Deake Corporation is a medium-sized, diversified manufacturing company. Recently, Jack Richards was promoted to manager of the property accounting section. Richards is having difficulty responding to some of the requests from individuals in other departments for information about the company’s fixed assets. Some of the requests are as listed:
1. The controller has requested schedules of individual fixed assets to support the balances in the general ledger. Richards has furnished the necessary information, but it was not provided on a timely basis for the controller’s financial reporting deadline. The manner in which the records are organized makes it difficult to obtain information easily.
2. The maintenance manager wishes to verify the existence of a punch press he thinks was repaired twice. He has asked Richards to confirm the asset number and location of the press.
3. The insurance department wants data on the cost and book values of assets to include in its review of current insurance coverage.
4. The tax department has requested data that can be used to calculate depreciation for tax purposes.
5. The company’s internal auditors have spent a significant amount of time in the property accounting section recently, attempting to audit the annual depreciation expense.
The property account records consist of a set of manual books. These records show the date the asset was acquired, the account number for the asset, the dollar amount capitalized, and the estimated useful life of the asset for depreciation purposes.
After many frustrations, Richards has realized that his records are inadequate and that he cannot supply data when requested. He has decided to discuss his problem with the controller, Jim Castle.
Richards: Jim, something has got to give. My people are working overtime and can’t keep up.
You worked in property accounting before you became controller. You know I can’t tell the tax, insurance, and maintenance people everything they need to know from my records. Also, that internal auditing team is coming back to check my area in a couple of weeks, and last year my group spent at least a hundred hours creating data to answer their questions. That really slows down the work pace. The requests of these people are reasonable, and we should be able to answer these questions and provide the needed data. I think we need a computerized property accounting system. I would like to talk to the information systems people to see if they can help me.
Castle: Jack, I think you have a good idea, but be sure you are personally involved in the design of any system so that you get all the information you need.
a. Identify and justify four major objectives Deake Corporation’s computerized property accounting system should meet to provide the data necessary to respond to requests for information by company personnel and auditors.
b. Identify the data that should be included in the computer record for each asset included in the property account.