A-10
A-9
Appendix: Comprehensive Cases
11. (Chapter 12) Assuming that F & C Construction has decided to computerize, discuss the pros and
cons of buying off-the-shelf packages versus developing its own software programs.
Part Four: Control and Audit of Accounting
Information Systems
12. (Chapter 13) Identify the internal control
weaknesses in the current operation of F & C
Construction. For each control, offer possible solutions to the weakness. This will be easier if you provide the information by the cycles discussed in the
case.
13. (Chapter 14) Assuming that F & C Construction computerizes, set up a system of internal controls over the computer function.
Part Five: Accounting Information Systems
Applications
14. (Chapter 19) If you did not complete the document flowcharts for all cycles in Part 1, then you
should develop a document flowchart of the production cycle for the current operation of F & C
Construction.
15. (Chapter 19) Specifically identify the information needed for the production cycle. Develop documentation to show how this output would be
provided.
16. (Chapter 19) Assume that F & C Construction
has chosen to implement a relational data base for its
production cycle, based on the REA data model.
Draw an E–R diagram for this data base.
17. (Chapter 19) Identify the internal control
objectives that should be established for F & C
Construction’s production cycle. Assuming that
F & C Construction will computerize its production
cycle, describe several internal control policies and
procedures that should be established to achieve
each of these objectives.
18. (Chapter 20) If you did not complete the document flowcharts for all cycles in Part 1, then you
should develop a document flowchart of the payroll
cycle for the current operation of F & C Construction.
19. (Chapter 20) Specifically identify the information needed for the payroll cycle. Develop documentation to show how this output would be provided.
20. (Chapter 20) Assume that F & C Construction
has chosen to implement a relational data base for its
payroll cycle, based on the REA data model. Draw
an E–R diagram for this data base.
21. (Chapter 20) Identify the internal control
objectives that should be established for F & C
Construction’s payroll cycle. Assuming that F & C
Construction will computerize its payroll cycle,
describe several internal control policies and procedures that should be established to achieve each of
these objectives.
CASE A.2: CACTUS SPINE COUNTRY CLUB1
Cactus Spine Golf Course is a private country club
located outside Las Vegas. It currently provides its
members with an 18-hole golf course, driving range,
golf shop, and restaurant. Recently a committee was
formed to examine the feasibility of expanding member services. In particular, they were interested in
developing plans to design and finance a swimming
pool complex for the property. Members currently
pay for recreational services as they use them. In
addition, they pay an initiation fee upon joining the
club and an annual fee of $1200 that is due and
payable on the anniversary date of membership.
Organization Structure
Figure 1 shows the structure of the Cactus Spine
Country Club. The club is governed by a board of
directors that is elected from the membership. The
board appoints a qualified member to the position of
financial secretary for a two-year period. Although
the board of directors is not compensated, the financial secretary receives a monthly stipend for services
rendered to the club.
John Parr is the new club manager. He was hired
two months ago after the retirement of Jerry Putter,
who held the position for 10 years. John came to the
This case was prepared by Carol F. Venable, School of Accountancy, San Diego State University, as a basis for classroom discussion rather than to illustrate effective or ineffective handling of an accounting system. Copyright 1993 by Carol F. Venable.
Reprinted with permission.
1
A-11
A-10
Last One
Case
A.2: Head
Cactus Spine Country Club
Figure 1 Cactus Spine Country Club Organization Chart
club highly recommended and with considerable
experience. John reports to the board of directors. He
also works closely with the financial secretary, Mary
Adams, and Joan Peters, his personal secretary.
Tom Birdie, golf pro, reports directly to John Parr.
Tom oversees the maintenance of the course and the
operations of the golf shop. He manages 30–45 fulland part-time employees, including Harry Eagle, golf
shop manager, and John Greene, maintenance manager. Sally Jones also reports directly to John Parr.As
restaurant manager, she supervises 10–20 full- and
part-time staff members. There is a fairly high
turnover in these areas since many employees are
hired on a temporary basis for peak demand periods.
The accounting department is headed by Fran
Smith, a long-time employee. Two accounting clerks
and the club cashier report to Fran. In addition, sev-
eral full-time golf shop employees are cross-trained
in cashier and accounting duties. These people are
used to maintain the seven-day staffing needs in the
cashier and accounting departments and to further
fill in during longer summer days.
The Golf Shop
Harry Eagle maintains a small inventory of quality
athletic apparel and golf equipment in the golf shop.
He and his staff also maintain a supply of related
accessories and a cooler with cold beverages and
snacks that can be heated in the microwave by
golfers waiting to tee off. Golf reservations are made
at the golf shop either by phone or in person. They
are recorded manually on a daily reservation sheet
(Fig. 2) that is preprinted with the available tee times.
Up to four people can sign up for one tee time.
A-12
A-11
Appendix: Comprehensive Cases
Figure 2
Daily Reservation
Sheet
Reservation Sheet For
Time
Name
Signature
ID #
Cart
Guest
0545
0600
0615
0630
0645
0700
0715
0730
Members usually sign up in pairs or foursomes.
When checking in for their reservation, members
sign the daily reservation sheet. The clerk on duty
then distributes the key for the mandatory electric
cart and records the cart number next to the signature of the party responsible for the key. The members’ signatures authorize that the greens fee be
charged to their account. Greens fees include the
use of one electric cart per two golfers. Fees for a
guest can be charged to the member’s account or
they can be paid in cash. The guest column on the
reservation sheet is used to record the few cash pay-
ments. These cash payments also are rung into the
cash register.
All golf lessons, food, clothing, equipment, and
accessory sales are recorded on the cash register
whether they are cash or credit purchases.
Prenumbered sales invoices also are prepared in triplicate when members charge items at the golf shop
(except for the greens fees). Members receive the
original invoice. At the end of each day, Harry Eagle
takes the daily reservation sheet, cash register tape,
duplicate invoices, and cash to the cashier in the
accounting department.
A-12
Case A.2: Cactus Spine Country Club
Cash Handling and Accounts Receivable
Processing for the Golf Shop
When the club cashier receives the daily reservation
sheet, cash register tape, invoices, and cash from the
golf shop, the amounts from the register tape are
compared to the charge invoices and the collected
cash. These amounts are recorded by the cashier on
the cash drawer summary sheet (Fig. 3). Harry, or his
representative, then signs the cash drawer summary
sheet to transfer the amounts collected. The cashier
combines these funds with those that were collected
from the restaurant and prepares a daily bank
deposit for all cash sales. This deposit is separate
from the one that is prepared to deposit the payments on account that arrive in the mail. All deposits
are made by John Parr’s secretary. The cashier turns
over the daily reservation sheet and one copy of the
charge invoices to the accounts receivable clerk, who
Figure 3
GOLF SHOP
CASH DRAWER SUMMARY SHEET
Cash Drawer
Summary Sheet
Register
Cash Sales
Register
Credit Sales
Greens Fees
Lessons
Food
Clothing
Equipment
Golf Accessories
Other
Totals Per Register Tape
Plus Beginning Bank
For Cashier’s Use
Received by
End of Shift
Cash Out Requirement
Cash Delivered to Cashier
For Cashier’s Use
Delivered by
Received by
Cash Over/(Short)
DR Cash
For GJ Use
CR Cash Sales Accts
CR Other Accts
DR/CR Cash Over (Short)
Recorded by
Date
For
Office Use
A-13
Appendix: Comprehensive Cases
enters the amounts in the accounting system. Posted
invoices and the daily reservation sheet are maintained in a file in chronological order in the accounts
receivable department. The second copy of the
invoice is attached to the cash drawer summary sheet
and filed in the cashier’s file. At one time, the second
copy was sent to the member with the monthly statement, but this procedure was deleted when the
accounting records were automated. Members who
question an item on their statement can obtain a
copy of the invoice from the accounting department.
Restaurant and Catering Services
Sally Jones, restaurant manager, supervises 10–20
full- and part-time individuals who provide breakfast, lunch, and light dinner services. She also
arranges for outside catering when the club plans
large, formal events or when club members want to
utilize the facilities for private parties. Members may
charge their daily purchases or pay cash. The daily
sales procedures are similar to those that are used in
the golf shop. The restaurant opens daily one-half
hour before sunrise. It closes at 7 P.M. in the summer
and at 4 P.M. in the winter.
Members may rent restaurant and meeting room
facilities for private parties. All catering services for
private parties must be arranged through Sally Jones.
If a private caterer is used in place of or in addition
to the regular staff, the club is billed directly and Sally
charges the catering fees to the member’s account.
This is in addition to the rental fee that is charged for
using the facilities.The rental fee has remained stable
for a number of years. Several private parties are held
each month, and the facilities are usually fully
booked during holiday and graduation periods. Sally
Jones prepares a party charge slip in triplicate for
billing members’ accounts for room rentals, food, services, and private catering fees. After the event, she
mails the original to the member, keeps a copy, and
sends another to the accounts receivable clerk.
Incoming Mail and Purchasing
John Parr’s secretary, Joan Peters, opens all the mail
and prepares a daily cash receipts prelist. She forwards the prelist, the checks, and the remittance
advices to the cashier. She also handles all correspondence and prepares purchase orders (Fig. 4) for
the approval of John Parr. Department heads must
submit purchase requisitions to her before any purchase orders are prepared. When bills arrive, she
attaches a copy of the appropriate purchase order
and forwards it to the accounts payable clerk after
the club manager has reviewed and initialed the bill.
Catering bills are handled separately. These are forwarded to Sally Jones, who authorizes payment by
initialing the invoice and forwarding it to the
accounts payable clerk. The accounts payable clerk
inputs all bills to the accounts payable system. The
accounting department supervisor reviews the
accounts payable listing and authorizes payment.The
accounts payable clerk then prints the checks, which
must be signed by the financial secretary before
being mailed. All accounts payable records are maintained in the accounting department.
The Current Accounting System
Fran Smith is the head of the accounting department.
She started with the club 10 years ago as a clerk in the
golf shop.After taking several night school courses in
accounting, she was promoted to accounts receivable
clerk 4 years ago. Fran then was promoted to her current position after the untimely death of the head
accountant 3 years ago. Fran carefully has maintained the same procedures that were started before
her promotion. However, there is no formal documentation for the current accounting system.
The current accounting system was installed by
the former head accountant. It consists of a small
IBM personal computer with a simple general ledger
package that has accounts payable and accounts
receivable modules. The system was designed so that
the head accountant made all general journal entries.
One clerk is responsible for maintaining the accounts
receivable records. Another clerk is responsible for
accounts payable records. This second clerk also is
responsible for preparing, distributing, collecting,
and reviewing time sheets and time cards. Once a
week the payroll items are sent to an outside payroll
service that prepares the checks and payroll records.
The number of employees fluctuates depending on
the season of the year. Many temporary employees
are hired during summer and holiday periods.
Paychecks must be picked up in person from the
cashier.
The cashier, Cynthia Smith, is responsible for
safeguarding all monies. Incoming receipts are
deposited intact with separate bank deposit slips for
cash sales, mail receipts, and other cashier-generated
monies. Remittance advices are forwarded to the
accounts receivable clerk with the prelist. Daily
deposits are recorded on a cash receipts report, a
copy of which goes to Mary Adams at the end of
the month. Since members are provided with
check-cashing privileges, Cynthia must replenish the
A-15
A-14
Last One
Case
A.2: Head
Cactus Spine Country Club
Figure 4
Purchase Order
SEND INVOICE TO:
Cactus
Spine
Country
Club
PURCHASE
ORDER NO. 1332
ACCOUNTING DEPARTMENT
123 Prickly Pear Lane
Cacti, NV 12345
This number must
appear on all
documents and
packages.
(123) 123-1234
Vendor
Ship To:
Date
Ship by Date
Ship Via
Freight Terms
Quantity
Product
Number
Description—Color Code
Special Terms
Unit Cost
Unit
PURCHASE CONDITIONS
1. Acknowledgment required.
2. Vendor is responsible for extra freight on partial shipments.
3. No substitutions without prior approval.
4. Our purchase order number must appear on all documents and packages.
PR File No.
Purchasing Agent
amount of cash in the club safe twice a week. In addition to her other duties at the end of the day, she prepares the beginning bank for each cash register. The
accounting department supervisor acts as cashier
when Cynthia Smith is away from the cashier’s cage.
They each maintain a separate cash drawer. At the
end of the day, all paperwork and monies must balance on the reconciliation sheet.
The accounts receivable clerk also is responsible
for entering the annual fee into the billing system so
that it will be included on the member’s bill.
Although it is an annual fee, members are allowed to
pay it in three monthly installments. The clerk keeps
a manual card file which indicates when each member’s installment is to be entered into the billing system. The clerk dates and then initials the card when
the amount is posted into the automated system.
Responsibilities of the Financial Secretary
Mary Adams is responsible for monitoring the financial position of the club. On a monthly basis, Mary
receives a financial report detailing overall income
and expenses. She reviews the results and presents
the report at the board of directors meeting. Mary
spends approximately 5 hours per week working at
the club. She signs all checks, and she receives reports
which indicate the members who are in arrears. Mary
is responsible for monitoring and contacting delinquent members before they are turned over to the
board of directors for further action. She also
receives copies of the validated bank deposit slips,
the monthly bank statement, and a copy of the cash
receipts report, which itemizes the daily deposits. She
reconciles these records.
A-15
Appendix: Comprehensive Cases
Discussion at the Last Board Meeting
At the last board meeting, Mary reported the financial results for the previous month and noted that
operating expenses again had exceeded operating
revenues. Mary also reported that she and John Parr
had reviewed the financial statements for the past
year. They both agreed that the club must increase its
revenues in the near future. Expenses have risen at a
steady pace over the past six months. They recommended that an immediate 10% across-the-board
increase in prices be approved by the board. John
reported that the club must soon upgrade its maintenance equipment. He currently is working with Tom
Birdie and the equipment custodian in inventorying
and examining the condition of the maintenance
equipment and electric golf carts. He stated that
equipment records were incomplete.
During the meeting, John noted that the annual
club dues were less than those at comparable facilities, but he refrained from making a recommendation to increase these dues. John also recommended
hiring a firm to examine the accounting system and
to make recommendations for its improvement. He
explained that his requests to the accounting department for departmental reports cannot always be handled by the current system. Although some reports
have been manually prepared, the department does
not have the time to compile others. He also noted
that the accounting department supervisor, Fran
Smith, didn’t appear to understand all of his concerns
about the operations of the accounting system. After
considering the reports by John and Mary, the board
decided to hire outside consultants. The board wants
a review of current operations and recommendations
for upgrading the accounting system.
The requirements for this case are divided to coincide with the major sections of the book. In addition,
the appropriate chapters are also identified.
Part One: Conceptual Foundations of
Accounting Information Systems
1. (Chapter 1) Discuss whether the board of directors should follow the recommendation for an immediate 10% price increase. What effect would a price
increase have on demand? What are the external and
internal factors that could be negatively affecting the
financial operations of the club?
2. (Chapter 2 or 4) Does the current system produce sufficient reports for decision making?
Recommend three reports, and explain why they
would be useful to management.
3. (Chapter 3) Prepare a flowchart of the purchasing and accounts payable procedures.
4. (Chapter 4 or 5) The company wants to create
a new-member master file that can be used for automatic billing when membership fees are due. The
club plans to retain the same three-month installment payment plan. Prepare a three-column work
sheet that identifies (a) the field names in the newmember master file, (b) the field type (alphabetic,
numeric, alphanumeric, date, monetary), and (c) the
positions (the number of characters in the field).
5. (Chapter 6) Draw an E–R diagram to represent a relational data base built according to the
REA data model, for the expenditure cycle.
Part Two: The Technology of Information
Systems
6. (Chapter 7 or 8) Should the club upgrade its
computer system? Identify the areas that should be
upgraded. Discuss the benefits that would be gained
from upgrading the system.
7. (Chapter 9) Design a network configuration
for Cactus Spine Country Club. Why did you choose
to include certain functions on the network?
Part Three: The Systems Development
Process
8. (Chapter 10) Identify the areas within the club
where there may be resistance to changing the system. Discuss why there could be resistance, and recommend some ways to avoid potential problems.
9. (Chapter 10) Consider the various strategies
for determining information system requirements,
and suggest which strategies would be appropriate
for this company. What are the factors that affect the
level of uncertainty in this company?
10. (Chapter 11) Design a sales invoice for the golf
shop.
11. (Chapter 12) Should the club continue to use
outsourcing for its payroll? Consider the costs and
benefits.
Part Four: Control and Audit of Accounting
Information Systems
12. (Chapter 13) Assess the costs and benefits of
using part-time and temporary employees. Does the
use of these employees increase control risks? Does
cross-training of employees benefit the club, and
does this increase any risks?
13. (Chapter 14) Assume that a thief broke into
the accounting department looking for money.
After finding none, he vandalized the department.
Records were destroyed, and the computer was
A-17
A-16
Last One
Case
A.3: Videos
Head Tonite
stolen. What activities should be listed in a disaster
recovery plan to help the department recover from
this event?
14. (Chapter 14) Distinguish between fraudulent
financial reporting and employee fraud, and identify
individuals and/or situations where this could occur
within the country club.
15. (Chapter 16) Prepare an input controls matrix
using the same format as given in the chapter, but
replace the field names with those that would be in
the new-member master file (see Requirement 5).
Place checks in the cells of the matrix that represent
input controls you might expect to find for each field.
improvements to the purchasing and accounts
payable functions. Use the following format to prepare your answer.
Part Five: Accounting Information Systems
Applications
Item Number
16. (Chapter 17) Design a party charge slip that
can be used for multiple purposes: (a) to reserve a
room and book a party, and (b) to later bill for the
party costs.
17. (Chapter 18) Identify the internal control
strengths and weaknesses of and recommend
Item Number
Description
Recommendations to
Correct Weaknesses
Strengths
Weaknesses
18. (Chapter 19) Identify the internal control
weaknesses of and recommend improvements for
the control of fixed assets. Use the following format
to prepare your answer.
Nature
of Weakness
Recommendation to
Correct Weakness
19. (Chapter 20) List the activities that the payroll
clerk must perform before the completed time sheets
and time cards are sent to the outside payroll service.
Does anything need to be done after the paychecks
are received from the outside payroll service?
CASE A.3: VIDEOS TONITE1
Videos Tonite is a family business that is owned and
operated by Bob and Mary Smithson. The business
consists of two video rental stores in a suburban area
of Chicago. Their daughter, Barbara, is a full-time
employee who eventually will take over the business
when Bob and Mary reach retirement age in a few
years. Each store is open for business from 10 A.M.
until 8 P.M., Monday through Saturday, and from
noon until 5 P.M. on Sunday. There are four part-time
employees at each location. The three family members divide their time between the two stores so that
new employees are scheduled to work with a family
member.
Videos Tonite rents the most popular movies.
Each store has approximately 2000 videos in stock,
and there are 10 video machines (VCRs) that are
available for rent. Bob orders all merchandise, and he
has been quite successful in assessing the video rental
market. Recently at the urging of his suppliers, Bob
added a small line of new videos for sale. The videos
seem to be selling well. He has placed two restocking
orders since adding this merchandise. Each store also
offers bagged popcorn and candy that is restocked on
Monday and Friday of each week by the popcorn
company supplier. The supplier leaves a delivery slip
after each restocking, and the company sends an
invoice every two weeks.
Membership Terms
Videos Tonite rents only to members of the Videos
Tonite Rental Club. A person becomes a member by
filling out an application and paying a $75 deposit.
The company requires the application information and deposit because the store originally experienced problems with cassettes and machines being
stolen by customers. New customers now receive a
This case was prepared by Carol F. Venable, School of Accountancy, San Diego State University, as a basis for classroom discussion rather than to illustrate effective or ineffective handling of an accounting system. Copyright 1993 by Carol F. Venable.
Reprinted with permission.
1