Accounting System
Assessment 3: Group Project
Names:
Ali Sarhan
201101119
Salman Ismaeel 201100106
Khaled Kamal
201101318
Ali Yusuf
201201237
Class: 01
Tutor: Rodney Cambridge
Word Count: 2496
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Table of Contents
1.0-Introduction .............................................................................................................................. 2
2.0-Narrative ................................................................................................................................... 2
3.0-Summary of Processes .............................................................................................................. 4
4.0-Context Diagram ....................................................................................................................... 5
5.0-Data Flow Diagram .................................................................................................................... 6
6.0-Internal Control Evaluation ....................................................................................................... 7
7.0-Recommendations .................................................................................................................... 9
8.0-Cycle Relationship to Others ................................................................................................... 11
9.0-References............................................................................................................................... 12
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1.0-Introduction
Ahmed-Sharif W.L.L. is one of biggest furniture houses in Bahrain that was established 40 years ago. Currently,
they run three showrooms, in Sitra, Sehla and Hoora. They provide readymade, imported and custom-made
furniture to their customer; thus they have quite a large sales cycle. This report aims to shed light on this
cycle,-how-it-is-internally-controlled-and-then-give-recommendation-to-increase-this-control.=Informationare-gathered-in-an-inteview-with-the-COO,-Mohmad-efran-(Efran,-2014).
2.0-Narrative-(Bahrain-Polytechnic,-2014-A)
The revenue cycle uses Inforbyets system, which-is-supplied by IT Department -in-order-to-produce-all-needed
documents-and-conduct-procedures. The revenue cycle begins when the customer enters the showroom, the
Sales representative will be assigned to deal with him throughout the purchase process. Then, the customer
will select the items he/she wants to acquire and the salesperson will record them in Infobyte. Sometimes the
customers will call asking for quotation. In this case a quote will be prepared and sent to the customers. In
either cases, a sales order will be issued, printed and signed by the salesperson to send it to the inventory
management department to clear the item for delivery (Inventory-Accounts-updated). When this happens, the
customer is required to put down payments as a guaranty that he will pay the rest. This will be shown in the
sales invoice. When the item is ready for delivery, a sales invoice will be created based on the sales order. It
will be printed, signed and attached to the items upon delivery; any salesperson can sign this document. Thecustomer-must-also-supply-their-personal-information-such-as address, mobile number and CPR so the
system in updated with customer information.
In case of a custom-made orders, Salesman will inquire about specifications arrange with the customer to
send handymen to take specific measurements. Then, a quotation will be prepared for the customer to be
informed about the price. A sales order will be formed upon customers’ agreement on price. Then, the
manufacturing department will proceed to request raw material from expenditure and will start producing it
(Raw-Materials, Accounts-Payable, Bank-Accounts updated). When the item is produced (Inventory Accounts
updated), customer will be requested to come to receive his/her sales invoice (Sales Order and Sales Invoice
updated) and the company will follow the delivery process stated above. Sometimes, the company will order
from the suppliers if they have item that fulfil their customers’ demands in case customers requested it
(Purchase Order/Accounts Payable updated). When the items arrive to the inventory warehouse of the
company in case if it was ordered from suppliers or when it is done in the manufacturing department , the
inventory department will inform the sales department about the existence of the items (Inventory/Accounts
Payable Accounts updated) in order to start the delivery process. If-the-items-cannot-be-custom made-or
ordered from the suppliers, then the customers will be given an apology note, and ask the customer to choose
another item if possible. Moreover, Discounts are given to special customers or customers that ordered big
quantities-only. The account department must approve this discount in order to be given. The discount is
added to the invoice and when paid, will also include in the receipts.
Furthermore, there are two types of payments in the cycle. Firstly, “Payment Before Delivery” method, where
the customer pay by cash or cheque before the delivery and without it they do not deliver the items. Once the
down payments have been received, the accounting department will single the delivery and inventory
department. However, some special customers only are allowed to purchase items in-credit and-given-a credit
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limit assigned by the credit manager that works within the accounting department. This type of payments is
called (Purchase on Credit) and when using it, the account department will update their accounts receivable as
per with the price of the items purchased. In both types of payments, the customer must put down a payment
agreed on with the salesperson as stated above. If the customers fail to meet his/her obligations, the credit
manager will contact the customers to sort the matter and might update their bad debt accounts if no
payments were received. In-this-case,-warning-letters-are-also-sent-to-the-customers,-and-if-this-does-notwork,-a-legal-action-using-the-services-of-an-external-lawyer-will-be-used.-This-will-also-mean-an-update-forthe-customers’-records-to-avoid dealing-with this customer on credit sales basis. Finally, the receipts are sentto-the-HR-department-where-they-will-use-them-to-calculate-the-commisons-earned.
When payments are received (cash-registry is used to accept payments), the records will be updated in the
system and the finance and accounting departments will be notified; (Customers’ Ledgers, Accounts
Receivables, Revenue Accounts and Cash Accounts updated). At the end of each week, all payments of
customers will be sent-and signed-the-finance-department by the Sales Manager to-be-deposited-in-the-bank(Bank-Account-updated).
After the price is agreed on based on the pricing list, the salesperson the customer will be given-a=date=of
delivery, and few days before the delivery, the salesperson will call the customer to re-confirm with him about
the date. When delivered, a delivery slip will also be included in order for customers to confirm they received
of the actual items they ordered. A copy of the slip will be sent to the inventory department.
All-this-process and the source documents-are-done-by using-the accounting Infobyte that-all-the companyuses-it (only-those-that have related jobs-use it; such as the inventory accounting and finance-departments.
These operations will be monitored by and reported to the Heads of the Departments and the main Head of
Operations. At-the-end-of-each-month-the-sales department-must-file-a-report-to-the-COO, using the reports
produced by the Infobyte-such-the-customers’ ledgers about-the-sales-conditions-and-any-noticeableproblems-or-huge-bad-debt.
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3.0-Summary of Processes
From the narrative above, it can be said-that-Ahmed-Sharif-sales-cycle-contains-7-main-process.-This-tablesummarizes-these-processes-in-order-to
create-a-visual-representation-of-the-cycle,-context-diagram-andlevel-zero-(Data-flow diagram-“DFD”)-(Bahrain-Polytechnic,-2014-A).
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4.0-Context Diagram.
This-Diagram-shows-the-highest-level-of-the-revenue-cycle-in Ahmed-Sharif;-the-context-diagram(Bahrain-Polytechnic,-2014-A) (BahrainPolytechnic,-2014-B)
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5.0-Data-Flow-Diagram
This-section-of-the-report-will-show-the-a-level-zero-data-flow-diagram;-which0comes-as-a-lower-level0than-thecontext-diagram-(BahrainPolytechnic-2014-A) -(Bahrain-Polytechnic-2014-C)
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6.0-Internal Control Evaluation
As stated, Ahmed-Sharif is a very large company in the furniture market, thus they need effective control
system to make sure that all their assets are protected, their records are-accurate-and-their-business runs with
maximum efficiencies. This section of the report will evaluate their internal control system in relation to the six
principles-of-internal controls (Efran,-2014)(Ali,-2014)(Bahrain-polytechnic-2014-D) (Bahrain-polytechnic2014-E).

Physical Control (Efran,-2014)
Ahmed-Sharif applies this type of internal control through many methods in the Revenue cycle. From a
mechanical standpoint, they use cash registers to accept cash payments; as it is known, the cash assistant
must enter the figure of payment to-produce receipts-for the-customers. Thus, this can be used to crossreference the amount of money sent to the finance department and the receipts. Moreover, all cash are
deposited in a safe that works with a password-known-by-the-sales-manager-only, before depositing it in the
bank at the end of the week. Other psychical controls includes security cameras which can deduct any theft
attempt with cast received. Another -internal-control-is-using-a-computerized-accounting-system,-Infobyte;which-can-be-consdired-a-physical-control-method-as-it-saves-all-doscuments-in-commuter=files-and-createbackups-among-other-benefits. ;
AIS System: Infobyte
Using AIS system is beneficial as it reduces the time needed to-process-sales-and decrease-the-risks of
human error; especially since all calculations are done automatically and extremely easy to use by the
sales staff as well-(Ali,-2014).-This-will-include-the-whole-process-from-issuing-quotes-to-delivering-thegoods-and-receiving-payments-as-the-system-is connected-the cash-register too,-which allows
manager-to-track-the-progress-of-sales-and-control-any-possible-problem-in-the-cycle. However, the
whole company uses this software across the different departments, and it does not limit the access of
users to some information through given specific accounts to employee-(Ali,-2014).-Therefore sales
records can be changed and fraud can be committed. Moreover, the company depends too much on
infobytes that down-time problems are huge risks. The system is designed to create backups
automatically on regular basis to avoid the loss of data.-The-backups-are-encrypted-by-the ITdepartment-to insure security and saved in the data base and stored externally so no important data
such=as=customers-information-are-lost-which-will-harm-the-cycle. However, the company has
suffered from problems with power loss which weakened the revenue cycle-(Efran,-2014).-This-systemis-updated-by-the-IT-department-on-a-six-months-basis-to-insure-optimal usage. Their only solution is
using manual sales order and other source documents to carry the revenue cycle and then enter the
data manually which is not efficient. Power loss has many problems such as the register will not work
and the electronic safe cannot be opened, thus the cash is kept with the sales manager until the power
restore. The-contingency plan is-not-effective-as=there-are-many-chances-for-theft especially-by-salesmanagers.

Establishment-of-Responsibilities-&-Segregation-of-Duties. (Efran, 2014)
The problem here is that the only type of responsibilities given-to-salespeople-is-given-to-the-manager-as-he
only has access to the safe. Other than that, no specific responsibilities are given to-other-salespeople-because
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they are trained-to-deal-with-customers-on-the-different and authorized to sign related source documents to
increase the time efficacy in the cycle; therefore there is weak segregation of duties as well in order(forexample-any-salespeople-can-use-the-cash-regirste-and-they-can-also-sign-of-sales-invoices). This provides
the opportunity for employees to fraud and increase the probability of error. Any salesperson can manipulate
the figures across the stages and the company cannot hold any specific employee responsible, because it is
difficult to have a solid on any employee, thus the company cannot address the issue of fraud or error easily.
Even though, the manager only has access to the safe, it does not really matter, because manager will only
transfer the money from-the-cashier to-the-safe-at-this point-and compare-it-to-the record, if the-employeealready-put=the-wrong-amounts-in-the-cashier, it-is-too-late.

Documentations Procedures
There are number of different documents that strengthen the internal control, mainly sales-quotes, sales
orders-and-receipts. These-are-important-because they-help to identify what customers’ truly ordered anduse it as a pace to cross-reference payments to detect any theft or errors. It also helps the cycle’s efficiency as
sales orders for-example-are-important-for-the-inventory-department-to-know-which-items to deliver.
Another important document is the delivery slip that is given to the customers upon delivery for customers to
check the conformity of items delivered-(Efran,-2014). This protects the company from delivering wrong items
to customers and allows the inventory management to keep record of outgoing inventory; thus increasing
internal control. All these documents must be printed and signed by salespeople-to-be-valid, the-issue isagain-that-any salesperson-is authorized-to-sign them which can open the door for dishonest acts. In addition,
when the cash is sent to finance department in the end of the month, the sales manager fills and signs a form
to
approve
money
transfer;-which-can-be-used-by-the-finance-to-cross-check-the-amonut-recieved.
Moreover,-the-price-list-protect-the-company-from-the-salesmen-offering-wrong-price-to-customers; which
might lead to potential customers’ loss and problems with them. Infobyets also allows for producing different
sales reports that is relevant to the management to identify inefficiencies or weaknesses and address them;
all-based-on-the-cycles-source documents (like sales order and invoice)-(Ali,-2014).-However,-the
confidentiality of-these-reports-and source-documents-can-be accessed by-anyone-with-access to-Infobyets
which-harm the-internal-control-in-this cycle. It is noted the company does not have a written-disaster-plan in
case of disasters,-like fire, that prevents them from using the system and how the sales will be carried. The
COO has commented that this is because they feel it is unlikely for them to face any problems as their
salespeople-are-well=trained-to-carry-sales-in-different-situations-(Efran,-2014);-regardless-this-is
not-an
effective-control-strategy-because-it-open-the-door-for-fraud-theft-and-even-embezzlements;-as-anyone-can
take-advantage-of-the-situation-if-a-plan-is-not-put-for-these-kind-of-situations.

Independent Internal Verification
The Independent internal verification is not 100% correctly here. The sales manager of each branch does
compare and cross reference the amount they have in the safe with the records and source documents to
make sure no theft has taken place, and this is done on weekly basis. However, the lack of a strong
segregation of duties makes it difficult to hold a specific salesperson liable when an error is found in the cycle.
Segregation of duties means that each employee work can be sufficiently reviewed by others; thus, it is the
basis of Independent internal verification and without it Ahmed Sharif is not carrying this principle correctly(Bahrain Polytechnic,-2014-B). Also, the key word here is “Independent” and having the sales manager doing it
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is not effective because he is also involved in the cycle and can easily get away with fraud. However, an
independent-verification by the account department occurs for the sales records is done on monthly basis and
on the inventory-management-department-to -reconcile-sales-orders-with-delivery-and-payments;-whichhelp deducting errors in the-revenue-cycle;-nonetheless-without-effective-segregation,-it is-still-not-a-good
internal-control.

Human Resources Control
When it comes to their HR control, Ahmed Sharif shows huge efforts to improve their internal control-on-the
revenue cycle. There are specific rules and procedures set that the employee must follow when dealing with
payments and sales records with set punishments for any employees that does not follow them. It should be
noted that -not-all-responsibilities-of key people such as sales manager in sales-are-well-defined;-which-can
creates-problem-with-the-cycle-flow-and-increase-wasted-time(some-salespeople-may-step-in-their-manager
authority-and-sign-trafer-of-customers-payments-to-finance;which-hedners the cycle). The company logic
here is that salespersons will come to know-the-authority-of-the-manger-by-time; which-is-not-a-good
practice. Ahmed-Sharif also pays attention to the possibility of unfaithful acts -in-their-recruitments, as-Itinvolves-heavy-background-and-reference-checks-for-any-applicant-so-they-only
hire
trustworthy-salespeople.
Bottom-line
Ahmed-Sharif-seems-to have a degree of an effective internal;-however, they-do have-problems with this
system can create many inefficiency=in the-future.-This-table-summarizes the-strengths-and-weaknessAhmed-Sharif’s-Internal-control-system.
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7.0-Recommendations
As shown above, Ahmed Sharif’ internal control can-be-improved-to-enhance-efficiencies-and-reduce-errors.
The following is recommended-for-Ahmed-Sharif-to-achieve-optimal-internal control,-with-taking-cost-andtime-efficiency-into-consideration :
1) A main issue as stated is the lack of strong segregation of duties and a low-level establishment of
responsibilities represented in the sales manager access to the safe. Any salesperson have the authority to
deal with customers, issue sales orders, work on the registry and a sign important documents. Thus, no one
has a specific responsibility and the duties are not segregated when it comes to salespeople. Ahmed Sharif
must establish specific responsibility to people in the cycle-without-harming efficiencies. Thus, salespeople
should be able to issue quotes and sales order but only the sales manager should be able to sign them. In
addition, only one salesperson should-work-on-the-registry. This-way,-the-company-can verify and crossreference documents in order to find any error and held that specific persons’ liable; Thus, responsibilities will
be established and duties are segregated which reduce the--chances-for-fraud-without-harming-time-or-costefficiency. On related note, the HR department must also provide guidelines about the authority structure on
the revenue cycle to-avoid any confusing –between managers and salespeople; which-can-slow-down-thecycle.
2) Infobyte system is very beneficial for the company-in-producing-manage-important documentations that aid in
decision making and the progress of the cycle; especially since it is involved in all the cycle stages. However,-itdoes-not-have-a-limiting-access feature which-harms-the-security-and-give-chance-to-manipulate-sales orders
and receipts. To avoid these problems, access to reports and the ability to-edit-documents after issuing should
be given to specific individuals to the people involved in this cycle. Infobyets-does-not-provide-the-feature-ofcreating-accounts-and-changing-the-system will be costly due to how dependent the company is on it. A
recommendation that, is not as costly, is creating-logins-to-their-computers-and=make-Infobyte-accessible
only through these computers; this way the company-can monitor sales employees in thesystem=and=deduct-any=possible=fraud-attempts.
3) The evaluation highlighted-how-the-ineffective-the-contingency-and-disaster-plans-the company uses in case
of inability to use the system. It is highly advisable to create a written plan and train the employees on. A one
way the company can make sure no one take advantage of the manual process of customers order is to make
them sign any documents or payments the receive and the manager to make sure of the accuracy at the
moment. This might give extra burden on sales department but it-is-only temporary until-the-system-is-backrunning.-If-it-is-within-the company-s’ budget, it is advisable for-them-to-purchase-an-electrci-regenrater-toavoid-power-problems.
4) Internal independent verification is a powerful tool in deducting errors or theft attempts. However, the
company depends on the sales manager, someone involved in the cycle, to do this verification; which means
he can get away with fraud. Therefore, it is recommended for the company to assign someone from another
related cycle to verify the processes; from accounting or finance as they can verify payments and receipts
among other related accounts (Company does this to some extent as stated). At the same time, the sales
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manager should not be involved by this in any way shape or-form-in-order-to-make-sure-this process-is-asaccurate-as-possible.
8.0-Cycle Relationship to Others
The processes in the revenue cycle cannot-exists without dealing-with the-other cycles; mainly speaking
expenditure, production, finance, accounting cycle, Information technology and Human Resources cycles.
When a customer’s orders an item, the company will either produce-(productions cycle) it or buy it from
suppliers. Either ways, the sales cycle will demand either raw material for-productions-or-items-from-suppliers
from the expenditure cycle. Furthermore,-credit-sales-and-discounts-must-be-approved-by-the-collection
department-that operate in the accounting-cycle,-which-also-update-the-ledgers-and-other-related-accounts
after-the-sales-have-been-concluded. The payments are also given to the finance department (cycle) to be
deposited in the bank. Moreover, the HR cycle supplies sales workforce for the revenue cycle and the sales
cycle gives them receipts for-commission-to-be-calculated. Finally, the IT cycle is-very-important becausethey-supply-and-maintain-Infobyets-and-as-stated,-the-sales-cycle-depends-largely-on-it-to-function.
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9.0-References

Ali, M. (2014). Personal Interview [IT Manager of Ahmed Sharif W.L.L].

Bahrain Polytechnic. (2014-A). Week 12: Data Flow Diagram [Power Point Presentation]. Isa Town,
Bahrain: Bahrain Polytechnic.

Bahrain Polytechnic. (2014-B). Week 11: Business Processes [Power Point Presentation]. Isa Town,
Bahrain: Bahrain Polytechnic.

Bahrain Polytechnic. (2014-C). Week 13: Revenue Cycle [Power Point Presentation]. Isa Town, Bahrain:
Bahrain Polytechnic.

Bahrain Polytechnic. (2014-D). Week 10: Fraud and Internal Control [Power Point Presentation]. Isa
Town, Bahrain: Bahrain Polytechnic.

Bahrain Polytechnic. (2014-E). Week 15: Threats in the Revenue Cycle [Power Point Presentation]. Isa
Town, Bahrain: Bahrain Polytechnic.

Erfan, M. (2014). Personal Interview [COO of Ahmed Sharif W.L.L].
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