Accounting systems design & evaluation

1. Accounting systems design & evaluation 9434SB 19 April 2002 Class 9

2. Exercises • There are various system tools used in documenting systems. • Describe these tools and describe the circumstances under which they are most useful • Distinguish between system flow charts and program flow charts • Compare the use of DFDs to the use of flowcharts • Explain the difference between a context diagram, a logical DFD and a physical DFD

3. This lecture • Functions/activities, input forms/ source documents and output reports for each subsystem • Payroll and human resource information system • Customer billing and payment • Purchase order and payment to suppliers • Fixed assets

4. DFD for the human resources cycle Time sheet Approval Personnel Action Forms Payroll Department Human Resources Payroll Dept Cheque Register Timesheet Deduction Rpt & Payroll Summaries Prepare paycheque Employee Paycheque And earning Summary Payroll Master File Prepare reports A.T.O. Tax reports

5. Payroll system • Objectives: records and processes data used to pay employees for their services. A payroll application calculates the pay due employees, prints paycheques and maintains cumulative earnings records • A separate system to allow for: • Withholding of deductions eg income tax and union fees • Application controls to detect fraud • Typically processed in batch mode

6. Activities in payroll systems • Record/ input payroll transactions for the period • Update payroll master file • Update tax rate and deductions (eg PAYG, HECS, Super) • Validate time and attendance data • Prepare the payroll • Disperse the payroll • Calculate employer-paid benefit and taxes (eg payroll tax, FBT) • Disperse payroll taxes and miscellaneous deductions System flowchart: refer Illu. 19-27 Boockholdt pg 679

7. Inputs Personnel records and action forms from HR Approved time sheets or timecard (Boockholdt Illu. 19-19) Deduction authorisation signed by employees Outputs Paycheques (Boockholdt Illu. 19-21) Pay advice slip (Boockholdt Illu. 19-21) Employee listing Payroll register (Boockholdt Illu. 19-22) Payroll master file (Boockholdt Illu. 19-23 and 19-24) Cheque registers Tax reports Deduction reports Payroll system (cont’d)

8. Sample GL entries generated by a payroll system Dr marketing salaries Dr Warehouse salaries Dr Manufacturing overhead Cr Payroll control to record the gross payroll costs of employee services Dr Payroll control Cr PAYG payable Cr Union fees payable to record the payroll deductions for the period

9. Other activities in the Human Resources Management System • Recruitment and hiring • Training • Assignment of job responsibilities • Evaluation of performance • Discharge of employees

10. Files maintained in a human resource information system • Employee payroll master file • Personnel reference and history file • Time record transaction file • Compensation reference file • Personnel planning file

11. DFD for the billing and receipts cycle Sales Analysis Reports Administration Sales AR Master File Cash Receipts Forecast Sales Order Invoice Aging Reports Bad Debt Reports Customers Receive payment Debit/ Credit Memo Manage Customer A/C Deposit Slips & Cheques Cheque & Remittance Advice Sales Return Notification Stock Control Receiving Dept Customers F.I.

12. Sample subsystems supporting the billing and receipts cycle • Order entry system • Shipping system • Billing system • Cash receipt system

13. Objectives of the billing & cash receipt systems • The purposes of the billing application are to prepare sales invoices for merchandise that has been shipped and to record the sale in the appropriate accounts • The purpose of the cash receipt system is to record payments made by customers for credit sales. It also deletes paid invoice records from the invoice detail file.

14. Inputs and activities of the billing and cash receipt systems • Inputs • Customer purchase orders • Sales order (Boockholdt Illu. 17-3) • Remittance advices(Boockholdt Illu. 17-5) • Credit memo authorisation Activities • Generate sales • Receive payments • Manage customer accounts

15. Outputs of the billing and cash receipt systems • Financial statement information • Customer Billing Statement (Boockholdt Illu. 17-8) or Invoices (Boockholdt Illu. 17-4) • Aging Report (Boockholdt Illu. 17-9) • Bad Debts Report • Cash Receipts Forecast • Customer Listing • Sales Analysis Reports (Boockholdt Illu. 17-11) • Credit Memos

16. DFD of the purchases cycle Stock Control Receive goods or services Delivery Notice Order Form Receiving Rpt Receiving Report Production Departments Purchase goods or services Purchase Order Merchant Notice of Receipt Payment Maintain creditors Cash Requirement Forecast Purchase Analysis Admin Creditors Master File

17. Sample subsystems in the purchases cycle • Purchasing system • Receiving system • Voucher system • Cash disbursement system • Inventory and Material Requisition systems

18. Objectives of the purchasing and cash disbursement systems • The purposes of the purchasing application are to identify materials, supplies, and equipment for acquisition; to select a supplier for these items; and to ensure that the items are requested and received. • The purpose of the cash disbursement system is to ensure that payments are made to vendors in the proper amount and at the proper time.

19. Inputs and activities of the purchases cycle • Inputs • Order Form or Purchase Requisition (Boockholdt Illu. 18-3) • Notice of Receipt or Receiving Report (Boockholdt Illu. 18-5) • Delivery Notice • Debit memo Activities • Procurement ie. Purchase goods and services • Track and receive goods and services • Maintain creditors and make payments

20. Outputs of the purchasing and cash disbursement systems • Financial statement information • Purchase orders (Boockholdt Illu. 18-4) • Vendor cheques (Boockholdt Illu. 18-7) • Cheque Register Boockholdt Illu. 18-9) • A Vendor Control Report (Boockholdt Illu. 18-8) • Discrepancy Reports • Cash Requirement Forecast (Boockholdt Illu. 18-12) • Purchase Analysis Reports • Open Invoices Report (Boockholdt Illu. 18-10) • Voucher Aging report (Boockholdt Illu. 18-12)

21. DFD for the non-current assets cycle ShippingReport Invoice Supplier User departments & Management Record disposal of assets Request For Disposal Buyer Non-currentAsset ChangeForm Update Reports PurchaseRequisition Record repair, maintenance & changes in locations Invoice Record cost of new assets Depreciate Non-current assets Non-Current Assets File

22. Objectives and outputs of the non-current asset system • To ensure effective and accurate processing of the purchase, maintenance, valuation and disposal of an organisation’s fixed assets. • Outputs include: • Financial Statement information • Fixed Asset Register • Depreciation Register • Repair and Maintenance Report • Retired Assets Report

23. Inputs and activities of the non-current assets system • Inputs • Purchase requisition • Request for disposal • Non-Current Asset Change Form • Invoice Activities • Record cost of new assets • Depreciate non-current assets • Record repair, maintenance and change in asset location • Record disposal of assets

24. In summary • Functions/activities, input forms/ source documents and output reports for each subsystem • Payroll and human resource information system (Notes: 9-4 to 9-10;TB: 5.1 to 5.4, Boockholdt pg 668-680) • Customer billing and payment (Notes: 9-11 to 9-15; TB: 6.1; Boockholdt pg 538-568) • Purchase order and payment to suppliers (Notes: 9-16 to 9-20; TB 6.1; Boockholdt pg 597-626) • Non-current assets (Notes: 9-21 to 9-23; TB: 6.1)

25. Exercises • TB Chapter 5 – Questions 1 to 4 • ACCA Paper 5 Exam (Jun 2000):Question 9 • Model Exam Question 5 • Compile a system flowchart for the granting of credit in a large wholesaling organisation