University of Negros Occidental- Recoletos

A Final Output in GORISK330

October 2021

Members:

Colimbo, Sushella Marie

Demetillo, Angel

Emnace, Cheveem Grace

Eriber, Mariel

Escleto, Daniela Faith

Exanes, Chermhel

C08

Instructor:

Atty. Reena May Reliquias, CPA

Nature and Background

Engaging in the food business is constantly attractive for start-ups. People do love to eat,
and it is an essential thing to live. This kind of business is easy to prototype and doesn't require
much investment in equipment. It can be done in a small space in one's home without requiring
establishing a factory. Bread manufacturing is the most considered type of business in the food
industry. Initiating it can be on a small scale, and entrepreneurs don't require complicated
licensing. Bread is an essential food available for the human diet. It is the most chosen among
other types of food because of its availability and high healthful value. The aroma of freshly
baked bread catches the heart of everyone. As Filipinos, it is a good part of our breakfast and
snacks in daily life. It is price friendly regardless of social class. Due to these reasons, the
demand for bread is growing enormously. Thus, putting up a bread manufacturing business is a
good investment. However, the effect of COVID-19 is evident in the food industry. The number
of closing establishments drastically went up, leading to massive losses and unemployment for
the workers. But many people engaged in the online selling of bread and pastries. The creativity
and resourcefulness of people lead to their growth and success despite the pandemic. In
manufacturing bread, there should be inventory and quality control. Checking and keeping track
of it is a must to guarantee the clientele the fresh and good quality products. The processes
involved are a bit tricky because the product they offer is food. Even if a small thing goes wrong,
it can cost a life and well-being of a customer. In pursuing this business, it will be a necessity to
invest more in research and development. An increasing number of competitors is a threat.
Therefore, one should strive to have an edge among others. It is a must to prioritize advertising
and marketing to reach a wide range of customers. Having exemplary customer service will
increase the clientele's loyalty, and satisfaction will lead to good word of mouth. Our bread
manufacturing business comprises different departments. Segregation of duties is highly
practiced and observed to operate efficiently. Prioritizing control over the organization at the
start will lessen the conflict and risks that may arise. We use manual and computerized systems
in each cycle. The technology indeed is a great help in easing the work. But our business still
uses traditional methods even more by those employees who are not assigned in the office work.
The following are the departments and their functions. The marketing department oversees
getting the business into the spotlight. It is their responsibility to ensure the position of the
establishment in the market. The purchasing department's obligation is to acquire and receive
raw materials. Monitoring the accounts payable for such materials is also under them. The
production department is the primary function of our business as it creates the products to be
sold. The research and development department brainstorms on how to excel in the highly
competitive industry. Either by improving the existing products or introducing a new one. The
one who provides and acquires the money is the finance department. It also includes accounting
for the cost of each product to be sold, keeping records of the transactions, and supervising
collections. A clear illustration of the organizational chart is shown below.
 Organizational Chart

President
CEO

VP of Manufacturing VP of Finance

Marketing Purchasing Production R&D Accounting HR

Department Department Department Department Department Department

Advertising/ Inventory Product

Purchasing Bookkeeping Hiring
Promotions Control Development

Public Mechanical/ Cost

Receiving Production Training
Relations Technical Accounting

Order Entry Accounts Quality Prototypes/

Invoicing Payroll
Scheduling Payable Control Samples

Technical Intellectual
Controller Collections
Support Properties

Cashier
Revenue-Receipt Cycle

Revenue-Receipt Cycle contains business activities and information with regards to sales
of goods and services to customers as well as cash collection as payment for those sales. This
cycle includes both the sale of goods (revenue) and the collection of cash (receipt). In a bread
manufacturing business, the revenue-receipt cycle begins with the sales order from customers. In
this step, the sales department performs the sales order entry process.

Cash Sales using the Point-of-Sale system

When customers enter the store and pick the inventory from the shelves and take it to the
cashier, the cashier scans for the product code in which the price and quantity, as well as the
description of the items, reflect on the computer screen. The POS system will calculate the price
of the item, including any sales tax, and it will also update the inventory count to show that the
product is already sold. After the customer handed payments, the cashier will encode the amount
received and the system will automatically compute for the change. Payment will be in cash
since our company does not accept debit cards. After which, a receipt is printed and handed to
the customer together with the change and the packed products. At the end of each day, the
money and receipts in the drawer are reconciled to the internal cash register tape.

Credit sales are usually for wholesale transactions only to known customers

When it is a purchase on account, the sales clerk will take the customers’ orders, then she
will check the availability of inventory in the finished goods storeroom if it is enough in regards
to the quantity ordered. If it is not enough then the sales clerk will inform the customer. The
same employee shall also present the credit request to the credit manager of the business and
once approved, the sales order will then be made and processed. Copies are sent to the
warehouse packing station, billing department, and customer. In taking credit sales, the process
is in wholesale or by the third-party businesses and not individual customers.

A picking ticket containing the specific product and quantity is prepared and sent to the
finished goods warehouse to allow picking of items. The warehouse clerk scans the product code
which will reflect the number of items and description to the computer and eventually update the
finished goods inventory in his terminal. Another warehouse employee will then take the order to
the packing station. The warehouse clerk assigned to the packing station will then compare the
sales order copy received with the picking list. Once matched, all the items will then be packed,
and the packing slip is then made. Once done it is then delivered to the customer. Sales invoice is
prepared in the billing department using the sales order copy received and send to the customer.
The accounts receivable subsidiary ledger is then updated.

Expense-Disbursement Cycle
Ordering

Every time that raw materials inventory is released to the production department upon
their issuance of material requisition, it is recorded in the system. There is already a pre-coded
reorder point that if the inventory level drops to that point, the system will automatically generate
an open purchase requisition file. The file contains all the inventory items that need to be
replenished along with the corresponding quantity, standard unit price, and the primary supplier
of such items. The system will sort the open purchase requisition file by the name of the supplier
and consolidates all items belonging to the same vendor. It shall be printed by the inventory
control clerk and send to the purchasing department for processing of purchase order.

Once the purchasing department received the purchase requisition, the Vice President for
Manufacturing will prepare the prenumbered Purchase Order and create multiple copies which
will be sent to the vendor for initiating the order, Accounts Payable department, Inventory
control department, a blind PO to receiving department and the other copy will be retained in the
purchasing department. Once the Inventory control clerk receives the Purchase order, the
corresponding inventory item in the open purchase requisition file shall be flagged “On Order” to
prevent them from making another purchase requisition and purchasing it again.

Receiving

When the order arrives, the receiving department will count the goods as well as inspect
the quality of goods ordered especially the raw materials needed in production. If some orders
are not in good condition, they will not be accepted and if the quantity does not correspond with
the number of goods ordered, it shall be settled by the purchasing agent or by the VP of
Manufacturing. The receiving clerk will prepare a Receiving Report which includes the PO
number of items received and create copies which shall be sent to the storeroom along with the
items, to Purchasing department and Accounts Payable department.

The “On Order” flag is removed once the inventory clerk receives the receiving report, the latter
will then update the inventory subsidiary ledger in her terminal, and batch totals of inventory
receipts are calculated and shall be used in updating the general ledger which will be done by the
controller once sent to her computer terminal. The purchasing clerk will close the purchase order
in the open purchase order file in their terminal upon the receipt of receiving report.

The moment that vendor’s invoice was received from the mailroom by the Accounts Payable
department, the AP clerk reconciles it with the purchase order and receiving report. If there is a
discrepancy in the documents, the accounts payable clerk needs to find out for it, if it is in the
receiving report then the latter will need to contact the VP Manufacturing to contact the vendor
so that they will be informed that there is any excess or shortage in items received. Everything
must be settled first before further processing and recording. If all aspects of the order reconcile,
the Accounts Payable clerk will then record the purchases in the computer especially in the
purchases journal and post the amount owed to the accounts payable-subsidiary ledger file and
prepare batch total to be sent to the controller terminal to update General Ledger. The AP clerk
creates vouchers and updates the open voucher payable file in their terminal, organizing it by
payment due date so that the business can pay its suppliers on time. Every day the AP clerk
checks the open voucher payable file and all currently due vouchers are sent to the cash
disbursement department.

Paying of Orders

After receiving the vouchers, the cash disbursement manager will then review and
authorize the preparation of the check. The cash disbursement employee or the treasurer will
proceed in preparing the check, payable to the vendor, and having the voucher as a basis to avoid
mistakes in preparing it. Every time that check is printed, the check register is automatically
updated. Multiple copies will be made. After the manager signed the check, the treasurer shall
distribute it together with the remittance advice to the mailroom to be delivered also to the
mailroom of the seller. The voucher will be stamped “paid” and sent back to the Accounts
payable department along with the copy of each check to close its corresponding open voucher
payable items. Batch total for checks is also made to be used in updating the general ledger
account.

The controller will be the one responsible for updating the general ledger using the batch totals
recorded in the computer system every day. Employees who can access the computer are limited
only to those who are responsible for such tasks for each computer is secured by a security code
which is only known to those who are highly responsible for it.

Inventory Management or Production Cycle

Every time items ordered arrive, the storeroom clerk compares the items and quantity of
the items received with the receiving report. After which, the inventory subsidiary ledger is then
updated having the receiving report as a basis for recording. The storeroom clerk is responsible
for keeping raw materials inventories as well as recording all the incoming and outgoing
materials.

The production cycle begins from planning production through the forecasted sales. The
production department prepares a production order to indicate what material is to be processed,
how much of it, at what time, and at which location. Once the production order is reviewed and
approved by the Production Manager, the production department clerk shall create a copy of it
and send it to the cost accounting department as one of the documents which serve as the basis
for cost summarization. Then, the Production clerk shall proceed in preparing the materials
requisition which contains the description of raw materials as well as quantity and send it to the
storeroom and a copy of it to the cost accounting for summarization of raw materials sent to the
baking area. Once the storeroom clerk receives the materials requisition, he then checks if the
quantity needed is available and prepares raw materials listed having the old materials be used
first and release them to the requesting department. The storeroom clerk shall then keep the
materials requisition document and record releasing of raw materials to update the inventory
subsidiary ledger.

Preparation of production report shall start to reflect the number of finished goods
inventory and a copy will be sent to the storage area to be compared with the actual count of
bread they receive. If the finished goods warehouse has now received the production report from
the production department, the quality control agent will be inspecting the goods that have been
delivered into the factory and will be compared to the production report. It is carried out to
ensure that the finished goods are still able to be shipped to customers and prevent defective
products from flowing down the successive operations and prevent loss to the company. Once it
matches, the Unit Production Manager shall sign the production report and send it to the cost
accountant. The cost accountant shall update the cost record through the data in the production
report and then the cost accounting department will prepare a monthly cost summary that shows
the department’s expenses, units produced, and costs allocated to the production units. After the
cost accounting department has summarized the monthly cost summary, General Ledger can now
be updated.

Finished products contain a product code in their packaging in which the finished goods
warehouse employee scans every time there is movement in items to automatically update the
finished goods inventory file in their system. It is to minimize any unethical behavior of
employees especially that they are exposed to items that can already be sold or even consumed.

Flowcharts of Accounting Cycles and Procedures