Accountants execute steps in the financial accounting process to process and report accounting transactions. Complete the requirements for Chapter 10, Case Analysis 10-21 (Food Court Inc.), on p. 327-329 of the textbook and submit via the course Dropbox by the final day of the unit (i.e., Tuesday midnight).

10-21. Food Court Inc.

Food Court Inc. (FCI) is a business in Boston, Massachusetts that offers meal plans to college students. Students, or their families, buy debit cards with fixed amounts that they can use to purchase food at more than 50 local restaurants. FCI sells the cards to students using an online storefront and in several locations near major college compuses. The following praragrapah describes the online card sales process.

A customer enters their credit card information online and then the amount of purchase. FCI's software automatically checks the card number to determine that it is a valid credit card number; for instance, there are certain digits that indicate Visa cards. The software displays an error message if the number is not valid. The usual cause of these errors is typographical. Once the customer completes the card order screen, the software sends the data in an encrypted form to FCI's host computer. Periodically, the FCI accountant retrieves transactions from the server. This is done by clicking on the "Get Transactions" screen button.

For each online transaction, the accountant then manually copies down the credit card number on a scrap of paper, walks across the office to the credit card machine, and keys in the credit card member, the amount, and the numerical portion of the address. The credit card software checks to see if the card is valid and charges it for the amount. The accountant next writes down the validation number, returns to the host computer, and enters it. The accountant points a receipt for the transaction and puts it in a file. The customer database now reflects the new customer. When a customer purchases a card off-line with a credit card, the accountant swipes the card directly, checks its validity, charges the card, and then writes down the validation number and enters it in the host computer.

FCI is considering teh purchase of credit card software that can reside on the host computer and interact with their accounting software. The credit card software costs about $400. The credit card company rates are likely to increase by about 0.5% because cards could no longer be swiped directly--all credit card purchases would need to go through the online software. The rate FCI has to pay the credit card company is based on this mix. Credit card companies typically charge more if card numbers are punched rather than swiped because they have more chance of invalid transactions due to theft. It's easier to steal a number than a card. Currently about half of FCI's sales transactions arise from online sales; the other half result from sales through the office.

Requirements

1. Should FCI buy the credit card software?

2. Use the skills you developed from Chapter 6 to develop a flowchart for FCI's online sales process.

3. What are the business risk associated with this process?