MUSIC SOURCE, INC.

— PAYROLL AND FIXED ASSETS (Manual System with Some PC Support)

MUSIC SOURCE, INC. PAYROLL DATA FLOW DIAGRAM

a
vi
Signed Paychecks

Update and

d
EMPLOYEES Print report
Personnel Action write checks Personnel Action

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Form, Time Cards Form, Time Cards,
Payroll Register
Time Cards Valid Employee

ha
Data Employee
Payroll Records
Register
Enter hours Employee

s
and validate ID, Hours History File
Update File
worked

as
general ledger
Sign checks

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Paychecks and distribute

General

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Ledger

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 MUSIC SOURCE, INC. FIXED ASSET DATA FLOW DIAGRAM

a
DEPARTMENT

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MANAGER
SUPPLIER
PO1

d
Invoice

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Prepare Fixed Prepare Fixed
Asset Purchase Asset Purchase
PR1 PO2

ha
Requisition Order

Match and
File

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PR2 PO3 update PO2, Invoice

as
Temporary File
Cash Disbursement
File

w
Accounts Voucher
Payable Account
Prepare check
Ledger Summaries
and post

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Prepare Fixed Fixed Asset
PR2 Asset Disposal Inventory

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Report Disposal
Report
Ledger Review and
post Journal
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Voucher
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Receive Fixed General

SUPPLIER Ledger
Asset Packing Slip
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PR2, Packing
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Slip

File
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 MUSIC SOURCE, INC. PAYROLL SYSTEM FLOWCHART - EXISTING

SALES OFFICE/ MAIN PLANT IT GENERAL LEDGER CASH DISBURSEMENTS

MANUFACTURING DEPARTMENT PAYROLL DEPARTMENT DEPARTMENT DEPARTMENT

a
Validate Personnel
Payroll Register Paychecks

vi
Employees Action Form
employee

Time Cards

d
re
Time Cards Post to General Cash Sign paychecks and
Account and Wages distribute to
Expense employees

ha
Employee Update Employee
History Records and Prepare
Payroll Register

s
Enter hours Signed
worked General

as
Paychecks
Ledger
Employee
Records

w
Supervisor
Employees

m e
Personnel

Print Personnel
co rc Action Form
o. ou
Action Form Time Cards

Payroll Register
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Personnel
Payroll Register
Action Form
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Time Cards
rs ud

Prepare
Paychecks
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Paychecks
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 MUSIC SOURCE, INC. FIXED ASSET SYSTEM FLOWCHART – EXISTING

PURCHASING ACCOUNTS PAYABLE CASH DISBURSEMENT GENERAL LEDGER

SUPPLIER USER DEPARTMENT DEPARTMENT DEPARTMENT DEPARTMENT DEPARTMENT

a
A Prepare Purchase Cash Disbursement D
Purchase Order

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Purchase Requisition Voucher
Requisition

Journal

d
Purchase Order
Voucher
Prepare

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Prepare
Purchase Purchase Account
check
Requisition Order Summaries
B

ha
Invoice
Check

s
A Reconcile
Invoice
Purchase Order

as
Purchase Order
B Receive C Post to
Asset and General

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Packing Slip Ledger
Record check in
Reconcile
Check Register

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C

Check co rc
Packing Slip
Purchase
Requisition
Set up AP and
Journal
General
Ledger
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record asset
Voucher
er res

Reconcile Print a Cash

D
Disbursement
Voucher
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rs ud

Cash Disbursement
Voucher
ou st

Print Account
Summaries for AP
is

and FA
Inventory
Th

Account
Summaries
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 MUSIC SOURCE, INC. FIXED ASSET SYSTEM FLOWCHART – EXISTING (Continued)

PURCHASING ACCOUNTS PAYABLE CASH DISBURSEMENT GENERAL LEDGER

SUPPLIER USER DEPARTMENT DEPARTMENT DEPARTMENT DEPARTMENT DEPARTMENT

a
Prepare Disposal

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Disposal Report
Report

d
Disposal Adjust FA

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Report Inventory
Record

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INTERNAL CONTROL WEAKNESSES

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PAYROLL
WEAKNESSES CONTROLS

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Transaction Authorization Supervisors must verify the accuracy of the time cards of employees and also
The employees themselves are the one who enter their hours worked data prepare personnel action forms that authorize employees to be paid.

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from their personally maintained time cards.
Segregation of Duties
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The cash disbursement clerk sign checks and also distributes the checks the
The AP department should review the payroll register and approves payment
(disbursement voucher) and cash disbursement then writes check that is
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employees. deposited into an Imprest account to cover the payment. There should be a
paymaster to distribute checks to help verify the existence of employees.
Independent Verification The General Ledger department should receive a journal voucher from cash
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General ledger clerk posts to the general cash account and wages expense for disbursements and an account summary from AP department before posting
the full amount of the payroll after receiving the payroll register. to general cash accounts.
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FIXED ASSET
WEAKNESSES CONTROLS
Accounting Records There should be a receiving report for audit trail.
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There is no receiving report.

Independent Verification There should be a formal receiving report so that a three way match can be
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Three way match is not performed because there is no receiving report. done.
Segregation of Duties The fixed asset department should be the one responsible for the
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a. The end user solely decides whether an asset should be disposed. authorization, maintenance and disposition of fixed asset.

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 b. The Accounts Payable Department updates the fixed asset records

MUSIC SOURCE, INC. PAYROLL SYSTEM FLOWCHART - REVISED

SALES OFFICE/ MAIN PLANT IT GENERAL LEDGER CASH DISBURSEMENTS

MANUFACTURING DEPARTMENT PAYROLL DEPARTMENT DEPARTMENT DEPARTMENT

a
vi
Validate Personnel A Account
Employees CD Voucher
employee Action Form Summary

d
Time Cards CD Voucher Payroll Register

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Time Cards

ha
Post to
Employee Update Employee General Prepare Check for
History Records and Prepare

s
Ledger Imprest Account
Supervisor Payroll Register

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Verification

General

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Employee Ledger Check
Records Register
Enter hours
worked

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ACCOUNTS PAYABLE

Supervisor
co rc Personnel
Action Form
DEPARTMENT

CD Voucher
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Payroll Register A
Time Cards
Payroll Register
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Print Personnel Payroll Register

Action Form Prepare Cash Disbursement Check
Voucher and Account
Payroll Register Summary
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Check
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Personnel
Action Form
Prepare Account
A
ou st

Time Cards Paychecks Summary

CD Voucher Imprest
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Account
Imprest
CD Voucher
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Account
Paychecks

Payroll Register

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 Employees Check

MUSIC SOURCE, INC. FIXED ASSET SYSTEM FLOWCHART – REVISED

PURCHASING ACCOUNTS PAYABLE CASH DISBURSEMENT GENERAL LEDGER

a
SUPPLIER USER DEPARTMENT DEPARTMENT DEPARTMENT DEPARTMENT DEPARTMENT

vi
A Prepare Purchase Cash Disbursement D
Purchase Order
Purchase Requisition Voucher

d
Requisition

re
Journal
Purchase Order
Voucher
Purchase Prepare Prepare

ha
Requisition Purchase Account
check
Order Summaries
B

s
Purchase
Invoice
Requisition Check

as
A Reconcile
Invoice
Purchase Order
Purchase Order Purchase Order

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B Receiving Receiving C Post to
Report Report General
Ledger

m e
Record check in
C
co rc
Reconcile
Reconcile
Check Register
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General
RECEIVING FIXED ASSET Ledger
Check DEPARTMENT DEPARTMENT Set up AP Journal
account Voucher
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Receive E
Asset and
Packing Slip
Print a Cash
Receiving D
Disbursement
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Report
Voucher
Packing Slip
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Cash Disbursement
Review Voucher
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Prepare report and

Receiving update
Report
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Print Account
Summaries for AP
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and FA
Inventory

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Summaries
 Fixed Asset
Sub Ledger

Receiving
E Report

a
vi
MUSIC SOURCE, INC. FIXED ASSET SYSTEM FLOWCHART – REVISED (Continued)

d
PURCHASING ACCOUNTS PAYABLE CASH DISBURSEMENT GENERAL LEDGER
USER DEPARTMENT

re
SUPPLIER DEPARTMENT DEPARTMENT DEPARTMENT DEPARTMENT

ha
Prepare
Disposal
Report

s
as
Disposal
Report

w
m e
co rc
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RECEIVING FIXED ASSET

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DEPARTMENT DEPARTMENT
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Disposal
Report
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Review
reportAsset
and
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Fixed
Subrecord
Ledger
asset

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