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ais_final_project_spring_2019.pdf
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Joe’s
Shoes for
Jocks
General Description of Business:
Joe Johnson opened Joe’s Shoes for Jocks in 1975. The store specializes in all types of athletic
shoes for children and adults. It also carries accessories such as shoelaces, socks and small
athletic items. Clerks frequently provide customers with shoe fittings and help guide them to a
properly fitting shoe for their particular fit, wear pattern, and intended use. The store guarantees
that if you are not happy with a pair of shoes, you may exchange them for another pair.
Customers seem to be very comfortable with this policy as there are very few merchandise
returns and many of the businesses customers are repeat customers.
The store is located in a strip mall. The store has a large display area in the front portion of the
store. (Most inventory is stocked in the display area.) There is one electronic cash register in the
front of the store. That register is used for all sales. The back of the building contains a
restroom, a large office containing a safe, and an inventory storage area. Joe and the bookkeeper
primarily use the office. On occasion the Assistant Managers also use the office to counsel/train
sales clerks, prepare work schedules, etc. There is a large door in the inventory storage area,
which is used for the unloading of merchandise received from vendors.
General Description of Employees:
➢ The store is a sole proprietorship, and Joe is the Owner/Manager. Joe’s duties include
marketing, budgeting, purchasing (inventory and all other necessary store/office items),
writing and controlling checks, payroll, and bank statement reconciliation.
➢ In addition to Joe, there are two Assistant Managers. The primary responsibility of these
Assistant Managers is supervising the salesclerks. In addition, they prepare work
schedules for employees, assist with buying, make sales as needed, and do merchandising
work. The Assistant Managers also handle all returns to suppliers. One Assistant
Manager makes a trip to the bank each day to make the daily deposit.
➢ There are 3-6 part-time Sales Clerks, depending on the season. Sales Clerks perform all
sales functions and assist with merchandising and inventory tagging.
➢ The last employee is a full time Bookkeeper. The bookkeeper’s duties include preparing
daily deposits, posting accounts receivable, preparing monthly statements for customer
accounts, filing, making inventory tags which are attached to all items, receiving new
merchandise, and filling in on the sales floor during peak rush periods.
Descriptions of Cycles:
Sales/Collection:
Over the last several years, Joe’s Shoes for Jocks has had annual sales of almost $1 million. The
majority of the customers pay by cash, check or debit/credit card; however there are about 300
customers with store charge accounts. Joe allows certain customers that he knows to open store
charge accounts upon request. There is no established policy for charge customers.
When a customer is ready to make a purchase, the customer can proceed to the cash register, or
give the merchandise to any available salesclerk. The salesclerk completes two copies of a prenumbered sales ticket. The transaction is then entered into the cash register by transaction type
and the appropriate register key is used:
Cash:
Check:
Debit/Credit Card:
Charge Account:
The sales ticket is validated on the back with the date and amount.
The sales ticket and the check are validated.
Debit/Credit card receipt is validated. In addition a three-part
debit/credit card receipt is also completed.
The sales ticket is validated on the back with the date and amount.
The first copy of the sales ticket (and debit/credit card receipt if applicable) is given to the
customer. The second copy is placed in the cash register. The third copy of the debit/credit card
receipt is filed by date in the back office. (A copy of the sales ticket is provided at the end of this
case.)
Layaways:
When a customer chooses to put an item on layaway, a special layaway form is completed. (A
copy of the layaway form is provided at the end of this case.) A minimum down payment of
20% is required to hold the merchandise. The balance is due in three equal payments over the
next 6 weeks. The sale is entered on the cash register using the layaway key. The layaway form
is validated with the date and amount. The original copy is given to the customer, and the
second copy is filed by customer name.
Sales Returns:
The store’s policy is not to give cash refunds when the item was paid for by cash or check. (This
was done initially to prevent dishonest customers from purchasing an item with a check and
returning the item the next day for a cash refund, only to later discover that the check bounced.)
Joe’s issues a credit for the merchandise that has been returned instead of returning the cash and
a three-part sales ticket is prepared and marked as a return. If the original sale was made on
account, only two copies of the sales ticket are prepared. If the merchandise was purchased on a
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debit/credit card, then the refund is made through the debit/credit card. In this case, a three part
bankcard receipt is also prepared along with two copies of the sales ticket.
The sales returns transaction is entered using the sales return key on the register. After the ticket
is validated, the original is given to the customer, the duplicate is placed in the cash register, and
the third copy is placed in a credit file (small wooden box) that is kept near the cash register.
The bookkeeper uses the second copy of credit account returns to post the transaction to the
accounts receivable subsidiary cards. Even though the amount of the sales return is actually a
credit, it is kept in the accounts receivable card to avoid the necessity of setting up an accounts
payable file.
When the customer returns to use the credit to purchase an item, the credit is verified with the
copy that has been placed in the credit file. This copy is then validated and put in the cash
register. It is used by the bookkeeper to offset the balance in the accounts receivable subsidiary
card.
Cash Receipts:
Joe or one of the Assistant Managers opens the mail daily and separates the checks or receipts.
The Assistant Manager prepares a sales ticket for each receipt and then enters the checks into the
register using the accounts receivable key. The sales ticket is validated with the date and
amount. The checks are placed in the register and included with the daily deposit. The
bookkeeper posts the collections from the information on the sales ticket. The same procedure is
used for layaway payments.
End of Day:
At the end of the day, the Assistant Manager on duty rings out the cash register and reconciles
the money and debit/credit card receipts in the cash drawer with the total on the register tape.
The cash register tape indicates the totals by transaction type. The information from the cash
register tape is entered into the daily receipts reconciliation. Two hundred dollars is kept in the
cash register drawer and becomes the next day’s beginning balance. The Assistant Manager then
places all other money, copies of sales tickets, debit/credit card receipts, the register tape, and the
reconciliation in the safe overnight.
The next morning, the bookkeeper removes the items from the safe, reconciles the register tape
with the items from the previous day, and prepares a daily deposit. The Assistant Manager on
duty then makes a trip to the bank to make the deposit during the mid-morning sales slump.
The bookkeeper also uses the sales tickets to post credit sales to the accounts receivable
subsidiary cards. Daily sales amounts from the daily receipts reconciliation are entered into the
sales journal at this time. All paper documentation is then stored in a file cabinet by date.
Acquisition/Payment Cycle:
Purchasing:
Joe plans the budget based on past sales and expected trends. He takes about 6-8 buying trips
each year. He comes in contact with at least 30 vendors on each trip. These vendors provide
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him with their own purchase orders. He uses those orders to make notations on what items he is
interested in ordering, constantly trying to maintain a running total so he doesn’t exceed his
budgeted amount. The actual ordering is not done until Joe returns to the store and reviews the
purchase orders. He then places the order by sending a copy of the vendor’s completed purchase
order to the vendor. A duplicate copy of the purchase order is placed in the file cabinet by
vendor name.
Receiving:
All shipments are sent via UPS or FEDEX. Shipments will typically arrive and be unloaded
through the back entrance. However, sometimes they will be delivered through the front. The
bookkeeper or owner unpacks the goods and compares the units received with the packing list
accompanying the shipment. If any discrepancies exist, they are noted on the packing list and
then discussed by phone with the vendor. The same procedure is used if any of the merchandise
is damaged. The vendor then issues a return authorization. This must be received before the
merchandise is returned.
The packing list from the vendor is kept in an open file until the invoice is received. Any
information about discrepancies and/or damaged goods is transferred to the invoice when it is
received, and the invoice is adjusted accordingly. The packing list is then used by the
bookkeeper to make inventory tags. The sales clerks attach the tags to the merchandise in their
spare time.
Cash Disbursements:
When the vendor’s invoice is received, the packing list is pulled and checked for discrepancies.
Any problems are handled by phone; the two documents are stapled together and filed by due
date. Most invoices carry a 2/10, net 30 discount.
All checks are pre-numbered and controlled by the owner. On the tenth of each month, Joe pulls
all the invoices, issues the checks, and mails them. Joe pays all other bills on the 15th of each
month. He also keeps track of the payroll, which is paid on the first and sixteenth of the month.
He enters all amounts to the check register.
Other Procedures:
The bookkeeper prepares customer statements by making a copy of the A/R subsidiary cards.
The statements are mailed to customers at the end of each month. At this point there is no real
effort to monitor the accounts receivable balances, and no interest is charged on accounts.
Joe reconciles the bank statement and takes care of all debit/credit card activity. A periodic
inventory is completed on January 1 and July 1. All available employees assist with the
inventory.
An outside accountant is retained to assist with taxes and preparation of any annual financial
reports that may be needed. The store currently maintains a daily sales register, a check register,
and a file of accounts receivable subsidiary cards. No other books are being maintained.
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Required:
1. As you read through the narrative for Joe’s Shoes for Jocks, you are to complete the 6
corresponding document flowcharts. I have provided shells which you are to use as a guide
when developing these 6 flowcharts using Excel’s drawing tools. They may be
SLIGHTLY modified as needed.
2.
You are also to prepare the Receiving Document Flowchart for Joe’s. I have not provided
a shell for this flowchart. You will need to develop it yourself from the narrative provided.
Again, you are to use Excel to develop this flowchart.
Requirements 1 and 2 above make up Part I of the Project.
Be sure to pay attention to how the flowcharts print out.
Use off-page connectors if they move on to a second page.
3.
As you read through the narrative, you are to identify the internal control weaknesses/risks
in the current operation of Joe’s Shoes for Jocks. For each weakness, offer possible
solutions/controls. (You will provide this information by cycles. You should have two
charts: one for the Sales/Collection Process and one for the Acquisition/Payment Process.)
This portion of the assignment should be communicated in a chart (Excel file) or table
(Word file) format. When developing your response, be specific and thorough–yet
concise/brief–. An example format is provided below. (You may use a landscape
orientation for your chart/table if it improves readability.)
Sales/Collection Cycle
Weaknesses/Risks
Corresponding Solution/Control
Requirement 3 above makes up Part II of the Project.
You should be able to find AT LEAST 8 to 10 weaknesses for each cycle.
4.
Lastly, you are to write a memo to Joe analyzing his current accounting information
system. You will want to (1) identify the major deficiencies in the current accounting
information system and (2) discuss the internal controls that should be implemented. Also
be sure to discuss (3) the information needed from the system that you think would be most
important for internal decision making. (Be sure to address all three parts.) The memo
should not be a list of the items listed in part 3; this should be an analysis of the system as a
whole. The memo is the higher level portion of the project and should be well thought out.
The memo should not exceed 2 pages.
Requirement 4 above makes up Part III of the Project.
BE SURE TO SPELL CHECK ALL YOUR WORK!
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WHAT YOU ARE TO SUBMIT:
Part I: Seven Flowcharts (40% of grade)
•
•
•
•
•
•
•
Sales Document Flowchart
Layaway Sales Document Flowchart
Sales Return Document Flowchart
Cash Receipts Document Flowchart
End of Day Document Flowchart
Purchasing Document Flowchart
Receiving Document Flowchart
Part II: Internal Control Weaknesses/Risks (40% of grade)
•
•
Sales/Collection Process Weaknesses & Controls Chart
Acquisition/Payment Process Weaknesses & Controls Chart
Part III: Memo (20% of grade)
For this final portion of the project, you are to submit a memo typed in Word. This memo
will address the enterprise information system as described in item 4 above. This memo
is to be two pages long. Be sure to use proper heading and file naming conventions.
All portions of this project must be submitted, and competencies must be
met in order to successfully complete this course.
You must complete this project on your own; you are not to discuss the
project with anyone other than the instructor.
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48632
Joe’s
Shoes for
Jocks
1345 Main Mall Drive
Forest Grove, Ohio 44356
(513) 874-4333
Date:
Customer:
Sold by
Cash
Quantity
Description
Charge
On Account
Paid Out
Price
Amount
No Cash Refunds
Sales Tax
Total
7
Layaway Merchandise Identification Ticket
Date:
Name:
Address:
City/State:
Telephone:
Clerk:
Quantity
Description
Price
Sub Total
–Agreement–
Tax
Payments of $____________
Layaway Fee
to be made every two weeks.
Total
Failure to make payment for
Deposit
4 weeks will cause merchandise to
Balance
be replaced in stock and the
customer will forfeit all previous
payments.
Date:
Customer Signature:
Date
Location
Old Balance
Amount Paid
New Balance
Number of Packages:
No Exchanges or Cash Refunds
8
Sales Document Flowchart
Initiate Sale
Sales Ticket 2
Sales Ticket 1
Ring on cash
or check key
and validate
sales tickets
Ring on
charge key
and
validate
Sales Ticket 2
Sales Ticket 2
Sales Ticket 1
Sales Ticket 1
3
2
CR
1
Ring on
bankcard
key and
validate
3
2
1
Sales Ticket 2
Sales Ticket 1
N = Numeric
D = Date
9
Layaway Sales Document Flowchart
Layaway Sale
2
1
Ring on Layaway
Key & Validate
Layaway Form
and Collect 20%
2
1
10
Sales Returns Document Flowchart
Initiate Return
2
2
1
1
3
2
1
3
2
1
2
1
2
1
3
3
2
2
1
1
11
Cash Receipts Document Flowchart
Manager/Assistant Manager
Bookkeeper
Mail Receipts
Open mail &
separates
checks/
receipts from
other mail
12
End of Day Document Flowchart
Manager/Assistant Manager
End of Day
Bookkeeper
1
Remove
items
from Safe
Sales Tickets
Debit/CC receipt
Reconciliation
Checks
Cash
Sales Tickets
Safe
Reconciliation
1
Register
2
2
Take to Bank
13
Purchasing Document Flowchart
Initiate Purchase
Vendor PO 2
Vendor PO 1
14
…
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