ANSWERS: 

 
1) What is a POS? - Point of Sale? Why are commercial establishments encouraged to use the POS
rather than the CRM (cash register machine?) What are the advantages - - from the point of the
AIS. 
 Both CRM and POS are used to manage sales. Cash register machine is a machine that
calculates totals, records sales, and it has a drawer for storing cash while POS is almost same
but POS offers more services or functions. Unlike the traditional cash register machine, it
involves a software. It allows you to manage inventory easily and monitor when stocks are
low.
 It is encouraged for establishments especially, department stores and groceries, because
POS system gives you running reports as each transaction happens. It allows you to make
better decisions about ordering and merchandising. 

2) What are the advantages of cashless transactions? - what possible downside can happen in
cashless transactions?
 Cashless transactions refer to electronic or digital transfer of money. There is no actual
physical exchange of money. It can be through cheques, debit and credit cards, e-wallets like
gcash or paymaya, or online transfer through mobile banking. It is really useful and more
convenient. Transfer of money is quicker and easier. Cashless transactions are prone to
cyberattacks and hacking risks. Businesses should keep a tight protection for their data and
also their customers’.

3) How do we understand the process system (in general) about payment via debit cards and credit
cards? - in the AIS, would these payment modes be conveniently viewed by the accounting
department of the vendor entity? - like, would the seller experience online credits from
customers' payments?
 Payment through debit cards deducts purchase from the checking account or saving of the
customer while with credit card, purchase is paid through credit. Customer must pay back
the credit to the bank.
 When a customer pays through debit or credit card, the bank will approve the transaction
and the selling entity receives credit from the customer’s payments.
 In AIS, such payment methods are more convenient because when you pay through debit or
credit card it automatically registers the data of the customer in the system. Like the name,
the amount and the bank. Less errors in the accuracy of the amounts also and less physical
cash involved in the transactions.
4) What about credit sales? - how do we go thru the revenue cycle for credit sales transactions? 

The process usually begins when a customer approaches the company and files a customer purchase
order. The sales department receives the document and prepares a sales order that is then sent to
the credit department for a credit check. Remember that salespeople will not perform credit checks
because their position as a salesperson may impact their credit decisions on customers. This is called
segregation of duties.

Once the credit department approves the customer and the order, the sales order is sent to the
shipping department, which will generate a shipping document, also referred to as a bill of lading or
a waybill. The approved sales order and the shipping document are then sent to the accounts
receivable clerk, who then generates a sales invoice and makes the necessary journal entry. And
finally, once the cash is received from the customer, accounting or treasury records the credit to
cash and debits the balance in accounts receivable.

5) What are the basic source documents needed in the revenue transaction processing to validate
entries into the books of accounts? 

 Customer order - indicate what type and quantity of goods the customer wants.

 Sales Order - contains specific information about the customer and the description of items
they ordered

 Stock release document - formal authorization allowing release of finished goods.

 Packing slip and shipping notice- record delivery to customer.

 Return slip - for sales returns

 Credit memo - support adjustments to customer accounts. (made by sales department)

 Remittance advice - for the cash receipt procedures.

 Bank deposit slip - amount of the day’s receipts 
6) What are the basic entries for revenue cycle that goes thru credit sales? 

At the end of the period, sales invoices are summarized into a sales journal voucher, which is sent to the
general ledger task for posting to the following accounts:

Accounts Receivable—Control XXXX.XX

Sales XXXX.XX

Periodically, the financial value of the total reduction in inventory is summarized in a journal voucher
and sent to the general ledger function for posting to the following accounts:

Cost of Goods Sold XXX.XX

Inventory—Control XXX.XX

ADDITIONAL INFORMATION:

POST TO GENERAL LEDGER. By the close of the transaction processing period, the general ledger
function has received journal vouchers from the billing and inventory control tasks and an account
summary from the AR function. This information set serves two purposes. First, the general ledger uses
the journal vouchers to post to the following control accounts:
Accounts Receivable Control XXXX.XX
Cost of Goods Sold XXX.XX
Inventory Control XXX.XX
Sales XXXX.XX

7) What precedes the Purchase order? - and why? 

 Before purchase order is prepared, inventory records must be monitored or checked first.
This is to make sure that there is really a need to order and to avoid storage costs and
spoilage.
 ---

8) What is the reason why the receiving clerk is separate from the stockman? - Complete the
answer. 
 This a control measure to avoid failure to properly inspect assets and theft of assets.
Segregate duties and to control product quality and quantity. The receiving clerk receives a
blind copy which contains relevant information about the purchases. He must physically
 count and inspect the goods. Sometimes they may be tempted to just transfer information
without performing physical count. The stockman double checks the output of the receiving
clerk.
 If the same person who is inspecting and counting the items received is also the one
assigned in the warehouse where the inventories are securely placed then there are chances
of fraud, the asset (inventories) are at risk and a greater possibility of theft of the assets. If
there is only one person assigned for receiving the inventory and stocking it, that person can
easily manipulate its quantity that could lead to theft of assets.

9) For consumable items in the warehouse, what are the best practices in putting order or in the
proper arrangement of items - i.e. items added, items released to avoid theft of stocks? 
 One of best practices and widely used is FIFO basis. Usually, older stocks are neglected in
inventory and these stocks are prone to theft and spoilages. Practice of FIFO ensures that
the first produced or purchased are sold first and the newer ones or last ones are sold last.
In using FIFO its is also easier to check and track inventory audit trail. Audit trail is the
chronological order of transactions done.

10) In the purchasing cycle, what four documents are used by the Accounting Dept., to validate, to
reconcile, to establish accuracy of the transaction. What are the entries? 
 Purchase order 
Perpetual inventory system:
DR: Inventory
CR: Accounts payable
Periodic inventory system:
DR: Purchases
CR: Accounts payable
 Receiving Report 
 Invoice
 Open ap file
DR: Accounts payable
CR: Cash

11) What possible irregular actions in source documents must always be checked or observed by the
Accounting Dept.? Because of these potential irregularities, the Accounting Dept. must impose
control policies and/or control procedures? - give examples of these control policies and
procedures?
 One possible irregular action in source documents is when the person in charge of writing
checks and posting in the cash account may withdraw cash and just adjust the amount
posted in the cash account to hide the transaction. Another is he/she may establish an
account payable to a nonexistent vendor. To avoid such frauds, accounting department
 must segregate these duties and functions and perform independent verification to secure
the accuracy.

12) In the conversion cycle - we cited one time in our discussion that the practice of implementing
cost accounting system is essential.  Why?
 Conversion cycle focuses on the production process or the manufacturing process. Cost
accounting is important in this cycle because it records the financial effects of the physical
events that are occurring during conversion. It records the materials and labor used.
Information this system produces is used for inventory valuation, budgeting, cost control,
performance reporting, and management decisions, such as makeor-buy decisions.

13) What particular dynamics are featured in cost accounting that can be considered a big help in
keeping track of data and information in the accounting system?
 Reconciliation and Delegation of Authority. In cost accounting, there is proper delegation of
authority. If there is overlapping of authority, keeping track of data and information might
be hard which might lead to fraudulent acts or misplacement of inventories. Cost
accounting reconciles the materials and labor usage taken from materials requisitions and
job tickets with the prescribed standards. Cost accounting personnel may then identify
departures from prescribed standards, which are formally reported as variances. In the
traditional manufacturing environment, calculated variances are an important source of
data for the management reporting system.

14) How do you establish the relationship of cost accounting and general accounting as part in the
processing of data and information in the system?
 In the payroll processing, production employees prepare two types of time records: job
tickets and time cards. Wherein, job tickets capture the time that individual workers spend
on each production job and cost accounting uses these documents to allocate direct labor
charges to work-in-process (WIP) accounts and create labor usage file. After, cost accounting
allocates labor costs to the WIP accounts, the charges are summarized in a labor distribution
summary and forwarded to the general ledger function. Furthermore, verification steps in
the conversion cycles includes cost accounting which reconciles the materials and labor
usage taken from materials requisitions and job tickets with the prescribed standards. Cost
accounting personnel may then identify departures from prescribed standards, which are
formally reported as variances. In the traditional manufacturing environment, calculated
variances are an important source of data for the management reporting system.

15) Give at least 2 examples of (common) fraudulent practices in the conduct of payroll management
system. How do we address these bad practices? 
  Common fraudulent practice is some employees clock in the time cards of absent
employees. This can be addressed by supervising the clocking in and out process.
 Another fraudulent practice is when supervisor submits fraudulent time cards for non-
existent employee. These paychecks are received and cashed by supervisor. This can be
avoided by always updating the employee file. Only time cards of current and valid
employees are processed. Company may also use a paymaster which is independent from
the preparation of payroll to distribute paychecks to the employees.

16) What is the basic payroll entry (template) upon the accrual of the payroll expenditure? and the
basic entry upon closing the accrued accounts? 
Journal entry for accrual of payroll expenditure:
DR: Salaries Expense
CR: Accrued Salaries 
Journal entry to close accrued accounts:
DR: Accrued Salaries
CR: Cash 

17) How do we segregate the functions of the HR and the Accounting Department is as far as the
preparation of the payroll is concerned? 
 The difference is that the HR of the payroll department computes the total salaries payables
with all the benefits and deductions per employee,

 while the accounting department, particularly the account payable department, simply
encodes the payable accounts in order to prepare the paychecks and the cash disbursement
voucher.

The HR department is in charge of personnel related data from employee benefits, employee
relations, pay rates and deductions, and payroll. They also record employee status as they occur.
In short, they handle the employee’s file to be used in payroll processing. HR Department
computes the total salaries payables with all the benefits and deductions per employee.

While the accounting department, as far as payroll preparation is concerned, receives a copy of
the payroll register from the payroll clerk and reviews it for accuracy before posting it and
recording the transaction. The accounting department is responsible for processing the time spent
on each job from production to be posted to the WIP account. It also authorizes the cash
disbursements department to deposit a check in the amount of the total payroll.

18) How do we differentiate the Purchasing Cycle and the OPEX cycle? - you can describe their cycles
and cite the differences: 
  The main difference is that purchasing cycle includes purchases of raw materials or
inventories. These costs are directly attributable to production that’s why they are included
in the cost of goods sold while operating expenses are costs that are not directly associated
with production. Examples are general administrative and selling expenses.

19) What are the control points of the OPEX cycle which must be given crucial attention to avoid
irregular practices?
 Operating expenses includes expenditures that are not related to production. Company
should do independent verification of the amounts and the legitimacy of bills or receipts
used in establishing payables. Strict policy about acknowledging receipts and authorization
of cash disbursements should be implemented. There is tendency that employees present
nonexistent transactions or manipulate the amounts.

20) Normally, how do we arrange the OPEX accounts for financial reporting purposes?
 Accounts related to operating expenses are presented in income statement. They are the at
2nd part or deducted from the gross profit. They are classified whether they are general
expenses, administrative expenses, or selling expenses.


21) Provide an example of OPEX transaction and give the corresponding accrual entries at the level of
the Accounting Dept., and the entries at the disbursements level.
 An example of transaction would be payment for utilities. You received your electric bill for
this for this month. Journal entry would be:
DR: Utilities expense
CR: Utilities expense payable
 At disbursement level or when payment for the payables have been authorized the journal
entry would be:
DR: Utilities expense payable
CR: Cash

22) In the Fixed Asset system - what ideal control practices must be in place to avoid fraud, theft, and
document manipulations?
 One ideal control practice is supervision controls. Fixed assets are prone to theft and
misappropriation because they are distributed throughout the organization. That’s why
supervisors must ensure that fixed assets are secured at their proper locations. Like the
company vehicles, they should be in the motor pool and not taken home. Also, fixed assets
must be used in accordance to the business practices.

23) What specific information are found in the lapsing schedule? 
  A lapsing schedule is a spreadsheet that lists the purchase date, depreciation, and other
accounting actions related to a fixed asset. The intent of the schedule is to show the decline
of book value of a fixed asset over time.
 As you mentioned before, it should also be attached to the Audited Financial Statements. If
not, the depreciation is questionable. This is to make sure that fixed assets are carried at
their actual value, not understated or overstated.

24) During one of our sessions, I discussed about the deficiency of the accountant's technical
competency when it comes to fixed assets management? - Recall how we explained this particular
issue and how it is best addressed or solved. 
 As mentioned in the previous discussions, accounting for fixed assets can be challenging to
accountants because of some technicalities. There are times that we are not really familiar
to the asset, like its features and how do we really know if its according to the description
submitted. A solution can be having an expert about the asset to validate the description.

25) What reconciliation and validation points must be considered in reporting depreciation,
accumulated depreciation, and fixed asset valuation in general? - as these are inherent in the
provision and reporting of data and information in the accounting information system? 
 Validation points that must be considered in reporting depreciation, accumulated
depreciation, and fixed asset valuation are the cost of the asset, estimated salvage value of
the asset, estimated useful life of the assets, and obsolescence. When reporting
depreciation, it must reflect the pattern in which the company uses the fixed asset, for
example machines should usually follow the output/ production method, because of
intensive use. Buildings, and non-producing usually follow straight line method. This is to
avoid understatement and overstatement of fixed assets- substance over form. 

 (Page 283) Validation points that must be considered in reporting depreciation,

accumulated depreciation, and fixed asset valuation are the cost of the asset, estimated
salvage value of the asset, estimated useful life of the assets, and obsolescence. A company
is free to adopt the most appropriate depreciation method for its business operations.
Accounting theory suggests that companies use a depreciation method that closely reflects
the operations’ economic circumstances. So, companies can choose a method that allocates
asset cost to accounting periods according to benefits received from the use of the asset.
Asset maintenance also involves adjusting asset accounts to reflect the cost of physical
improvements that increase the asset’s value or extend its useful life. Such enhancements,
which are themselves capital investments, are processed as new asset acquisitions. The
depreciation of fixed assets used to manufacture products is charged to manufacturing
overhead and then allocated to WIP. Depreciation charges from assets not used in
manufacturing are treated as expenses in the current period.