Accounting Information Systems in Caesar Ltd

Caesar Ltd is a kitchware manufacturer. The company uses a periodic inventory system to record inventory levels. When customer orders are received, the sales department will send a copy of the customer order to the production floor. The customer order will initiate the production process and indicate the potential need of parts not available in inventory. The inventory clerks search for parts. If parts are out of stock, the inventory clerks will issue two copies of a purchase requisition. The production manager approves the purchase requisition. One copy of the approved purchase requisition is sent to the purchasing manager and the order copy is sent to the accounting department.

The buyer checks the suppliers prices for the required parts and recommends two suppliers. The purchasing manager chooses the supplier and four copies of a purchase order are issued. The first copy is sent to the supplier, the second copy is kept by the purchasing manager, the third is sent to the warehouse and the last copy is sent to the accounting department. All purchase order copies are filed by supplier number.

It usually takes one week for the ordered parts to arrive. When the parts arrive, the warehouse manager and the inventory clerks inspect and count the parts. The purchase order copy is used as the basis for comparison. A receiving report in three parts is prepared. If prices and quantities received agree with the purchase order and with the information on the packing slip, the parts are accepted. If any difference exists, the production manager will come and decide whether to accept or to reject the parts.

One copy of the receiving report is sent to the purchasing manager and another copy is sent to the accounting department. The original copy is kept at the warehouse. The accounting clerk files the receiving report along with the purchase requisition and the purchase order by supplier number. The clerk also prepares the necessary journal entry and credits the related supplier in the subsidiary ledger. When the supplier invoice is received, the accounting clerk matches the information to the purchase requisition, purchase order and receiving report and prepares a disbursement voucher. This voucher initiates the journal entry for the disbursement of cash and the cashier uses the voucher to prepare a cheque for the treasurer to sign before the cheque is sent to the suppliers.

Required:

1. Using the information in the case study, draw a document flow chart for Caesar Ltd

2. Using the information in the case study, draw a level 0 DFD and a context diagram for Caesar Ltd

3. The management of Caesar Ltd wants to improve the companys operations and at the same time improves its financial position. They find a software solution provider and the consultant suggests Caesar Ltd to implement an electronic data interchange (EDI) system.

Explain and discuss one possible implementation of an EDI system at Caesar Ltd. What areas should the management of Caesar Ltd concentrate on and what are the related problems and solutions associated with implementation EDI?