BKAS2013 - ACCOUNTING INFORMATION SYSTEM

Accounts Payable and Cash Disbursement

Maryam describes as follows of how she handles the cash payment to the EMSBs vendors, specifically on the purchase of inventories.

Upon receiving the purchase order copy, Maryam temporarily files the purchase order (by supplier name) in Incoming Vendors Invoice while waiting for the invoice to arrive from the vendor. When the vendors invoice arrives, she takes out the respective purchase order copy that matches the vendors invoice. The supplier invoice details are reconciled with the respective purchase order.

Maryam gets into EMSBs accounting system and records the vendors invoice by keying-in the resellers ID. A computer program then reads the vendors master file and displays the vendors details on screen. She then records the vendors invoice details onto the system. A next computer program edits and checks the invoice details entered for possible data entry errors. Upon saving the transaction, the computer program records the transaction into the purchase file and updates the respective vendors file and subsequently the general ledger master file. She then prints the accounts payable summary and files together with the purchase order copy and vendors invoice by the invoices due date into an Open Invoice file.

When asked about the payment procedures, Maryam elaborated as below:

On every Monday, she checks on the invoice for payment file for any outstanding invoices that are becoming due within that week. For all invoices becoming due, she takes out the invoices with the attached purchase order copy and enters the vendors details into the EMSBs accounting system (account payable cash payment module). Upon entering the vendors details, a computer program retrieves the respective vendors record from the vendors master file and displays all pending invoices on screen. She then chooses the invoices for payment and records the payment details. The computer program records the transactions into a cash disbursement file and creates a payment voucher register file. Consequently, the computer program updates the vendors master file and general ledger master file for all transactions entered.

Next, she prints a payment voucher for the respective invoices due for payment. She later forwards the payment vouchers to Jason, the account manager for payment processing. The account manager makes a payment using online banking to the respective vendors as per the payment voucher. The payment slip is then given back to her for filing purpose. Finally, she attaches the purchase order, vendors invoice, payment voucher and the payment slip into the Paid Invoice file based on the payment date.

When asked for any specific reports prepared at the end of each month, Maryam indicated that she produces a report from EMSB accounting system comprising of purchase summary, accounts payable summary, and total cash disbursement of the month. The reports are forwarded to the general manager.

QUESTION :

Identify possible weaknesses in the EMSBs Purchase Order and Cash Disbursement procedures. Provide an appropriate argument to support each of the weaknesses highlighted.