...CHAPTER 2 SYSTEM DEVELOPMENT LIFE CYCLE TYPES OF INFORMATION SYSTEM Transaction Processing Systems A transaction processing system provides a way to collect, process, store, display modify or cancel transactions. Most of these systems allow multiple transactions to take place simultaneously. The data that this system collects is usually stored in databases which can be used to produce reports such as billing, wages, inventory summaries, manufacturing schedules, or check registers. Management Information Systems A management information system is an information system that uses the data collected by the transaction processing system and uses this data to create reports in a way that managers can use it to make routine business decisions in response to problems. Some of the reports that this information system creates are summary, exception and ad hoc reports. All this is done to increase the efficiency of managerial activity. Decision Support Systems A decision support system helps make decisions by working and analyzing data that can generate statistical projections and data models. This system gives support rather than replacing a managers judgement while improving the quality of a managers decision. A DSS helps solve problems while using external data. Expert Systems and Neutral Networks An expert system, also known as a knowledge-based system, is a computer system that is designed to analyze data and produce recommendations, diagnosis and decisions that are controlled...
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...problem, like breaking the accounting rule, being in prison. For example, some employees avoid being laid off, they will help their companies hiding the real information or situations, so that affect the healthy development of the world economy. Independent auditors are held to their own standards and have their own independent boards of review that they answer to, so companies that hire them can be assured of the highest standards of quality and integrity. Secondly, professional skepticism is a key characteristic for auditors. Professional skepticism requires every auditor to have a questioning mind and a critical assessment of evidence. We can find this requirement on page 17 of our textbook. So auditors must responsible for not accept management assertion without corroboration. Even though some auditors and the companies have close relationship, they have to guard against being too trusting in accepting representations about the client’s financial statement. Auditors should keep their professional attitude and make a fair audit to the companies. In conclusion, hiring a CPA as controller who had...
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...other like companies. If management feels things aren't going well, they can help pinpoint the problem through comparing their ratios with other companies. They may have several ratios that are comparable, but a couple which are way off. That might be where the problem is. Also, ratio analysis may help by comparing your company with prior periods. If a particular ratio is declining when it would be better if it were staying the same or increasing, then again looking at the ratios are important to find out where the problem lies. Ratios are important to spot trends too They are calculated by dividing one statistic by another. For example one ratio use widely is PE--price to earnings. The price of the equity is divided by the earnings per share of the equity. That tells the relative price of an equity in relation to its earnings. Another is dividend %. That tells the amount of dividend divided by the price of the share of equity. Others commonly evaluated are gross margin; which is gross profit/sales, I think. Debt/equity which is debt of the company divided by equity or how leveraged the company is. ROI is another--profit divided by invested capital. This is a lot of information to take in but accounts receivable turnover ratio is a measure of the liquidity of a company's AR asset. Typically, the higher the turnover is, the more favorable it is. An interesting counter argument to the preceding statement is that a too high an account receivable turnover ratio may point...
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...MANAGEMENT OF FINANCIAL SERVICES LESSON 13: FACTORING – THEORETICAL FRAMEWORK Lesson Objectives • • • • • • • Finance Maintenance of accounts Collection of debts Protection against credit risks”. To understand the Concept of Factoring. Methodology of Factoring and Forfeiting. Types of factoring. Introduction Receivables constitute a significant portion of current assets of a firm. But, for investment in receivables, a firm has to incur certain costs such as costs of financing receivables and costs of collection from receivables. Further, there is a risk of bad debts also. It is, therefore, very essential to have a proper control and management of receivables. In fact, maintaining of receivables poses two types of problems; (i) the problem of raising funds to finance the receivables, and (it) the problems relating to collection, delays and defaults of the receivables. A small firm’ may handle the problem of receivables management of its own, but it may not be possible for a large firm to do so efficiently as it may be exposed to the risk of more and more bad debts. In such a case, a firm may avail the services of specialised institutions engaged in receivables management, called factoring firms. At the instance of RBI a Committee headed by Shri C. S. Kalyan Sundaram went into the aspects of factoring services in India in 1988, which formed the basis for introduction of factoring services in India. SBI established, in 1991, a subsidiary-SBI Factors Limited with an...
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...6: CASH, TEMPORARY INVESTMENTS, ACCOUNTS RECEIVABLE and NOTES RECEIVABLE PROBLEM SOLUTIONS Assessing Your Recall Cash: Probable Future Value – The probable future value in cash is the ability of the cash to be exchanged for goods and services in the future. Ownership – Ownership is evidenced by possession of currency and by the right to control bank accounts. Temporary Investments: Probable Future Value - The probable future value in temporary investments is the cash payments that will be received from the investments in the future. These payments take the form of dividends in the case of shares and interest in the case of debt as well as the ultimate sales price of the securities when they are sold. Ownership – Ownership is evidenced by share or debt certificates although sometimes these documents are not distributed to the owners but a record is kept by the brokerage house that handles the investments for the company. Account Receivable: Probable Future Value – The probable future value in accounts receivable is that they represent the right to receive cash at some (usually fixed) date in the future. The cash, in turn, has value in the ability to be exchanged for goods and services in the future. Ownership – Ownership is evidenced by contracts either written or implied between the buyer and the seller. Invoices and shipping documents usually provide the necessary evidence of proof that a receivable exits. Notes Receivable: Probable Future Value – The probable...
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...in almost every desk of the organization and all over the factory. Statement of the Problem: The efficient management of working capital is very vital for a business survival. This is premised on the fact having too much working capital signifies inefficiency, whereas too little cash at hand signifies that the survival of business is shaky. Here I focus on working capital management practices in M. M. ISPAHANI Ltd. to evaluate the real condition that are existing. Objectives of the study: The main objective of the study is to gather practical knowledge about working capital management of M.M. ISPAHANI Ltd. My study covers the following areas: * To Study the working capital policies of the sample company. * To study the structure of working capital. * To measure the utilization of working capital of the sample company. * To examine the impact of working capital on profitability. * To identity the problems facing the sample company. * To suggest the recommendation of measuring working capital Management efficiency. Scope of the Study: In my term paper the sample size was one and M.M. ISPAHANI Ltd. was selected as a sample and my topic was working capital management. For gathering more about my requirements I have scheduled my time in various departments, such as Department | Days | Executive Officer | 07 | Finance & Accounts | 15 | Marketing & Sales | 05 | Purchase | 05 | Import & Export | 05 | Administration | 03 | ...
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...Week 4: Internal Control, Cash, and Receivables - Class Activity 1. | Which one of the following is not a primary component of an internal control system? A. | Risk assessment | B. | Information and communication | C. | Monitoring | D. | Rationalization | | 2. | Which of the following is not a reason why an organization establishes a system for internal control? A. | To safeguard its assets | B. | To increase efficiency of operations | C. | To ensure compliance with laws and regulations | D. | All of these are reasons why an organization establishes a system for internal control. | | 3. | Which of the following statements is correct? A. | Control is most effective when two or three people are given responsibility for the same task. | B. | The person who has custody of assets should not perform the record keeping for the assets. | C. | The person who has custody of assets should also perform the record keeping for the assets. | D. | It is often a waste of company resources to have an employee perform independent internal verification. | | 4. | Internal auditors A. | are hired by CPA firms to audit business firms. | B. | are employees of the IRS who evaluate the internal controls of companies filing tax returns. | C. | evaluate the system of internal controls for the companies that employ them. | D. | cannot evaluate the system of internal controls of the company that employs them because they are not independent. | | 5. | Segregation...
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...Managerial Finance Solution Lawrence J. Gitman CHAPTER 15 Curent Liabilities Management Instructor’s RESOURCES Overview This chapter introduces the fundamentals and describes the interrelationship of net working capital, profitability, and risk in managing the firm's current liability accounts. The management of current liabilities requires choosing appropriate levels of financing and involves trade-offs between risk and profitability. This chapter also reviews sources of secured and unsecured short-term financing, including the role of international loans. Spontaneous sources, such as accounts payable and accruals, are differentiated from negotiated bank sources, such as lines of credit. The cash discount offered on accounts payable and the costs of forgoing the discount are described. Secured sources include bank and commercial finance company loans backed by collateral such as inventory or accounts receivable. PMF DISK This chapter's topics are not covered on the PMF Tutor or the PMF Problem-Solver. PMF Templates The following spreadsheet template is provided: Problem 15-8 Topic Cost of bank loan Find out more at www.kawsarbd1.weebly.com 393 Last saved and edited by Md.Kawsar Siddiqui Part 5 Short-Term Financial Decisions Study Guide The following Study Guide examples are suggested for classroom presentation: Example 1 4 Topic Loss of loan discounts Accounts receivable as collateral Find out more at www.kawsarbd1.weebly.com 394 Last saved and...
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...Controls for Inflows Controls for Inflows Internal controls are a vital component in the business process and can serve to deter and minimize risks associated with day-to-day business. Internal controls are designed to safeguard a company’s assets by preventing theft, fraud, and waste of company resources. They are also implemented to ensure compliance with internal and other regulations. Sarbanes-Oxley Act of 2002 (2003) requires information from management and the auditors regarding the effectiveness and efficiency of a company’s internal controls. Effective internal controls will ensure reliability of financial reports. This proposal includes internal controls each company should implement for cash, sales, accounts receivable, inventory, and production. Cash A company must have strong effective internal control to protect against its cash resource. “Cash is highly liquid (easily converted into cash!), not easily identifiable as company property, and highly portable. For these reasons, cash is the favorite target of employee thieves, although theft of inventory is a close second” (Louwers, Ramsay, Sinason, & Strawser, 2007, p, 211). A company should have written processing procedures for cash known by those involved with cash. Additionally cash (includes money orders and checks) should always be stored in a locked and secured area. One main internal control for protection of cash is segregation of duties. Collection, accounting, and reconciliation of cash...
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...Topic: Managing accounts receivables Name: Course: Instructor’s Name: Date: Accounts receivables have both positive and negative aspects. They are an indicator of robust sales and reliable customer base. However, the fact that accounts receivables do not constitute cash at hand or in the bank leaves a possibility of not collecting the money. Therefore, it is crucial to have in place, a system to manage accounts receivables, as well as logical implementation of effective credit and collection policies (Brigham, 2009). Credit and collection policies are an organization’s rules governing the functions of its credit and collection department. A billing manager should consider the organization’s mission and goals, financial obligations, and demands regarding risks when implementing such policies (Hong, 2008). In order to meet its financial obligations such as current expenses and bills, an organization should maintain an adequate float of cash in its possession. Ineffective credit and collection policies affect an organization’s cash flow. Policies that leave room for delayed collection activities, or extension in payment hinder a firm’s ability to meet its financial obligations (Hong, 2008). Any credit and collection policy should be in line with the organization’s goals. Organizations usually set goals that rhyme with their strategic direction and prevailing market conditions. Policies for managing credit should be in such a way as to foster achievement of those goals...
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...The Audit of Specific Items Audit Sampling and Other means of Testing Computer-Assisted Audit Techniques Not-for-Profit Organisations The Use of Assertions by Auditor What are substantive procedures? Substantive procedures are tests to obtain audit evidence to detect material misstatements in the financial statements. Substantive procedures generally include analytical procedures and test of detail of transactions, account balances and disclosures. What are the assertions used by auditors? Hint: PROVE Presentation and disclosures (or Classification and understandability) Records completeness, accuracy, cut-off (correct accounting period) Obligation (or rights and obligation) Valuation and allocation Existence Audit Procedures What are some of the typical audit tests? Confirming compliance with law and accounting standards Reviewing notes for understandability Reviewing of post year-end items Cut-off testing Analytical review Confirmations Reconciliations to control accounts Recalculation of correct amounts Third party confirmation Reviewing invoices for proof that item belongs to the company Matching amounts to invoices Confirming accounting policy consistent and reasonable Reviewing post year-end payments and invoices Expert valuation Physical verification Inspection of supporting documentation Confirmation from directors that transactions relate to business Inspection...
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...networking hardware and software to business customers. KCN is exposed to external shocks and competitive forces in its industry. To effectively compete and succeed, KCN must have qualified personnel. Management must increase its activities by 3% annually for next 3 years to achieve its goals. | Planning Meetings | To indicate meetings held with client and Audit Team | So far 2 meetings: 1) meeting with client and 1) Audit team | Ownership and Management | To determine the owners and management of the company | Private owners: John, Terry, and Mark Keystone; Keith and Rita Young.Terry and Mark Keystone are a part of the board of directors. | Objectives, Strategies and Business Risks | To describe KCN’s business objectives, major strategies and the risks related to achieving its objectives | Major Objective: Increase revenues by 6% & Net income by 8% annually for next 3 years.Major Strategies: New software development, aggressive advertising, and sales to high risk customersMajor Risk: inability to compete for qualified employees to produce software products; ineffective advertising;disproportionate increase in uncollectable receivables due to target market with higher risk | Measurement and Review of Financial Performance | To understand methods used by management to monitor performance |...
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...concerned w/ the analysis of decisions that affect CA & CL (Networking capital=CA-CL) *Short term financial management is called working capital management * The most important difference btwn short-term and long-term is the timing of the cash flows (short term – cash inflows and outflows within a year or less) * Cash = LT – debt + Equity + CL - CA other than cash – Fixed Assets ⇒activities that increase cash: 1. long term debt 2. equity (selling some stock) 3. CL 4. CA other than cash (selling some inventory for cash) 5. fixed assets (selling some property). * Activities that decrease cash (opposite of above) * Operating Cycle – the period between the acquisition of inventory and the collection of cash from receivables. 1. Inventory period – the time it takes to acquire and sell inventory. 2. Accounts receivable period – The time between sale of inventory and collection of receivables. (Operating cycle = Inventory Period + Accounts Receivable Period) * The operating cycle describes how a product moves through the CA accounts moving closer to cash. * Accounts Payable Period – The time btwn receipt of inventory & payment for it. *Cash Cycle – The time btwn cash disbursement and cash collection. The Cash Cycle is the number of days that pass before we collect the cash from a sale, measured from when we actually pay for the inventory. (Cash Cycle = Operating Cycle – Accounts Payable Period) * Cash Flow Timeline - A graphical representation of the operating cycle and the cash...
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...INFS7004 Accounting Information Systems Lecture 4 Transaction Cycles: The Revenue Cycle 1 The Conceptual System The Revenue Cycle The revenue cycle is the set of activities in a business which brings about the exchange of goods or services with customers for cash. Most business transactions are conducted on a credit basis. Cash is received after goods are shipped to the customer. 2 Sales Order 1 Credit / Customer Service 2 REVENUE CYCLE (SUBSYSTEM) Cash Receipts/ Collections 6 Shipping 3 Billing/ Accounts Receivable 4/5 Journal Vouchers/Entries: How do we get them? Billing Dept. prepares a journal voucher: Accounts Receivable Sales DR CR Inventory Control Dept. prepares a journal voucher: Cost of Goods Sold Inventory DR CR Cash Receipts Dept. prepares a journal voucher: Cash Accounts Receivable DR CR 4 Sales Order Procedures Sales order procedures include the task involved in receiving and processing a customer order, filling the order and shipping products to the customer at the proper time, and correctly accounting for transaction. 5 Receive Order At this point, sale process begins indicating the type and quantity of merchandise desired by customer. It may or may not be a physical document Orders may arrive by mail, by telephone, or from a field representative who visited the customer After creating the sales order, a copy of it is placed in the customer open order file. 6 Check Credit For...
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...and preparation for multiple users may lead to increased neutrality | VERIFIABLE | Information may not have been checked for verifiability or accuracy | Controls may increase verifiability of this information | Controls may increase verifiability of this information | COMPLETENESS | Least complete | Average completeness | Most completeness | ACCESSABLE | Most accessible | Average | Average | What is an accounts receivable aging report? How long debts have been outstanding with debtors, management need to know for cash flow issues, customers’ accounts balance. Why is accounts receivable aging report needed for an audit? To see if accounts receivable is accurate in looking at provisions for bad debts What is an accounts receivable aging report used for normal company operations? Determining credit policies, if credit collections need to be chased up, appropriate credit limits, allow the follow-up of outstanding amounts Where will you collect the data you need to prepare the report? Cash collections, Accounts receivable lecture What will it look like? Customer number (invoice number) | Customer name | 0-30 days outstanding | 31-60 days outstanding | 61-90 days outstanding | XXX | XXX | XXX | XXX | XXX | Who should receive the...
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