Question

Point-of-sale (POS) system is used in Fiesta, a local supermarket. The supermarket maintains no credit sales; all transactions are paid using cash or credit/debit cards. The inventories are kept on the supermarket’s shelves. Customers pick the items they wish to buy and carry them to the checkout counter where the transaction begins.

First, the checkout clerk scans the bar codes printed on the items with a scanner. The scanner, which is the primary input device in the POS system, is mounted on the checkout counter. The POS system is connected online to the supermarket’s inventory file from which it retrieves price data. The price for each item is displayed on screen for customer’s checking. The quantity-on- hand figure in the inventory file is reduced in real time to reflect the item being sold. As an inventory item falls to a pre-determined level, it is reordered automatically by the system. When all the items are scanned at the checkout counter, the POS system calculates discounts and total for the sale transaction. A record of the sales transaction is stored in the POS system.

In case of credit card payment, the checkout clerk inserts the credit card into a small machine which is connected to the credit card issuer via electronic connection. Through this process, the clerk can determine whether the credit card is valid or not. When the checking is finished, the machine generates a credit card receipt on which the customer signs if the transaction exceeds certain dollar amounts. In case of signed receipt, the clerk compares the signature to the one signed at the back of the credit card to ensure the two signatures match with each other. The clerk gives the customer a copy of the receipt and secures a second copy in a drawer of the POS system. Similar steps follow for debit card (e.g. Octopus card) transaction, except customer signature is not required. For cash sales, the checkout clerk secures the cash in the drawer. The cash sale is recorded on a two-part paper receipt. One copy is given to the customer as a receipt, the other copy is secured within the POS system. The POS system records the types of payments (e.g. cash, credit card, etc.) made by customers for all sales transactions.

At the end of the checkout clerk’s work shift, a supervisor unlocks the drawer and retrieves all the cash and paper receipts. The drawer is removed and replaced with a new drawer containing a known amount of start-up cash for the next clerk. The supervisor and the checkout clerk take the cash and paper receipts to the treasury department. A cash receipts clerk in the treasury department reconciles the cash and paper receipts against the data stored inside the POS system.

Often, small discrepancies exist because of errors in giving change to customers. The supermarket’s policy specifies that cash shortages below certain small amount is recorded but not deducted from the checkout clerk’s salary. Cash shortages above that small amount, however, should be reviewed for possible disciplinary action.

When the cash and paper receipts have been reconciled to the POS system’s record, the cash receipts clerk prepares a cash reconciliation form and gives one copy to the checkout clerk as a receipt for cash remitted. The cash receipts clerk records the cash received and cash short/over in a cash receipts journal. The cash receipts clerk files the credit/debit card receipts and secures the cash in a safe for deposit at a local bank the next working day. At that time, the cash receipts clerk prepares a three-part deposit slip for the total amount of the cash deposited. One copy is filed, and the other two copies are taken to the bank together with the cash.

Required:

Answer the following questions. Observe the word limit as stated in the answer booklet.

a. What revenue cycle process in a level 0 data flow diagram is discussed most in the case?

b. Identify one automated control used by the supermarket to avoid uncollectible amount.

c. What is the name of the data file that must be kept accurate in order to avoid customer dissatisfaction at the checkout counter?

d. What is the manual control procedure to ensure the data file in part c is accurate?

e. What kind of control measure that is used by the supermarket to ensure their sales data input is accurate?

f. Identify one control weakness at the supermarket.

g. How to correct the control weakness as identified in part f?

Answer 1

a) Revenue process cycle is mainly automated and there is no manual intervention to it. Items checked out directly recorded in the System as revenue.

b) Collecting all the payments either through cash or debit/credit card avoids the risk of uncollectible amount. There is no credit sales in the super market.

c) Super market inventory's file is the main source of data that must be accurate. This is so important because quantity and price flows from this file to screen of the customer.

d) As the sales data is stored in the POS system. The manual procedures is the reconciliation of sales data with cash collection at every day end.

e) Bar codes are printed on the items to ensure that the sales data input is accurate.

f) Segregation of duties at day end is missing the super market. At day end check out clerk receipt clerk is responsible for reconciliation as well as recording the same in books of accounts.

g) This control weakness can be corrected by segregating the duties. Some of the person from accounts team should be responsible for recording cash receipts in the cash receipts journal. This will reduce the chances of fraud in the supermarket.