Prepare a system flowchart of Marys Sunshine Pool Companys transaction processing under the manual system

REVENUE TRANSACTION CYCLE

Sales are made to users of pool supplies. Pool supplies are displayed and orders for products are taken in the showroom. The traveling salesmen also take orders. The distribution center is located on the same lot as the showroom/office building. It is here that the orders are filled and shipped.

Order Processing

All sales are credit sales, which are subject to the approval of Ed. Ed approves credit based on his "gut" feeling for each individual case and on the opinions of his bowling buddies. Generally, Ed wants to make the sales and few orders are not approved. In the few cases where Ed does not approve the credit, he marks his copy of the sales order accordingly. He makes a copy of all of the disapproved orders and two copies of the approved orders. He sends one copy of both the approved and disapproved orders and all of the original orders to Mary. He sends a copy of the approved orders to the twins so they can fill them.

Mary prepares a report for each salesperson listing both the sales orders turned down for credit and the approved sales and sends the reports along with the marked sales orders to the salespeople. The salespeople notify customers of disapproved credit and then throw the reports and disapproved sales orders in their car trunks or wastebaskets. The salespeople file the original approved sales orders for later use. Mary files the copies of the approved orders until a shipping notice is received. The copies of the disapproved orders are thrown away.

Shipping

Out of town orders are shipped common carrier FOB Destination. Recently, Ed had a brief meeting with the twins about the possibility of sending the bulk of freight shipments through one common carrier, Mundane Shipping. The advantage to Marys Sunshine would be a rebate paid quarterly of up to 15% of freight charges. Based on prior years' business, this rebate would total in excess of $15,000 per year. Without giving this practice much thought, Ed told the twins to begin using Mundane Shipping as much as possible.

The twins take all of the approved orders, find and box the merchandise and prepare a bill of lading for the carrier. The twins send their copy of the sales order marked "shipped" and a copy of the bill of lading to Mary.

After an order has been shipped, the twins update the inventory cards to keep an accurate record of items on hand.

At the end of the week, all of the inventory cards are reviewed and a weekly inventory report is prepared.

Accounts Receivable

Mary matches the sales order marked "shipped to her copy of the sales order. She then prepares a two-part invoice and mails the original to the customer. She records the sales in the sales journal and the receivables in the subsidiary ledger. Mary files by date her copy of the invoice with her copy of the sales order and the shipping documents.

During the summer season, Marys Sunshine often has difficulty in shipping customer orders in a timely manner. Supplier delays in delivery to Marys Sunshine and increased volume cause delays in outgoing shipments. At the end of some months, Mary prepares and mails customer invoices ahead of actual shipment. She claims this practice more closely matches revenues and expenses. As usual, Mary records the sales in the sales journal and in the accounts receivable subsidiary ledger.

Customers are allowed to take a 2% discount if they pay within 10 days of the billing date; otherwise, the net amount is due in 30 days.

Once per month, Mary prepares a listing of delinquent customers that she sends to the salespeople. They are responsible for collecting the overdue amounts.

Cash Receipts

Mary opens the mail each day; sorts the cash receipts and the invoices to be paid and logs them in the appropriate logs. Mary records the receipts on customers account in the cash receipts journal and in the accounts receivable subsidiary ledger. After recording all the cash receipts, she prepares a deposit slip and takes the cash to the bank.