StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Accounting Information Systems and Control Issues at Future LTD - Case Study Example

Cite this document
Summary
The paper “Accounting Information Systems and Control Issues at Future LTD” is a valuable example of a finance & accounting case study. Business success depends on how effective policies in place towards the management of revenue, cash streams, and stock. Through the focus on the earlier mentioned three items, an organization is bound to sustain profitability…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER94.1% of users find it useful

Extract of sample "Accounting Information Systems and Control Issues at Future LTD"

Key words: Cash, Stock, Control, Threats

Introduction

Business success depends on how the effective policies in place towards the management of revenue, cash streams, and stock. Through the focus on the earlier mentioned three items, an organisation is bound to sustain profitability and ensure going concern is on a more permanent basis. Therefore, from the analysis of Back from the Future Ltd, it is evident that there is the need for more comprehensive analysis of the operational mandate. Admittedly through analysis of its transactional needs, the company is bound to ensure successful performance and necessitate profitability. Hence, this paper will examine the operational mandate of Back from the Future Ltd through an analysis of its revenue cycle and streams. Furthermore, the paper will examine the organisational cash and stock threats and controls.

Understanding Revenue Cycle and Streams at Back from the Future Ltd

First and foremost, in reference to Droms and Wright (2015), a revenue cycle denotes the set of given activities that ensure an organisation can exchange the diverse goods and services with their clients for cash. Accordingly, the revenue cycle denotes two main activities or phases, the physical and the financial phase. The physical phase denotes the process in which the goods are transferred to the client whereas the financial phase entails the instance whereby cash is received from the customer. Thus, from the evaluation of Back from the Future Ltd, there are three main revenue streams that require in-depth analysis in regards to the revenue cycle Saebi and Foss (2015). As the first revenue stream at Back from the Future Ltd, it is evident that the business accrues cash from direct sales from the retail customers who visit their depots. Therefore, to manage the revenue stream, it is mandatory that the organisation maintains a systematic cash receipt system. Through the cash receipt system, the organisation can record both electronically and manually of the cash receipts from the customers. In reference to Li (2016), cash is extremely liquid therefore it is important that an updated cash receipt system is maintained both manually and electronically.

As the second revenue stream for Back from the Future Ltd, it sells goods to its customers regarding credit. Credit sales are equally a risky initiative though most organisations sell on credit terms. Therefore, from the evaluation of Back from the Future Ltd, to maintain a proper revenue analysis of its credit sales, it should implement a sales return system. The sales return system should focus on the billing of the debtors, ensuring shipping or distribution of the products is in an effective manner and manages a proper flow of products and cash.

The third revenue stream for Back from the Future Ltd emanate from the online purchases from its consumers. Through the internet approach, the company has to maintain a stringent and effective online payment system. Accordingly, the organisation should implement an automatic bill-pay system. Through the bill-pay system, the customers obtain their invoice online and the shipping procedure done through mutually agreeable terms Saebi and Foss (2015).

Cash and Stock Threats and Controls at Back from the Future Ltd

Maintenance of a multiplicative approach to revenue streams can present a daunting environment for any organisation. As such, from the examination of Back from the Future Ltd, it is evident that there are sources of cash. Therefore, it is important that the organisation maintains a divisional approach towards management of the different cash stream. Therefore, from the analysis of the organisation, an analysis of the different threats and controls is as follows:

Cash Sale to Direct Customers

Selling of goods and services in cash to the potential customers present an avenue for different threats. As earlier mentioned, cash is highly liquid, and there prevail various threats that may impede successful sales. Hence, from the analysis of Back from the Future Ltd, the various threats that can emanate from cash sales include:

Failure to Make Sale Entry

Failure to make sales entry is a common aspect of any organisation. In most instances, management of manual and automated cash receipt books poses a daunting environment. Therefore, there can be errors in making data entry in either of the approach (Fields 2016). The failure to make data entry poses a daunting environment for the organisation since customers may pay for a given commodity but the books do not reconcile.

Billing Errors

Billing errors can be evident in various ways especially in the management of cash sales. As such, customers can make orders for given quantity of commodities via the phone and make changes in quantity when they arrive at Back from the Future Ltd.’s depot Saebi and Foss (2015). Additionally, the organisational employees may record a cash sale as a credit sale and vice versa. Therefore, the various billing errors pose a threat to revenue streams.

Theft

Theft is a vice that may impede on the cash at hand or at the bank for different organisations. Employees may undertake unscrupulous dealings with customers to acquire money through illegal means. Therefore, it is fundamental that an organisation maintains effective ways to ensure there is no cash loss.

Controls

Ensuring an effective control system of the cash that is transacted at Back from the Future Ltd is imperative to necessitate profitable outcomes for the business. Therefore, the various controls that the organisation can implement include:

Segregating the Duties of the Employees

Segregation of duties entails employment of different employees to manage a given aspect of the cash transaction. Accordingly, there should be two employees to manage cash receipt in an automated and manual manner respectively (Fields 2016). Additionally, the employees should be located differently in the organisation to necessitate a daunting environment for collusion.

Use of software that creates invoice that is based on the cash sales

There is diverse accounting software that necessitates effective management of cash sales. Through the above approach, the management can ensure that the cash sales reflect the inventory bought. Furthermore, reconciliation with the customer demand is bound to prevail through the plausible accounting software.

Barcoding Stock

Barcoding of stock is a novel approach towards management of stock in the organisation. Admittedly, barcoding generates a comprehensive and accurate approach that the management can utilise to manage its stock. Through barcoding, each stock sold on cash terms is registered in the master data system. Barcoding in reference to Jackson, Lipe and Waddoups (2016) is an effective approach towards minimization of theft

Maintenance of Reconciliation Documents

In the analysis of theft, it can result in loss of both inventory and cash. Therefore, organisations are advised to maintain proper documents to ensure multiple entries of cash sales. The use of sales order documents, picking, and packing slips are necessary tools for proper management of cash flow.

Credit Sales Management of Stock and Cash

Credit sales form one of the most pertinent and used approaches in the transactional process of an organisation. From the analysis of Back from the Future Ltd, it is evident that credit sales form the most lucrative approach to making sales Saebi and Foss (2015). However, cash loss forms a daunting environment for the organisation. Therefore, the various cash threats emanating from credit sales include:

Bad Debts

Maintaining accounts receivables is daunting for any organisation. Most importantly, the prospect of bad debts forms a facet of concern. Bad debts significantly deplete the organisational profitability. Therefore, from the analysis of Back from the Future Ltd, it is important that debt recovery approaches are set forth.

Billing Errors

Similar to cash sales, billing errors are evident. Most importantly in the purchase through credit, the billing errors can entail non-coherence between quantity ordered and price set, financial statement errors in reporting and even inaccurate shipping or distribution invoice. Therefore, it is important for plausible approaches.

Controls

Credit sales as earlier entail thorough analysis by the organisation. In making a credit approach to sales, it is understandable that the management fears on how the approach can diminish the profit streams of the organisation. Hence, the most effective control systems entail:

Transaction Authorization

Authorization of credit sales is fundament to manage the different debtors. Accordingly, Fields (2016) asserts that specific Ok should prevail in the sale of goods to existent or new customers. Through management of the credit buyers, the organisation can permit the evident return of goods sold on credit and also record the payments received. Rating of the credit buyers enables the organisation to minimise the prospect of bad debts.

Segregation of Duties

No one employee should have the capability to carry out a credit transaction from commencement to culmination. Therefore, separation of authorization of credit sales, custody of stock and billing should be maintained Saebi and Foss (2015). Through the earlier mentioned approaches, prevention of collusion prevails.

Access Controls

Maintaining an effective system especially in regards to automated credit sales management is important. Through ensuring that only specified individuals can access the master accounting records is imperative. As such, through the approach, the prospect of fictitious data entry is eliminated Saebi and Foss (2015).

Incentive-Based Payment System

From the analysis of Back from the Future Ltd, a fear of profitability reduction especially in credit sales is an aspect of concern. To ensure that debtors do not reduce the levels of profitability, it is advisable that an incentive-based approach is implemented. The incentive-based approach should entail:

Further discounts on prompt payment of debts

Debtors who pay in a prompt manner receive better ratings, therefore, access to better credit purchase terms

Encouraging cash payments through percentage discounts for repeat customers

Cash Threats and Controls for Online Customers

The online approach forms an innovative approach towards necessitating revenue streams. As such, from the analysis of Saebi and Foss (2015), the main problem threat for Back from the Future Ltd is the prospect of billing disputes. As an organisation that implements the automatic bill payment system, the prospect of non-reconciliation between the paid amount and the products delivered is a significant threat.

Control System

The control system for online purchases should denote maintenance of individual customer accounts. Through maintaining individual customer accounts, the electronic transfer of payments, shipping and even status of the goods bought can be managed effectively (Saebi and Foss, 2015). The systematic management of bills of lading in regards to the online customers should depend on real-time information relay to ensure products are received in a plausible manner.

Conclusion

Management of the different forms of sales is important for not only Back from the Future Ltd but also diverse organisations globally. Therefore, maintaining information intelligence on the evident threats and controls plays a fundamental role. Through focusing on the threats and controls, the business can ensure that its profitability is sustained, and there are no evident losses, especially in their credit sales.

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(Accounting Information Systems and Control Issues at Future LTD Case Study Example | Topics and Well Written Essays - 1750 words, n.d.)
Accounting Information Systems and Control Issues at Future LTD Case Study Example | Topics and Well Written Essays - 1750 words. https://studentshare.org/finance-accounting/2109089-accounting-and-finance-at-back-from-the-future-ltd
(Accounting Information Systems and Control Issues at Future LTD Case Study Example | Topics and Well Written Essays - 1750 Words)
Accounting Information Systems and Control Issues at Future LTD Case Study Example | Topics and Well Written Essays - 1750 Words. https://studentshare.org/finance-accounting/2109089-accounting-and-finance-at-back-from-the-future-ltd.
“Accounting Information Systems and Control Issues at Future LTD Case Study Example | Topics and Well Written Essays - 1750 Words”. https://studentshare.org/finance-accounting/2109089-accounting-and-finance-at-back-from-the-future-ltd.
  • Cited: 0 times

CHECK THESE SAMPLES OF Accounting Information Systems and Control Issues at Future LTD

Information Assurance Systems and Risk Assessment Model

… The paper "Information Assurance systems and Risk Assessment Model" is a brilliant example of a term paper on management.... The paper "Information Assurance systems and Risk Assessment Model" is a brilliant example of a term paper on management.... oming back to the issue of the risk-averse nature of businesses in the context of the XYZ organization, the one question we need to ask before proceeding any further is whether a mere risk assessment is enough to act as a strong foundation for resolving all those difficulties arising out of risk management in case of information management and assurance systems....
18 Pages (4500 words) Term Paper

Strategic Management Accounting

Each and every individual budgets his time, his expenditure, his future income, and so on.... Budgets help to peep into the future and help to plan accordingly.... Each and every individual budgets his time, his expenditure, his future income, and so on.... Budgets help to peep into the future and help to plan accordingly.... Every organization plans beforehand what they will do in the near future.... business organization that has a good plan for the future and a sound process to control things becomes successful in the long run....
14 Pages (3500 words) Essay

Benefits for Management Accountants in Understanding the Explanations of Decision-Making Processes

Today, there have been conspiracy whereby the field of management is greatly dissatisfied with current accounting systems.... Many managers believe that the accounting systems have greatly failed in adjusting their activities and objectives towards decision making.... anagerial accounting is concerned with providing information to managers inside the organization assisting in directing and controlling its daily operations.... It can be defined as a process whereby there is measurement, accumulation, identification, analysis, preparation and communication of information used by managers in decision making....
11 Pages (2750 words) Article

How Management Accounting Can Supply Information to Assist the Management of Sony Corporation

Sony Corporation is a company that specializes in consumer electronics such as televisions, hi-fi, and mini hi-fi systems, digital still cameras, home theatre systems, MP3 players, notebook and tablet computers, etc.... Sony Corporation is a company that specializes in consumer electronics such as televisions, hi-fi, and mini hi-fi systems, digital still cameras, home theatre systems, MP3 players, notebook and tablet computers, headphones, and digital video cameras among others....
6 Pages (1500 words) Essay

Budgeting and Entrepreneurial Control System

In this regard, it is imperative to state that the control systems employed by the management are a result of the evolution of various systems and beliefs over a period of many years.... This part of the paper will first of all outline the issues that have been dealt with by Paul M Collier in his Entrepreneurial Control and the Construction of a Relevant Accounting.... … The paper “Budgeting and Entrepreneurial control System” is a helpful example of a finance & accounting essay....
7 Pages (1750 words) Essay

Auditing and Assurance - Cheaper Eats Company

Due to the risk of competition Cheaper Eats ltd returns is expected to drop.... he risk of competition in the market will then suppress the prices of Cheaper Eats ltd thus prompting a lower rate of marginal income therefore this will force the management to design a way to adopt in order to meet the targeted results.... Cheaper Eats ltd is known to outsource 60 % of its major products from Zen suppliers.... Cheaper Eats ltd is not in compliance with Zen's terms of payment where during the previous period Cheaper Eats ltd delayed the payment however discouraging Zen's credit terms....
9 Pages (2250 words) Assignment

Establishing and Maintaining Accounting Systems

While the human resource application makes up of part of the major modern information systems that are commonly integrated with accounting information systems.... On the contrary, the accounting information system combines the information already processed in the TPS makes an analysis, study the practice and designs used in the accounting for the organization transaction process, implementation, and monitoring information systems.... he accounting systems such as the Management information systems (MIS) are interactive human-machine programs that work to support decision making for users both in and out of the traditional organizational boundaries (Elliott, p....
10 Pages (2500 words) Assignment

Accounting and Financial Management

… The paper "accounting and Financial Management" is a great example of a finance and accounting assignment.... nbsp; The paper "accounting and Financial Management" is a great example of a finance and accounting assignment.... here was a remarkable fall in ABC learning because it had forgone its basic business and decision making, as well as spending costs without reasonable management, which were the fundamentals of sound accounting....
9 Pages (2250 words) Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us