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

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

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

DFD for the human resources cycle Time sheet Approval Personnel Action Forms Payroll Department Human Resources Payroll Dept Cheque Register Time sheet Deduction Rpt & Payroll Summaries Prepare paycheque Employee TB pg 224 Paycheque And earning Summary Payroll Master File Prepare reports A.T.O. Tax reports

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

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

Payroll system (cont’d) 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 Personnel records: are records which affects the status of an employee’s pay eg employee hiring, a change of status or a resignation. Time sheets: A recording of time spent by workers. They are generally required for hourly workers. If a company uses a job cost system, time sheets for employees need to be cross-referenced with time recorded on individual jobs. Pay advice slip: provided to employee showing all necessary details including gross salaries, deductions and net pay. Some pay slips may include employee year to date earning records. Payroll register: a report printed prior to payment of wages, listing all employees who are due to be paid, their gross wages, deductions made and the net amount due. Payroll master file:This file contains one record for each current or past employee and contains data necessary for determining payroll deductions and submitting earnings information required in government reports.

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

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

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 Employee payroll master file: contains earnings records of the employees and employees details. Personnel reference and history file: contains non-financial and financial data concerning each employee. Time record transaction file: copies of time records used in payroll processing for a particular pay period. Compensation reference file: Table of pay rates and salary levels for various job description Personnel planning file: provides the basis for planning for future personnel needs.

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 TB: pg 222 System flowcharts: refer Boockholdt Illustrations 17-25 and 17-26 Deposit Slips & Cheques Cheque & Remittance Advice Sales Return Notification Stock Control Receiving Dept Customers F.I.

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

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.

Inputs and activities of the billing and cash receipt systems 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 Remittance advice A document returned by customers with their payments. Credit memo. A document that records a sales return or sales allowance.

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 Customer billing statement. A list of all transactions in a customer’s account during a specified time period, usually a month. It is mailed to the customer. Aging report A document which shows outstanding balance categorised according to how long it has existed. Usually an aging report shows amounts less than 31 days, and those 31 to 60 days and 61 to 90 days. Sales Analysis Report: summarises sales revenue,costs and profit margin by customer, product sales person, or sales district.

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 Source: TB page 223 System flowcharts: refer Boockholdt Illustrations 18-21 and 18-24 Notice of Receipt Payment Maintain creditors Cash Requirement Forecast Purchase Analysis Admin Creditors Master File

Sample subsystems in the purchases cycle Purchasing system Receiving system Voucher system Cash disbursement system Inventory and Material Requisition systems Receiving applications are to ensure that all receipts of material, supplies, and equipment are authorised and to record their receipt in the accounting records. Voucher system to record the obligation to pay a supplier. Inputs to this system are vendor invoices and records from the receipts, open purchase order, and purchase order detail files. This is an accounts payable system that assigns a unique identifying number to each vendor invoice

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.

Inputs and activities of the purchases cycle Procurement ie. Purchase goods and services Track and receive goods and services Maintain creditors and make payments Inputs Order Form or Purchase Requisition (Boockholdt Illu. 18-3) Notice of Receipt or Receiving Report (Boockholdt Illu. 18-5) Delivery Notice Debit memo Debit memo A document sent by a purchaser to a vendor that documents a purchase return. Purchase requisition A document prepared by someone in an organisation requesting that the purchasing department acquire goods and services. Receiving report A document prepared in the receiving department to record the receipt of goods from a vendor

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) Purchase Order A document prepared in the purchasing department and mailed to a vendor requesting that the vendor sell goods or services on credit. Vendor Control Report summarises the changes made to the payment file sorted by vendor Cash Requirement Report lists vouchers by the date they are due to be paid. IT aids the accounts payable department in planning cash flows and in identifying which invoices should be paid promptly to receive discounts and maintain good relations with vendors. Open Invoices Report lists unpaid vendor invoices as of the date of the report. Voucher Ageing Report summarises vouchers by how long they have existed.

DFD for the non-current assets cycle Shipping Report Invoice Supplier User departments & Management Record disposal of assets Request For Disposal Buyer Non-current Asset Change Form Purchase Requisition Update Reports Record repair, maintenance & changes in locations Invoice Record cost of new assets Depreciate Non-current assets Non-Current Assets File

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

Inputs and activities of the non-current assets system 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

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)

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