He then prints two hard copies of each purchase order and sends them to the respective vendors.
Receiving
When the items are received, the receiving department clerk reconciles the goods with the attached packing slip and the digital purchase order, which he accesses from his computer terminal. The clerk then creates a digital receiving report, stating the condition of the materials received. The system automatically closes the purchase order previously created by the purchasing agent. In addition, the receiving clerk prints a hard copy of the receiving report, which he sends with the inventory to the warehouse where the items are stored.
Warehouse
Upon receipt of the inventory, the warehouse cleric reconciles the items with the receiving report and updates the inventory subsidiary ledger. The accounting system automatically and immediately updates the inventory control account in the general ledger.
Accounts Payable
Once the AP clerk receives the vendor’s invoice, she reconciles it with the purchase order and receiving report from her terminal. The clerk then creates a digital vendor invoice record and sets a due date for payment. The system automatically updates the AP control account in the general ledger. Daily, the AP clerk reviews the open vendor invoice records from her terminal, looking for items that need to be paid. The clerk then records the payment in the digital check register and closes the open vendor invoice. Finally, the clerk prints a hard copy of the check and sends it to the vendor. The system automatically updates the AP and cash GL accounts.
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.
- d. (Optional) Prepare a system flowchart of a redesigned computer-based system that resolves the control weaknesses that you identified. Explain your solution.
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Chapter 5 Solutions
Accounting Information Systems
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