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Table 10.2
Concluded
Chapter 10
487
Actor
Activity
Accounts
payable clerk
24. Gives checks to controller.
Controller
25. Signs checks.
Accounts
payable clerk
26. Mails checks.
27. Prints cash payments journal.
28. Selects option to post payments.
Computer
29. Updates the General_Ledger_Transfer Table and balance due
in Supplier Table.
30. Sets Post_Date field in payment record to the current date.
Signs checks (E10)
Completes payment (E11)
Figure 10.1
Overview Activity
Diagram for ELERBE,
Inc.—Invoicing/
Payment Process
Supplier
Accounts
Payable Clerk
Controller
Computer
S: Supplier
Send Invoice
Invoice
Record Supplier
Invoice (E6)
P: Purchase_
Order
I: Invoice
[in progress]
R: Receipt
Select Invoices
for Payment
(E7)
GL: General_
Ledger
Cash Requirements
Approve
Payment (E8)
I: Invoice
C: Cash
Requirements
Report
I: Invoice
Prepare
Checks (E9)
Checks
Sign
Checks (E10)
PY: Payment
CH: Checks
Complete
Payment and
Post (E11)
S: Supplier
GL: General_
Ledger_Transfer
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Figure 10.2
Detailed Activity
Diagram for ELERBE,
Inc.—Record Supplier
Invoices (E6)
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Transaction Cycles and Accounting Applications
Supplier
Accounts
Payable Clerk
Computer
Sends1 Invoice
Assembles2 Batch
Invoice
S: Supplier
Counts3 Invoices
I: Invoice
[in progress]
Calculates4 Totals
R: Receipt
Compares5 Invoice
with PO/Receipt
P: Purchase_
Order
Enters6 Invoice
Record7 Invoice
Prints8 Purchases
Journal
I: Invoice
Reviews9 Purchases
Journal
I: Invoice
10
Makes
Corrections
Posts11 Invoices
Updates12 General_
Ledger_Transfer
Table and Supplier
Balance Due
Sets13
Post Date
S: Supplier
GL: General_
Ledger_Transfer
I:Invoice
Documenting ELERBE’s Data Design
In this section, we will document the data design for the AIS described in Exhibit
10.2 using a UML class diagram and record layouts. UML class diagrams were discussed in Chapter 5. If necessary, review that material before proceeding.
Events and Tables Used. Chapters 2 and 5 discussed transaction and master
tables. We used event analysis to identify the need for transaction tables and associated master tables. Table 10.3 shows the events in ELERBE’s process related to
processing supplier invoices and making payments. The event numbers will be used
to connect the UML class diagram with the menu, data entry screens, and data tables. As seen from Table 10.3, only three of the events are recorded in transaction
tables (E6, E9, and E11).
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Figure 10.3
UML Class Diagram
for ELERBE, Inc.—
Acquisition Cycle
Employee
(Requestor)
Inventory
(E3)
Requisition
Employee
(Manager)
(E4)
Purchase_
Order
Employee
(Purchasing
Officer)
Supplier
(E5)
Receipt
General_
Ledger_
Transfer
Employee
(Receiving
Clerk)
(E6)
Invoice
Employee
(Accounts
Payable
Clerk)
(E9, E11)
Payment
Employee
(Controller)
Notes: (1) All of the cardinalities between the events and agents are (m,1). All of the cardinalities between the events and Inventory Table or events and General_Ledger_Transfer Table are (m,m). (2) A
Cash-in-Bank Table could have been connected to the Payment Table and placed to the left. This was
not done because in this case, there is only one bank account for cash; thus, there is no benefit in
creating a table of one record only.
Table 10.4
Record Layouts for Acquisition Cycle
Supplier Table
SupContact
TeleG/L_
Dis- Discount Balance
YTD_
plier# Name Address _Person phone# Account Due count
_Rate
_Due Purchases
349
Smith Fall River
Supply
Jon
Stevens
508-5551851
1100
30
10
.02
$0
$0
Employee Table
Employee#
Name
Position
122-22-3333
Mike Morgan
Inventory clerk
613-20-7891
Deborah Parker
Supervisor
074-31-2525
Stephen Larson
Purchasing officer
131-31-3131
Kevin Smith
Receiving clerk
034-11-2222
Mary Brown
Accounts payable clerk
(continued)
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Figure 10.4
Acquisition Cycle
Menu for ELERBE,
Inc.
Chapter 10
497
Acquisition Cycle Menu
A. Maintain
1. Supplier
2. Inventory
3. Employee
B. Record event
1. Enter requisition (select goods and services for purchase) (E3)
2. Enter purchase order (E4)
3. Receive goods (E5)
4. Enter purchase invoice (E6)
5. Select invoices for payment (E7)
6. Print checks (E9)
C. Process data
1. Post (E6, E11)
2. Purge records
D. Display/print reports
Event Reports
1. New purchase orders report
2. Purchases journal (E6)
3. Cash payments journal (E11)
Reference Lists
4. Supplier list
5. Inventory list
Summary and Detailed Status Reports
6. Open purchase orders report
7. Open payables report (E7)
8. Cash requirements report (E7)
9. Accounts payable detailed ledger
10. Accounts payable summary ledger
E. Query
1. Query events
2. Query suppliers
3. Query inventory
F. Exit
class diagram, the activity diagram, and the menu as well as their individual limitations as to scope.
Focus on Problem Solving 10.d
Comparison of Documentation Tools (P1, P4)
ELERBE, Inc.
Required: Review the documentation prepared for the invoicing and cash payments part of the acquisition cycle. Relate the events listed in Table 10.1 to these diagrams. If an event is represented on
(continued)
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499
Step 1: Accumulate a batch of invoices. Every week, the accounts payable
clerk accumulates a batch of invoices. Assume that ELERBE received only three
bills during a particular week and calculated the batch control totals in Table 10.5.
Table 10.5
Batch Totals for
Invoice Data Entry
Batch Total
Value
Count
3
Total amount due
Hash total
$440
1396 (sum of Supplier#s)
Date
05/29/03
Step 2: Enter each invoice. One of the three bills to be recorded is shown in
Figure 10.5. Note that the bill is a continuation of the example started with the
requisition in Chapter 9. Figure 10.5 presents a sample invoice received from the
supplier.
Figure 10.5
Purchase Invoice
Received by ELERBE
Smith Supply
Fall River, MA
Invoice# 5510
Customer: ELERBE
Invoice Date: 05/27/03
Customer PO#: 599
Item#
Description
Quantity
Price
Extended Price
56-103
Blank CD
10
$11
$110
53-408
CD Labels
5
18
90
Total
$200
Delivery charge
5
Total amount due
Due date 06/26/03
$205
2% discount if paid by 06/06/03
To record the purchase invoice, the accounts payable clerk selects item B4
from the menu shown in Figure 10.4. The only data entered are the Purchase_Order#, Supplier_PI#, credit terms, Purchase_Invoice_Date and the general
ledger distribution. The general ledger account numbers and amounts that are entered will be used by the system to record the effect of the invoice on the accounts in the general ledger module. After the user has entered the invoice and
selected SAVE on the data entry screen, records are added to the Invoice and Invoice_Detail tables. Carefully review the data entry screen and record layouts in
Figure 10.6.
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Figure 10.6
Page 500
Transaction Cycles and Accounting Applications
Enter Purchase Invoice Screen and Record Layouts
Enter Purchase Invoice (Menu item B4)
SAVE
Information Display
599
Purchase Order#
05/17/03
Purchase Order Date
1077
Requisition#
122-22-3333
Employee# (Requestor)
349
Supplier#
Inventory Control
Department
12 $11
Item#, Quantity, Price 402
5
18
Item#, Quantity, Price 419
Receipt#
Employee# (Receiver)
Receiving Date
Received Quantity
1405
131-31-3131
05/26/03
10
Item#, Quantity
Item#, Quantity
402
419
10
5
Data Entry Section
599
Purchase Order#
459
Voucher#
5510
Supplier's Purchase Invoice#
05/27/03
Purchase Invoice Date
06/26/03
Due Date
06/06/03
Discount Date
2%
Discount Rate
General Ledger Distribution
GL#
1100
6500
3100
Account
GL Distribution Amount
Inventory
200
Freight-In
5
Accounts Payable
(205)
*The Information Display appears after the user enters the Purchase_Order# in the Data Entry Section.
The data shaded in gray are not entered by the user. They are either computer-generated (Voucher#) or a display of data read
from a table.
Invoice Table
Purchase Invoice
Voucher# _Order# _Date
459
599
EmSupployee# plier
(AP clerk) _PI#
Due_
Date
Disc_
Date
05/27/03 034-11-2222 5510 06/27/03 06/07/03
G/L_
Post_ Post To_
Rate Date _Date Pay? Paid?
.02
Invoice_Detail Table
Voucher#
G/L_Account#
Amount
459
1100
200
459
6500
5
459
3100
(205)
Assume that the other two invoices (indicated on the batch document in Table 10.5)
have also been entered. The next step is to print a list of the invoices.
Step 3: Print an edit report. After the three invoices in the batch have been entered, the accounts payable clerk wants a printout of the events that were entered.
The clerk returns to the menu and selects item D2, Display/Print Purchases Journal.
The clerk then enters the report criteria in the screen shown in Figure 10.7.
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501
Figure 10.7
Display/Print
Purchases Journal
PRINT
Display/Print Open Payables (Menu item D7)
Accounting Application
Report Name
Document Type
Date Range
Unposted, Posted, or Both
On Hold?
Required Attributes
Order By
Group By
Summary Figures
Detail or Summary?
Purchasing
Purchasing Journal
Purchase Invoices
All
Unposted
No
Vch#, PO#, Supplier#, PI#, PI, Date, GL#, Amount
Voucher#
Voucher#
Total of Amounts Due
Detail
The inverted triangle (䉮) indicates that upon selecting this field the user is presented with a dropdown box of choices. Shaded items were predetermined when the clerk selected the purchases journal report from the menu.
By requesting only unposted transactions, the accounts payable clerk is assured
of seeing only the new items that have just been entered. This allows the clerk to
make a careful review of the data entered and to search for errors before posting.
In addition, if the company has a policy of making journal entries for new transactions, the report will provide a good basis for a journal entry because it will not
include any transactions that have already been journalized.
The printed purchases journal is shown in Figure 10.8. The report conforms to
the criteria selected by the user. Only unposted transactions have been printed. The
general ledger detail items (Account# and Amount) have been grouped by voucher.
The title identifies the report as a journal. An event report that has implications for
the general ledger is frequently referred to as a journal.
Figure 10.8
Purchases Journal
Purchases Journal 05/29/03
Document Type: Vouchers
Unposted transactions only.
Detail grouped by Voucher#.
Voucher#
Purchase
Order#
Supplier#
Purchase
Invoice#
Purchase
Invoice Date
GL Account#
Amount
459
599
349
5510
05/27/03
1100
$200
6500
5
460
614
720
432
05/29/03
1100
20
461
602
327
322
05/29/03
6200
215
Total
$440
*GL# 1100 ⫽ Parts Inventory; GL# 6500 ⫽ Freight-In; GL# 6200 ⫽ Office Supplies Expense.
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Figure 10.7
Display/Print
Purchases Journal
PRINT
Display/Print Open Payables (Menu item D7)
Accounting Application
Report Name
Document Type
Date Range
Unposted, Posted, or Both
On Hold?
Required Attributes
Order By
Group By
Summary Figures
Detail or Summary?
Purchasing
Purchasing Journal
Purchase Invoices
All
Unposted
No
Vch#, PO#, Supplier#, PI#, PI, Date, GL#, Amount
Voucher#
Voucher#
Total of Amounts Due
Detail
The inverted triangle (䉮) indicates that upon selecting this field the user is presented with a dropdown box of choices. Shaded items were predetermined when the clerk selected the purchases journal report from the menu.
By requesting only unposted transactions, the accounts payable clerk is assured
of seeing only the new items that have just been entered. This allows the clerk to
make a careful review of the data entered and to search for errors before posting.
In addition, if the company has a policy of making journal entries for new transactions, the report will provide a good basis for a journal entry because it will not
include any transactions that have already been journalized.
The printed purchases journal is shown in Figure 10.8. The report conforms to
the criteria selected by the user. Only unposted transactions have been printed. The
general ledger detail items (Account# and Amount) have been grouped by voucher.
The title identifies the report as a journal. An event report that has implications for
the general ledger is frequently referred to as a journal.
Figure 10.8
Purchases Journal
Purchases Journal 05/29/03
Document Type: Vouchers
Unposted transactions only.
Detail grouped by Voucher#.
Voucher#
Purchase
Order#
Supplier#
Purchase
Invoice#
Purchase
Invoice Date
GL Account#
Amount
459
599
349
5510
05/27/03
1100
$200
6500
5
460
614
720
432
05/29/03
1100
20
461
602
327
322
05/29/03
6200
215
Total
$440
*GL# 1100 ⫽ Parts Inventory; GL# 6500 ⫽ Freight-In; GL# 6200 ⫽ Office Supplies Expense.
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if payment is made within 10 days of the invoice date. Consider the question posed
in box 10.l to understand why companies may pay bills weekly.
Focus on Problem Solving 10.l
Timing of Bill Payment and Purchase Discounts (P4)
Many suppliers give customers a discount if they make payment within 10 days. As noted, many companies pay bills once a week.
Required: Discuss why paying bills weekly is effective. Why may companies choose not to pay bills
more frequently (daily)?
The solution to this Focus on Problem Solving box appears on page 523. Check your answer and make sure you understand
the solution before reading further.
ELERBE pays its bills on Fridays, and this particular Friday is June 2. There
are three steps in the process of choosing bills for payment at ELERBE:
Steps in the process of selecting bills for payment
Menu item
1. Print an open payables report to get a list of all unpaid bills.
D7
2. Select invoices for payment.
B5
3. Print a cash requirements report—a listing of invoices selected in Step 2.
D8
Each of the steps will now be considered in turn.
Step 1: Print an open payables report to get a list of all unpaid bills. The
accounts payable clerk selects menu item D7 and then enters the report requirements using the screen shown in Figure 10.9.
Figure 10.9
Criteria for the
Content of the Open
Payables Report
Display/Print Open Payables (Menu item D7)
Accounting Application
Report Name
Document Type
Paid?
Date Range
Required Attributes
Order By
Group By
Summary Figures
Other Calculations
PRINT
Purchasing
Open Payables
Purchase Invoice
No
All
Voucher#, Supplier#, Disc Date#, Due Date#, Amount
Earlier of due date or unexpired discount date
No
No
No
The inverted triangle symbol (䉮) indicates that upon clicking this field, the user is presented with a
drop-down box of choices.
Shaded items were predetermined when the clerk selected the purchases journal report from the menu.
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The open payables report is given in Figure 10.10. It is consistent with the report specifications set by the user in Figure 10.9. The first voucher in the report is
the one we have followed throughout this chapter.
Figure 10.10
Open Payables Report
Open Payables Report: 06/02/03
Document type: Purchase invoice Paid?: No
Date range: All
Supplier: All
Voucher#
Supplier#
Disc_Date
Due_Date
Amount
Discount
Net
Cumulative
459
349
06/07
06/27
$205
$4
$201
$201
430
103
06/05
$150
$150
$351
441
251
06/25
$200
$200
$551
460
720
06/29
$20
$20
$571
461
327
06/29
$215
$215
$786
$790
$786
Total
06/01
lost
The accounts payable clerk will use the open payables report for deciding what
invoices to pay. The open payables report should be designed to provide relevant
information (to make effective payment decisions). Furthermore, the information
should be organized to make the payment process efficient. Complete box 10.m to
consider whether the order of items in the report is suitable.
Focus on Problem Solving 10.m
Ordering of Invoices in an Open Payables Report (P5)
ELERBE, Inc.
Required: Examine the open payables report. In what order should the invoice records be shown
to help the accounts payable clerk select invoices for payment? Do you think the report in Figure
10.10 orders the information in this way?
The solution to this Focus on Problem Solving box appears on page 523. Check your answer and make sure you understand
the solution before reading further.
Step 2: Select invoices for payment. The accounts payable clerk selects menu
item B5. A list of unpaid bills is presented, and the clerk clicks on the ones to be
paid. The company is making payments on June 2, 2003. The goal is to pay bills
on time to preserve the company’s credit reputation and to take any opportunities
available for early payment discounts. What bills should the company pay? Consider this by reading box 10.n and answering the questions posed.
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Figure 10.11
Selecting Bills for
Payment Using
Peachtree Accounting
v.6.0
The choices made by the user in this screen are to pay any invoices due before June 11, 2003, and
any invoices with discount dates before June 11. (We assume that paid invoices are automatically
prohibited from selection.)
The event of selecting appropriate invoices for payments is key to addressing the
execution risks of late, missed, or duplicate payments. Complete the requirements
in box 10.o to consider how this event helps in addressing these risks. Other execution risks such as wrong supplier or wrong amounts are better controlled while
recording the invoice itself (event E6) since event E7 only uses existing information
about these items.
Focus on Problem Solving 10.o
Suitability of Report Criteria for Internal Control Purposes (P3)
ELERBE, Inc.
Required:
1. Consider the invoice selection screen in Figure 10.11. How do the report criteria in this screen
help reduce these risks?
a. Make a duplicate payment
b. Failure to make a payment
c. Late payment
(continued)
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(concluded)
2. Based on these invoice selection criteria, would the report that resulted from Figure 10.11 be useful to an auditor who is attempting to verify the amount of accounts payable reported in the balance sheet?
3. What should be the balance in the general ledger account, Accounts Payable? (Hint: You can determine the amount based on information in one of the reports that you have already read.)
The solution to this Focus on Problem Solving box appears on page 523. Check your answer and make sure you understand
the solution before reading further.
Prepare Checks (Event E9)
Once the bills have been selected and approved for payment, the accounts payable
clerk is ready to print the checks.
The accounts payable clerk loads a batch of prenumbered, blank checks in
the printer and then returns to the menu and selects item B6, “Print checks.”
This selection results in printing a batch of checks, updating the purchase invoice records to show payment, and adding cash payment records to the
Cash_Payment Table. Carefully review the sample of the check and check stub
in Figure 10.12 and notice that they are consistent with the purchase invoice
recorded earlier. The check stub helps the supplier process the payment correctly
and makes sure that ELERBE gets credit for the discount. Observe that the
Check# appears twice, once in the stub and once in the check. The Check# was
preprinted on the check itself, but the matching Check# on the stub is printed
by the system.
Figure 10.12
Example of Printed Check with Check Stub
Invoice #
Invoice Date
Voucher#
Gross Amount
Disc. Taken
Net Payment
5510
05/27/03
459
$205
$4
$201
Check# 102
Date: 06/02/03
Date: 06/02/03
Check#: 102
Amount: $201.00
TWO HUNDRED AND ONE AND 00/100 DOLLARS
Pay to the order of:
Smith Supply
1234 Adams Street
Fall River, MA 02816
Data in blue are printed by the computer. Everything else was preprinted on the checks by the service that provides blank
checks to the company.
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▪
▪
▪
▪
515
Chapter 10
Required sequence of events. The system could prevent the printing of a
check if there is no related purchase invoice record.
Limitation of access to assets and information. Only a few employees are
given access to the blank checks.
Sequence of prenumbered documents. The Check# on the check is
preprinted, and the Check# on the stub is printed by the computer. If one of
the checks is lost or stolen, the Check# printed on the stub will not agree
with the Check# that was preprinted on the check, and the theft or loss will
be revealed. In addition, if a check is taken from the bottom of the pile of
blank checks, the Check# will be much higher than the others. When the
bank statement arrives, the canceled check will stand out because it is way
out of order.
Positive pay system. The company sends the bank a list of legitimate checks,
and the bank clears only those checks.
Efficiency. Rather than printing and mailing checks, many companies use electronic funds transfer (EFT) services to pay their suppliers. Under this process, the
company sends an electronic message to a bank or third party that serves as a clearinghouse, decreasing the balance in the payor’s bank and increasing the balance in
the payee’s bank. Using an EFT service reduces mailing time so that bills can be
paid on the same day as the due date or discount date.
Complete Payment Process—Signing and
Mailing Checks (Event E11)
After the checks are printed, the accounts payable clerk obtains the controller’s signature. The signed checks are then mailed. The clerk chooses menu item D3 and
prints the cash payments journal (Figure 10.13). The report becomes an audit trail
for supporting transactions posted to the general ledger.
Figure 10.13
Cash Payments
Journal
Cash Payments Journal
All checks printed on 06/02/03.
Date
Check#
Voucher#
Supplier#
DR
?
CR
?
06/02/03
101
430
103
150
150
06/02/03
102
459
349
205
201
4
355
351
4
Total
CR
?
Complete the requirements in box 10.q to test and expand your understanding of the cash payments journal.
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517
End of Period Activities
Print Accounts Payable Ledger. Monthly, or more frequently, the company may want to print a report that indicates the amount owed to each supplier, as well as the details of purchase and payment transactions for each supplier.
Such a report could be useful to the treasurer or accounts payable clerk. Figure
10.14 gives a representation of an accounts payable ledger which is in the format of a grouped detail report. After reviewing the report, answer the questions
in box 10.r.
Focus on Problem Solving 10.r
Interpreting the Accounts Payable Ledger Report (P5)
ELERBE, Inc.
Required: Review the accounts payable ledger in Figure 10.14. What general ledger account should
have a balance equal to the amount of the grand total? Would the report be useful to an auditor who
was certifying the financial statements?
The solution to this Focus on Problem Solving box appears on page 524. Check your answer and make sure you understand
the solution before reading further.
Figure 10.14
Accounts Payable
Ledger
Accounts Payable Ledger
Criteria: All suppliers; all outstanding invoices; all other transactions with
the supplier during the month of June; ordered and grouped by Supplier#.
Supplier#
349
Name
Smith Supply
Voucher#
459
459
583
Total amount owed
Date
05/27/03
06/02/03
06/14/03
Supplier#
460
Name
Green Maintenance
Amount
$ 205
(205)
302
$ 302
Voucher#
Date
601
06/15/03
Total amount owed
Amount
$ 425
$ 425
Etc.
Grand Total
$5,432