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Accounting Information Systems 14e Romney / Steinbart Problem 3.6 Ashton Fleming has decided to document and...

Accounting Information Systems 14e
Romney / Steinbart
Problem 3.6
Ashton Fleming has decided to document and analyze the accounts
payable process at S&S so the transition to a computerized
system will be easier. He also hopes to improve any weaknesses
he discovers in the system. In the following narrative, Ashton
explains what happens at S&S:
Before S&S pays a vendor invoice, the invoice must be matched
against the purchase order used to request the goods and the
receiving report that the receiving department prepares. Because
all three of these documents enter the accounts payable
department at different times, a separate alphabetical file is
kept for each type of document. The purchase orders that are
forwarded from purchasing are stored in a purchase order file.
The receiving reports are stored in a receiving report file.
When vendor invoices are received, the accounts payable clerk
records the amount due in the accounts payable file and files
the invoices in the vendor invoice file.
S&S pays all accounts within 10 days to take advantage of early payment discounts. When it is time to pay a bill, the accounts
payable clerk retrieves the vendor invoice, attaches the
purchase order and the receiving report, and forwards the
matched documents to Ashton Fleming.
Ashton reviews the documents to ensure they are complete,
prepares a two-part check, forwards all the documents to Susan,
and records the check in the cash disbursements journal.
Susan reviews the documents to ensure that they are valid
payables and signs the checks. She forwards the check to the
vendor and returns the documents and the check copy to the
accounts payable clerk. The clerk files the documents
alphabetically in a paid invoice file. At the end of every
month, the accounts payable clerk uses the accounts payable
ledger to prepare an accounts payable report that is forwarded
to Susan. After she is finished with the report, Susan files it
chronologically.
Required:
A) Evaluate S&S Company's procedures to determine which areas
in the accounts payable function could be computerized.
B) Prepare a revised flowchart to reflect your proposed
changes for a computerized system.

Solutions

Expert Solution

For Point A: As per the existing process S&S company Is following complete manual process which is duplicating the same activity within different departments.

Accounts Payable (AP) is an important division for any organisation to make sure smooth payments and to record all the transactions to get tax benefits and cash discounts if any available from different vendors.

As everyone knows that all vendor payments are linked with prior orders (also having some exceptions where some expenses we incur without releasing purchase orders). So base to AP payment is Purchase Order and receiving department confirmation. Accordingly, we can align both the department's conformation on a realtime basis by way of linking goods/service receipt confirmation in the computerised system. Once after getting the invoice copy accounts payable clerk can post the journal for invoice payment subject to confirmation from both the departments (Orders department & receiving department).

After posting journal for payment, Ashton will review it as a two-way check and validate payment for next step (i.e. for final approval of Susan).

Susan will approve same for payment which can be linked directly to the bank for real-time payments to save cheque processing time to avail benefits of cash discount.

An automated system can eliminate manual filings of different departments which is cost-effective and also improves the internal control mechanism.

For Point B:


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