Physical and Manual System, Reasons of Manual Systems, Tasks, activities, and procedure so of M annual Revenue system and Accounting information Systems

1. Habib Ullah Qamar
Govt. college of Commerce Gujranwala
4/26/2016

2.  In the last lecture we started introducing
revenue cycle
 We found the there are three main processes
that are performed in completing revenue
cycle
 Sales Order Processing
 Sales Return Procedures
 Cash Receipt Procedures
 How we can make revenue cycle more reliable
ad accurate with different ICS checks and
practices

3.  We will start with description of Physical
System and why we still need it.
 Manual system
 Models of previously discussed system
concepts
 Internal controls and segregation of duties
 In the end we will try to highlight the
inefficiencies of manual system
 Lets start…….

4.  How can we describe a system in the best possible
way?
 Textual form
 Visual form
 Physical observation
 Three reason behind Manual System
1. serve as a visual training aid to promote a better under-
standing of key concepts
2. flowcharts reinforce the importance of segregation of
duties through clearly defined departmental boundaries
3. fundamental component of the framework for viewing
technology innovations (shortcomings and failings of
current generation technology be-come the design
imperative for the next)

5.  Manual System?
 Second Computerized System?
 Some instructors prefer to teach manual
systems before moving on to computer
applications.
 Others favor moving directly to computer-
based systems.
 We will start manual and then computerzied

6.  Sales order processing
 Sales return processing
 Cash Receipt Procedures
 Now we will study the same concepts with
different viewpoint
 We will uses Document flowcharts for manual
systems which additional information than
DFDs
 Departments boundaries and documents

8.  Sales Department
 Credit Department Approval
 Warehouse Procedures
 The Shipping Department
 The Billing Department
 Accounts Receivable, Inventory Control, and
General Ledger Departments

9.  Receiving Department
 Sales Department
 Processing the Credit Memo

10.  Mail Room
 Cash Receipts
 Accounts Receivable
 General Ledger Department
 Controller’s Office

11.  Do you observe anything different than
conceptual system?

13.  Transaction Authorization
1. Credit Check
2. Return Policy
3. Remittance List (The cash prelist provides a means for
verifying that customer checks and remittance advices
match in amount)
 Segregation of Duties
1. Transaction authorization should be separate from
transaction processing.
2. Asset custody should be separate from the task of
asset record keeping
3. The organization should be structured so that the
perpetration of a fraud requires collusion between
two or more individuals

14.  Supervision
1. Some firms have too few employees to achieve an
adequate separation of functions. These firms must rely
on supervision as a form of compensating control. By
closely supervising employees who perform potentially
incompatible functions, a firm can compensate for this
exposure.
◦ Accounting Records
1. Pre-numbered Documents
2. Special Journals
3. Subsidiary Ledgers
4. General Ledgers
5. Files. The revenue cycle employs several temporary
and permanent files that contribute to the audit trail.

15.  Access Controls
1. Limiting access Warehouse security, such as fences,
alarms, and guards. Depositing cash daily in the bank.
Using a safe or night deposit box for cash. Locking cash
drawers and safes in the cash receipts department.
2. Restricted access to AR Subsidiary ledger, sales order
documents, Cash and General Ledger.
 Independent Verification
1. The shipping function verifies that the goods sent from
the warehouse are correct in type and quantity.
2. The billing function reconciles the original sales order
with the shipping notice to ensure that customers are
billed for only the quantities shipped
3. Prior to posting to control accounts, the general ledger
function reconciles journal vouchers and summary reports
prepared independently in different function areas

16.  Overview of RC
 Three key processes
 Sales order
 Sales Return
 Cash Receipt
 RC Controls

17. Accounting Information
System..by
James a Hall
Chapter 4
http://theITedcuaiton.com/

18. See you again in sha ALLAH
4/26/2016