Department of Accountancy

School of Business and Economics

University of San Carlos

P. Del Rosario St., Cebu City, 6000

CHURUS Corporation

A Company Study of Accounting Information System

Presented to the

School of Business and Economics

University of San Carlos

Cebu City, Philippines

Submitted by:

Barbosa, Ira Christine A.

Cervantes, Mary Shyne K.

Mabale, Luke S.

Regner, Niño Miguel O.

Submitted to:

Mrs. Marilyn Cortes, CPA

November 25, 2019

 Table of Content

Part 1: Company Background

Company Profile

Organizational Structure

Present Condition of AIS

Part 2: Accounting Information System

Revenue Cycle

Sales Order Processing

Cash Receipts

Expenditure Cycle

Commission Processing

Cash Disbursement Processing

Payroll Processing

Fixed Asset Processing

Financial Reporting System

Part 3: Summary of Recommendations

Part 4: Appendix

Accounting Document/s
 PART 1:
COMPANY
BACKGROUND
Company Profile:

Churus Corporation, established on April 25 2009 by Alberto and Gemma Chua, the
company’s chief operating officer and chief executive officer, respectively, is a service company
based in Cebu City, Philippines. It is a corporation which provides spa services under the
trademark/ name La Esperanza and now has four branches namely in A.S Fortuna, Cebu IT Park,
Mabolo, and Ramos. The company has been known to be a quality provider of spa services all
over the city of Cebu, and in par with its recognition is the realization of its partnership with Nuat
Thai Services Inc., one of the most prominent spa corporations in the country. Before it
flourished into what it is now, it experienced a hiatus back in 2012 due to financial struggle. With
persistence and cooperation, it regained its corporate vigor back in November of 2016 and has
been stable in its operations up to this date. It is currently underway to expand its business and
add another branch in Lapu-Lapu City.
Organizational Structure

Gemma Chua
Chief Executive Officer

Alberto Chua
Chief Operation Officer

Princess Chua Jon Chua Jan Chua

Marketing Head Operations Head Finance Head
Current Problem of Accounting Information System

1. Delay in releasing payroll

2. It takes time to calculate deductions in employee payroll.

3. The same person collects and records the daily revenue.

4. Ineffective supervision of supplies

5. Tendency to create material errors such as miscalculations in the income, salary, commission
etc.

Interview Questions:

1. What is the background of the company?

 Type of Business
 Owner and Manager of the Business
 Year it first began
 Branches (How many?)

2. What is the organizational structure of the company?

3. What are the current problems of your company’s Accounting Information System?

4. Discuss to us your payroll system.

5. Discuss to us your collection procedures. (Cash Inflow)

6. Are your company’s files secured?

7. How do you keep them secured?

8. If you are going to rate (1-10, one being lowest and 10 being the highest) the security
of data and information in your company, what would it be?
9. If there’s any problem regarding the security of the company, what would you
recommend?

10. Is fraud easily traced in your company? Why or why not?

11. How do you trace fraud?

12. Describe to us the activity cycle in each department of your company. (Sales
Department, Marketing Department, IT Department, HR Department, Accounting
Department)
ANSWERS:

1.

- Type of business
 Service business (SPA)
- Owner and Manager of the business
 Alberto Chua & Gemma Chua
- Year it was Established
 2006
- Number of branches
o 4 ( A.S Fortuna, Mabolo, IT Park, Ramos)
o We are planning to open another branch in Lapu-Lapu

2.

- Gemma Chua (CEO)

- Alberto Chua (COO)
- Princess Chua (marketing head)
- Jon Chua (operations)
- Jan Chua (finance)

3.

- Delay in releasing payroll, ineffective supervision in supplies, weaknesses in segregation of

duties, takes time to calculate deductions in payroll, and tendency of material errors to
occur

4.

- The payroll is every Saturday

- The style is commission-based
- 30% of the price of each service will go directly to the employee.

5.
 - The operations officer will be the one to get the income from the previous day every
morning. Then, it passes through the finance office where he collects the cash, computes the
sales, and the employee’s commission then eventually through the bank.

6.

- Yes

7.

- It is kept inside the office

- Authorized personnel are the only ones allowed to go inside the storage room where files
are kept inside a container.

8.

- For me it would be 8, because we are the only ones who can access the storage room.

9.

- We would immediately have a meeting between the ceo and her staffs to figure out the
problem then fix it as soon as possible.

10.

- Yes, we can easily trace fraud in the company because of the people we hire plus my mom,
the CEO, is an accountant she really knows her stuff. We also let people sign a certain
contract for security purposes.

11.

- We always monitor our accounts around 3 times a week to make sure there is no problem.

12.

- Sales Department
o Every day we input all the sales from the 4 branches and deduct all the expenses during
the day and after file a financial report to be presented to both CEO and COO.
- Marketing Department
 o In the marketing department, my sister insures the ambiance of the place, the
cleanliness of the area, thus she is the one assigned in looking for possible places to put
a branch in. she also gives a way coupons and makes the design of fliers.
- HR Department
o So my dad receives all the bio data collected from branches since we are hiring today.
Then he handles the schedule of each employee because in our system employees are
shifting from time to time, one branch to another.
- Accounting Department
o My mom is assigned to do this task so basically she handles all the paper works like
income taxes, BIR papers, etc.
 PART 2:
ACCOUNTING
INFORMATION
SYSTEM
REVENUE CYCLE
Cash Receipts Process Narrative

Sequence Person Involved Activity

 Takes note of the service to
be rendered asked by the
customer and its equivalent
service fee
 Receives the amount paid
by the customer after the
service has been rendered
 Prepares invoice and
records payments in the
company’s books
1 Cashier
 Counts cash at the end of
the shift
 Makes cashier’s report and
sends it to the finance
manager
 Sends the money to the
treasurer once the report
has been checked and
verified by the finance
manager.
2 Bookkeeper
 Receives cashier’s report
3 Finance Manager
 Performs cash count
  Compares cashier’s report
with the cash reading
 Makes revenue report and
sends it to the accountant
 Receives revenue
report for
verification
 Receives cash from
cashier
 Decides whether to
deposit the cash or
4 Treasurer
not. If not, drops
the deposit
envelope inside the
safe. If yes,
prepares bank
deposit slip and
deposits it
Data flow Diagram of Cash Receipts
Cash Receipt Flow Chart
 CONTROL POINTS IN THE REVENUE CYCLE

CONTROL ACTIVITY CASH RECEIPTS

Transaction Authorization Cash prelist (Remittance List)

Segregation of Duties Cash receipts should be separate from cash

accounts

The one who collects cash should not be the

one who will record such collection
Supervision Mail Room

Accounting Records Checks, cash receipts, cash accounts,

remittance list

Access Controls Physical access to cash

Independent Verification Cash receipts, general ledger, bank

reconciliation
EXPENDITURE
CYCLE
COMMISSION
PROCESSING
COMMISSION PROCESSING
Sequence Person Involved Activity
1. Prepares and computes each
employee’s commission for
the day based on the data
from their ledgers.

2. Records each employee’s on

their individual commission
1 Finance Manager slips.

3. Prepare checks and vouchers

based on commission slips.

4. Sends checks and vouchers to

treasurer for assessment and
approval.

 Receives checks and

vouchers from finance
manager.

2 Treasurer  Reviews and approves

computation of commissions.

 Forwards approved checks to

paymaster.

1. Receives checks from

treasurer.

2. Prepares employee

3 Paymaster paychecks based on

commission slips.

3. Gives out checks to

employees.
Commission Processing Data Flow Diagram
Commission Processing Flow Chart
 CONTROL ACTIVITY CASH RECEIPTS

Transaction Authorization commission slip authorizes finance manager to

compute commission data of employees

treasurer authorizes approval of paychecks to

be distributed paymaster authorizes
distribution of paychecks
Segregation of Duties treasury function separate from payroll
function

check preparation is separated from check

distribution

record keeping is separated from payroll

 summary[|]

preparation of check separated from signing

Supervision distribution of paycheck secured by paymaster

commission data gathering secured by finance

manager

checks and vouchers to be assessed and

approved secured by finance manager

approved checks secured by treasurer

Accounting Documents/Records paycheck, commission slip, check, voucher,
ledger(???)

Access Controls limits access to commission slip, checks and

vouchers
Independent Verification reconciliation of commission data from service
ledger/journal(???)

review by treasurer of all computations in

checks and vouchers

review of paychecks by paymaster

 CASH
DISBURSEMENT
PROCESSING
Cash Disbursement Processing
Sequence Person Involved Activity
1. Checks due payments from
unpaid balances.
2. Prepares two check
vouchers.

3. Issues and prints checks.

4. Opens the Accounts
Payable File Opens the Accounts
Payable File and prints the
purchase order, receiving report,
1
Treasurer sales invoice together with the
check and check voucher to the
income auditor and controller
for approval and signing.

5. Sends the first copy to the

income auditor.

6. Receives the official receipt

and updates necessary files.

7. Receives the purchase order,

receiving report, sales invoice, check
and the check voucher

8. Receives the check and the

2 Authorized Signatories check voucher

9. Signs the voucher

3 Cashier 10. Collects the check

 12. Receives the check and the
check voucher then sign it
13. Gives out checks to
employees.

14. Receive the official receipt

and the signed check from the
vendor.
4 Cost Analyst 15. Will immediately close the
voucher.
Flowchart
Data Flow Diagram
 CONTROL ACTIVITY
Transaction Authorization
Segregation of Duties
Supervision
Accounting Documents/Records
Access Controls
CASH RECEIPTS
official receipt and signed check authorizes the
closing of voucher
income auditor and controller authorizes cash
disbursement
preparation of check voucher is separated from
signing of check voucher
distribution of voucher is separated from
issuance of voucher
authorization of disbursement is separated
from treasury function
treasurer supervises the time payments should
be made, the preparation of checks vouchers
and the updating of necessary files
reception of purchase order, receiving report,
sales invoice, and check voucher secured by
authorized signatories
cost analyst supervises the closing of voucher
accounts payable file, check voucher, purchase
order, sales invoice, receiving report, official
receipt
access to check vouchers and receipts secured
by treasurer
Independent Verification checks due payments from unpaid balances

updating necessary files once official receipt is

received

checks official receipt and the signed checks

by cost analyst
 PAYROLL
PROCESSING
 Person Involved Activity
 Employees use time card to
capture the time the
All Department
employees is at work in the
Service Department.

 Prepare personnel action

forms which serve evidence
that employees are
authorized to receive
paychecks

 Prepare payroll register wich

contain gross pay, deducton,
overtime pay, and net pay.

Human Resource/ACC???  Record payroll register in the

employee payroll records

 Once the employees follows

established procedures for
completing the timesheet it
will be then sent to
Accounting Department for
calculating of each
employees paycheck

 Calculate the total net pay of

each employee which
Accounting Department includes the gross pay and
withholding taxes.
 After calculating, the
accounting department will
create employee check of
each employee.

.
Data Flow Diagram
Flow Chart
 CONTROL ACTIVITY CASH RECEIPTS

Transaction Authorization Time card authorizes to compute payroll form

Signed paychecks authorizes the paymaster to

distribute the paycheck to employees
Segregation of Duties Time keeping function and personnel function
is separated

Record keeping is separated from payroll

processing

Check preparation is separated from check

distribution

Preparation of check is separated from signing

Supervision Time keeping process

Accounting department supervises the creation

of employee checks

Accounting Documents/Records Time cards, personnel action forms,

Access Controls Physical access to time cards

Independent Verification Reconcile payroll summary with the

paychecks

Reviews the total net pay of each employee

which includes the gross pay and withholding
taxes
FIXED ASSET
 CONTROL ACTIVITY
Transaction Authorization
Segregation of Duties
Supervision
Accounting Documents/Records
Access Controls
Independent Verification
CASH RECEIPTS
Purchase order authorizes payment for
purchased fixed asset
Preparation and verification of purchase
requisition is separated
Administrative function is separated from
accounting function
Verification of purchase requisition secured by
manager
Purchase requisition order, purchase order,
supplier’s invoice, packing slip, receiving
report
Access to purchase order secured by
accounting department
Chief operating officer reviews purchase
requisition
Accounting department verifies purchase
requisition
 SUMMARY OF
RECOMMENDATION
Recommendation/s for Revenue Cycle

The current accounting information system of Churus Corporation contains a threat to

the integrity of its revenue cycle. As shown above, the cashier, which is responsible for the
collection of payments from customers, in the same practice, executes the recording and updating
of the income ledgers which is eventually sent to the financial manager for the computation of
commissions.

This poses a problem to the company because there is a vulnerability to temptation

when an employee positioned to collect payments has the full control and manipulation of its
receipts in the books. The weakness in segregation of duties shall be remedied by hiring a clerk
solely for the purpose of journalizing the income and transferring payments data to the finance
department.

This will prevent the occurrence of lost revenue, internal conflict, and wasted worker
effort. This remedy should be implemented as early as possible since the problem is posed at one
of the most vital points with regards to the growth of the business-revenue.