GREEN PRODUCTS GARDEN

SUPPLY (STAND-ALONE PC-BASED

ACCOUNTING SYSTEM)

Green Products Garden Supply sells and distributes

a wide range of garden products and equipment

including organic fertilizers, premium flower

and grass seeds, organic pesticides, and garden

spreaders. The headquarters and warehouse is

located in Hopewell, Virginia. Their customers are

primarily small garden centers and landscape companies

in the Mid-Atlantic States. Sales are on

credit.

The current information system includes manual

procedures supported by independent (non-networked)

PCs in each department. Communications

between departments is entirely through hard-copy

documents. Recently, the company has been receiving

complaints from customers and suppliers about billing,

shipping, and payment errors. Management

believes that these complaints stem, in part, from

their antiquated computer system. You have been

hired to assess the company's procedures and internal controls.

The following is a description of the company's revenue cycle.

Sales Procedures

The revenue cycle begins when a customer places an

order with a sales representative by phone or fax. A

sales department employee enters the customer order into a standard sales order format using a word processor

installed on a PC to produce: three sales order

copies, a stock release document, a shipping notice,

and a packing slip. The accounting department

receives a copy of the sales order, the warehouse

receives the stock release and a copy of the sales

order, and the shipping department receives a shipping

notice and packing slip. The sales clerk files a

copy of the sales order in the department.

Upon receipt of the sales order, the accounting

department clerk manually prepares an invoice and

sends it to the customer. Using data from the sales

order, the clerk then enters the sale in the department

PC and records the sale in the sales journal and in

the AR subsidiary ledger. At the end of the day the

clerk prepares a hard-copy sales journal voucher,

which is sent to the general ledger department.

Upon receipt of the sales order and stock release

the warehouse clerk picks the products and sends

them to the shipping department, along with the

stock release. The warehouse clerk then updates the

inventory records on the warehouse PC and files the

sales order in the warehouse. At the end of the day

the clerk prepares a hard-copy inventory account

summary and sends it to the general ledger

department. The shipping department clerk receives a shipping

notice and packing slip from the sales department.

The clerk files the shipping notice and holds open

the packing slip until he receives the stock release

and products from the warehouse. Upon receipt of

the stock release, the shipping clerk prepares the two

copies of a bill of lading using a word processor. The

bills of lading and the packing slip are sent with the

product to the carrier. The clerk then files the stock

release in the department.

The general ledger clerk posts the journal voucher

and inventory summary to the general ledger, which

is stored on the department PC, and the clerk then

files these documents in the general ledger

department. in the department. At the end of the day the clerk

prepares an AR summary on the PC. A hard copy

of the summary is sent to the general ledger

department.

The mail room clerk sends the checks to the cash

receipts department, where a clerk endorses each

check with the words "For Deposit Only." Next,

the clerk reconciles the checks with the remittance

list and records the cash receipts in the cash receipts

journal on the department PC. Finally, the clerk

prepares a deposit slip and sends it and the checks

to the bank.

The general ledger clerk posts the accounts receivable

summary to general ledger and files it in the

general ledger department.

Required

a. Create a data flow diagram of the current system.

b. Analyze the physical internal control weaknesses

in the system.