Prime Parts, Inc. (PPI) is a leading wholesaler of aftermarket auto parts and supplies for the automotive
Question:
Prime Parts, Inc. (PPI) is a leading wholesaler of aftermarket auto parts and supplies for the automotive repair and reseller industry. PPI provides national reach, rapid delivery, and customized account service. PPI is expanding its operations and introducing a new information system to handle the large volume of sales as a result of its growing business. You have conducted interviews with the managers who oversee the sales and cash receipts system. The following is a summary of your discussions.
Use this narrative to prepare a system flowchart to depict the sales and cash receipts system (Revenue Cycle) for PPI.
The sales department receives sales orders from customers and enters the sales order information into the system to determine availability. If the items on the sales order are available, then a picking ticket (2 copies) is generated. One copy of the picking ticket is forwarded to the warehouse and the other copy along with the original sales order is filed alphabetically in the sales department. If the items on the sales order are not available, then a backorder request is generated and forwarded to the purchasing department, and the sales order is filed alphabetically in a temporary file. In the warehouse, the picking ticket is used to pick and pack the order and it is forwarded with the picking ticket to the shipping department. In shipping, the order is verified as to the correct items and quantities. If the order is correct, the order information is entered into the system to update inventory and a packing slip (3 copies) is generated. The order along with the packing slip is shipped to the customer. One copy of the packing slip is sent to billing and the other copy of the packing slip along with the picking ticket are filed in shipping alphabetically. If the order is not correct, it is sent back to the warehouse with the picking ticket. In the billing department, the packing slip is entered into the system to update Inventory and accounts receivable. An invoice is generated (2 copies). One copy of the invoice is mailed to the customer, while the other copy of the invoice is filed with the packing slip alphabetically by customer in the billing department. Customer checks are received in the mail room with a remittance and forwarded to the cash receipts department where a deposit slip is prepared. The customer checks and the deposit slip are forwarded to the treasurer department where the checks are endorsed and taken with the deposit slip to the bank. The remittances are forwarded to the accounts receivable department where the information is entered into the system to update accounts receivable. An accounts receivable aging report is generated and forwarded to the controller department. Remittances are filed alphabetically in the accounts receivable department.
Introduction to Financial Accounting
ISBN: 978-0133251036
11th edition
Authors: Charles Horngren, Gary Sundem, John Elliott, Donna Philbrick