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Homework answers / question archive / Question 1:Simple Sales System Asales system for a small retail store is described in the following paragraph As a sale occurs ,customer details including customer number and address , as well as the items purchased , are written on a blank invoice form
Question 1:Simple Sales System
Asales system for a small retail store is described in the following paragraph
As a sale occurs ,customer details including customer number and address , as well as the items purchased , are written on a blank invoice form . Item descriptions , quantity sold and unit price are also filled in, with the sales staff having some discretion in setting the unit price for situations such as bulk purchases or repeat customers
These invoice forms are collected at the end of the day and keyed in to the computer, with an invoice number assigned to invoices as they are keyed in. This number is recorded on the store copy of the invoice Any new customers are added to the customer master list as their sales are entered and any details not gathered on the invoice are left blank. Data are stored on a central server and this server is backed up monthly .The system is also connected to the organisation's suppliers and used to order goods .
Required :Identify any risks within the system , the potential consequences of these risks , and controls that could be implemented to mitigate these risks.
Question 2: ABC Computers
ABC Computers sells desktop computer systems that it assembles from parts and software that third -party vendors provide .Customers are both private consumers and small businesses . Consumers pay cash or by credit card , but business customers buy on credit .Sales are made on-line or by a hard -copy order document that customers mail or fax to the company
When a credit order is received ,the sales clerk verifies inventory availability , prepares a sales order and sends the stock release copy to Willy , a warehouse employee ,who picks the goods and arranges shipment Willy then prepares the bills of lading and the shipping notices . Barb in the billing department received the shipping notice from Willy and updates the inventory to account for the reduction in inventory . Barb files the stock release ,prepares the invoice ,and mails a copy of it to the customer .Barb then updates the sales journal and then sends the invoice ,sales order ,stock release and shipping notice to the accounts receivable department
Adam in the accounts receivable department files the documents that Barb sent him and updates the accounts receivable ledger .Mickey in the mail room receives remittance advices and customer cheques sent in payment of accounts .He sends the remittance advice to Adam for posting to the accounts receivable ledger and sends the cheques to Carol , the cash receipts clerk . At the end of the day, she prepares a deposit slip and deposits the cheques into the company's bank account , files the bank receipt and updates the cash receipts journal
Cash sales to consumer customers are handled in asimilar manner to the process described above except that cheques or credit card account numbers are submitted with the original order.
At the end of each week , John , an accounting clerk reconciles all transactions and posts them to the general ledger .
Required :Identify any risks ,the potential consequences of these risks and controls that ABC Computers could implement to reduce exposure to these risks
Question 1: Simple Sales System
RISK: The first risk in this situation is the assigned sales staff have the discretion in setting the unit price for bulk purchases or repeat customers. Second, all the details that have not gathered in invoice are left blank when putting a new customer to the customers master list.
CONSEQUENCE: If the sales staff has the discretion in setting unit price for bulk purchases or repeat customers, there's a possibility of misstatements in unit price. For the second risk, there's a possibility of transaction errors if the details are incomplete.
CONTROLS TO BE IMPLEMENTED: Since the bulk purchases are usually for repeat customers and you have a customers master list, you can record how many pieces for each bulk orders and assigned a specific unit price made by these recurring customers. Once they come back, the sales staff will based the unit price on customers masters list. Since, they are recurring customers you can make an agreement with them to have a specific number of bulk orders only. In this way, you can make sure that there will be no misstatements in unit price and you can monitor your inventory as well. For the second risk, you must fill up all the blank details to avoid transaction errors like terms of payment and others that included in the masters list.
Question 2: ABC Computers
RISK: Cash Sales are not submitted with the original order.
CONSEQUENCE: If the Cash Sales are not submitted by the original order, there's a possibility of misstatements in invoice. It could be the price or it could be the computer parts etc. For example, the original customer order is a graphic card with a high quality amounting to $1,000 and pay in cash. The sales clerk who prepare the sales order can state that the customer only order a Class A graphic card which only amounting to $700. The customer can't check the difference since the graphic card already installed in the CPU when delivered. Carol, the Cash Receipts clerk will not doubt the $700 she received because it matched to the Sales Order created by the Sales Clerk. The other department can validate if the sales order is correct because unlike the credit transactions, original order not submitted with cash sales.
CONTROLS TO BE IMPLEMENTED: Original Order by the customer should be submitted weather it is Cash Sales or Credit Sales.
