Dire Dawa University

College of business and economics

Department of accounting and finance

Individual assignment for Accounting Information System (15%)

Submission date: 24/05/2016

Question 1.
Meron plc is a textile industry supplying valuable garment products to garment tailing
companies like Ambassador plc. It has centralized accounting information system. The
administrative, production, shipping, receiving and warehouse are housed at away
buildings. The marketing department consists of three sales representatives. Upon
obtaining order from customers by telephone, a sales person manually prepares a pre-
numbered multiple-part sales order. One copy of the order is filed by date and the second
copy with the picking ticket is sent to shipping department noting the back order (no order
is cancelled) for any inventory shortage after checking the inventory records. All sales
are on account, FOB shipping destination, except sales for new customers. All the time
order is placed, the sales representatives check credit histories either to accept or reject
the order. A picking list, the document that lists all the approved picking tickets together is
forwarded to warehouse. Accordingly the warehouse picks and packs the items listed on
the picking list. The packages and the packing lists are sent to the shipping department for
moving the item to the customers’ destination and updating the inventory records as it is
removed from the shelf. The shipping department, upon shipping, should keep record of
shipments (the carrier, shipped to customer, date picked, date to reach etc) and sales order
shipped (performed). Packed goods, packing slip and bill of lading are picked by the carrier
upon the shipment.
Suppose that a customer with a good paying history placed a sales order with the total
quality of 1000 units to be shipped within two days, where the inventory available
according to perpetual inventory record is less than what is required. The order has been
performed accordingly.
The sales order is forwarded to the billing department from sales representatives and bill
of lading and packing list are sent to this department once singed by shipping clerks from
the shipping department to note that the goods have been shipped. The billing department

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 then prepares three-part sales invoices. One copy is used to maintain record of customer
account and other copy is sent to the customer to request payment and the other copy is
remained in the ring. At the end of each month the company prepares monthly statement
(cycle billing) and sent to customers and they pay accordingly. A customer check is directly
sent to the mailing room (cashier).

Required: Draw a data flow diagram DFD separately for Sales Order Entry, Shipping, and
Billing and Account Receivable maintenance activities.

Question 2.
A&V Safety, Inc., is a growing company specializing in the sales of safety equipment to
commercial entities.

Revenue Cycle of A &V Safety, Inc.,

A&V Safety, Inc., has one sales department at its headquarters in San Diego; however, their salespeople do
go out to visit former and potential clients. Due to the nature of the business, sales always go through a
salesperson.

The customer and the salesperson write out the customer order (CO) together. From here the CO is returned
to the office, where the sales clerk completes a purchase order (PO).

Here the sales clerk performs a credit check and either authorizes or rejects the order. If the credit is
authorized, the CO is entered into the company’s centralized computer system.

Once the order is entered, an electronic copy is sent to the customer, warehousing, shipping, and billing.
An employee then files a hard copy of the CO in the open sales order file.

Warehousing receives the copy of the CO, prints one copy, and uses it as a stock release form to collect the
order. Once the goods are picked, the warehousing clerk removes the items from the inventory sub ledger
electronically.

This automatically updates the general ledger. He then files the electronic sales order in the completed order
file, signs the printed stock release, and files it in the picked goods file.

The picked goods are then sent to the shipping department, where the goods are reconciled with the
electronic sales order.

Two copies of the sales order are printed. One copy is sent to the carrier with the goods. The second copy
has billing information added to it and is entered into the computer system as a shipping slip. Once this is
done, bills of lading are prepared electronically. Two copies go to billing, and the third is filed in shipping.

Upon receipt of the shipping slip and the two bills of lading, the billing clerk prepares a sales invoice from
the shipping slip. This is then printed with any other charges and sent to the customer as a bill. An invoice
copy is sent back to sales to close the open order file. Once the bill is sent, billing records the sale

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electronically in the sales journal, and an invoice copy goes to AR, where the AR sub ledger is updated.
Both automatically update the general ledger.

Mail is received in the 20-person mail room, which is overseen by one manager. Here the checks and
remittance advices are split after being reconciled. The remittance advices are sent to the AR department,
where they are compiled into an electronic remittance list.

One copy is electronically sent to cash receipts, where the remittance list is reconciled with the checks sent
from the mail room. The cashier then signs the checks and prepares deposit slips. One deposit slip is sent
to an accountant in charge of cash receipts who updates the cash receipts journal electronically. This then
automatically updates the general ledger. Once the cash receipts journal is updated, the checks and two
copies of the deposit slip are sent via an armored carrier to the bank. One copy of the deposit slip is filed
with a copy of the remittance list. A final copy of the deposit slip is sent to the AR department, where it is
reconciled with the remittance list on file. Once the reconciliation is complete, the AR sub ledger is updated
electronically, automatically updating the general ledger.

Required:

A. Create a data flow diagram (DFD) of the current system.

B. Create a document flowchart of the existing system.

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