Question 2 Study the scenario and complete the question that follow(s): A friend of yours, Ben...

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Question 2 Study the scenario and complete the question that follow(s): A friend of yours, Ben Joubert, recently purchased a majority shareholding in Be Arty (Pty) Ltd, a wholesale Art and Crafts supplies business in Johannesburg; he has also taken over the responsibility for the daily running of the business. However, as he does not have an accounting background, Ben Joubert has engaged you to evaluate the company's systems which he believes are not up to standard. His major concern at this stage is certain functions within the revenue and receipts cycle; "the cycle seems to me to be in a mess, I'm sure that we are not filling all our orders, bad debts seem to be very high and we may even be making deliveries without raising invoices. I'm sure there are many other problems in the cycle; I need you to look into it for me and make some recommendations." You agreed to the engagement and set about evaluating certain functions in the revenue and receipts cycle. Your discussions with Brent Oppels, the stores foreman, and Jackie Street, the accountant, and your own observations revealed the following: A. Receiving customer orders/sales authorisation • Orders are taken over the phone or are received through the post. Sometimes phone orders are followed up by a written order through the post for the same goods. When an order is phoned through, whichever employee receives the call jots down the details of the order, i.e. customer name, delivery address and details of goods required on a telephone message slip. If the customer wants a price, the employee reads the price off a price list. These messages are then placed on the order clerk, Quinten Swart's, desk. Customer orders received through the post are also passed to Quinten Swart. • Quinten Swart prepares a single copy pre-printed prenumbered picking slip for each order transferring the details on the message slips/written customer orders onto the picking slip. He writes in the selling prices for the goods but does not calculate the value of the sale, VAT, etc. Written customer orders and message slips are thrown away. B. Processing of orders/despatch • The picking slips are placed in a wire basket at the entrance to the warehouse. Either of the two pickers collects the picking slips from the wire basket and picks the goods from the warehouse shelves placing them in suitably sized boxes. The picking slip is placed in the box with the goods and the box is transferred to the despatch section. The clerk in despatch: 1. enters the delivery details on the box (taken from the picking slip) 2. checks the items in the box against the picking slip (see also 4 below), and. 3. signs the picking slip after sealing the box. 4. If an item on the picking slip is not in the box or an order has only been partially filled, the despatch clerk writes "not in stock" or "incomplete order" next to the item. The despatch clerk then prepares a two-part pre-printed sequenced delivery note from the details on the picking slip, reflecting the actual quantities in the box. Where the quantity is less than the quantity ordered, the delivery note is marked "out of stock" to notify the customer. The picking slip is then thrown away. The boxes are loaded onto the company's small delivery vehicle by the despatch clerk and both copies of the delivery note for each delivery are handed to the driver. The driver is given a list of delivery notes, and he ticks off each box as it is loaded onto the vehicle. He and the despatch clerk sign the list. On delivery of the goods to the customer, the driver obtains the customer's signature on both delivery notes, leaves the top copy with the customer and, on return to Be Arty (Pty) Ltd.'s premises, hands the second copy of each delivery note to Luna Lee, the bookkeeper. • Luna Lee files each delivery note in date order. If the customer collects an order from Be Arty (Pty) Ltd.'s despatch area, the customer signs both copies of the delivery note and keeps one copy which must be shown to the guard at the exit to the company's premises. The second copy goes to Luna Lee. Around the 25th of each month, Luna Lee prepares invoices to be sent to customers on her computer using a simple software package. Details of sales are taken from the delivery notes returned by the driver. Where an invoice must be made out to a customer who does not appear on the debtors' master file, Luna Lee makes the required addition to the master file. Once you had investigated the system, you asked Ben Joubert whether there were any constraints or specific requirements of which you should be aware before making your recommendations. He responded as follows: 1. The company should continue taking orders over the phone without written customer orders. 2. The company should continue to make only credit sales, i.e. no cash on delivery sales. 3. Due to his tight budget having just purchased the business, no costs are to be incurred on new computers or software or on hiring of additional staff, but that if necessary new or redesigned documentation (stationery) could be purchased (only Jackie Street and Luna Lee have computers). If necessary, Rose Mabangu, a competent clerical assistant, could be transferred to the warehouse. 4. Invoicing of customers should become much more frequent to improve cash flow. Required Recommend improvements to the company's business processes and control procedures/ activities, which should be introduced to address the weaknesses, considering the constraints and specific requirements listed above. (20 Marks) Question 2 Study the scenario and complete the question that follow(s): A friend of yours, Ben Joubert, recently purchased a majority shareholding in Be Arty (Pty) Ltd, a wholesale Art and Crafts supplies business in Johannesburg; he has also taken over the responsibility for the daily running of the business. However, as he does not have an accounting background, Ben Joubert has engaged you to evaluate the company's systems which he believes are not up to standard. His major concern at this stage is certain functions within the revenue and receipts cycle; "the cycle seems to me to be in a mess, I'm sure that we are not filling all our orders, bad debts seem to be very high and we may even be making deliveries without raising invoices. I'm sure there are many other problems in the cycle; I need you to look into it for me and make some recommendations." You agreed to the engagement and set about evaluating certain functions in the revenue and receipts cycle. Your discussions with Brent Oppels, the stores foreman, and Jackie Street, the accountant, and your own observations revealed the following: A. Receiving customer orders/sales authorisation • Orders are taken over the phone or are received through the post. Sometimes phone orders are followed up by a written order through the post for the same goods. When an order is phoned through, whichever employee receives the call jots down the details of the order, i.e. customer name, delivery address and details of goods required on a telephone message slip. If the customer wants a price, the employee reads the price off a price list. These messages are then placed on the order clerk, Quinten Swart's, desk. Customer orders received through the post are also passed to Quinten Swart. • Quinten Swart prepares a single copy pre-printed prenumbered picking slip for each order transferring the details on the message slips/written customer orders onto the picking slip. He writes in the selling prices for the goods but does not calculate the value of the sale, VAT, etc. Written customer orders and message slips are thrown away. B. Processing of orders/despatch • The picking slips are placed in a wire basket at the entrance to the warehouse. Either of the two pickers collects the picking slips from the wire basket and picks the goods from the warehouse shelves placing them in suitably sized boxes. The picking slip is placed in the box with the goods and the box is transferred to the despatch section. The clerk in despatch: 1. enters the delivery details on the box (taken from the picking slip) 2. checks the items in the box against the picking slip (see also 4 below), and. 3. signs the picking slip after sealing the box. 4. If an item on the picking slip is not in the box or an order has only been partially filled, the despatch clerk writes "not in stock" or "incomplete order" next to the item. The despatch clerk then prepares a two-part pre-printed sequenced delivery note from the details on the picking slip, reflecting the actual quantities in the box. Where the quantity is less than the quantity ordered, the delivery note is marked "out of stock" to notify the customer. The picking slip is then thrown away. The boxes are loaded onto the company's small delivery vehicle by the despatch clerk and both copies of the delivery note for each delivery are handed to the driver. The driver is given a list of delivery notes, and he ticks off each box as it is loaded onto the vehicle. He and the despatch clerk sign the list. On delivery of the goods to the customer, the driver obtains the customer's signature on both delivery notes, leaves the top copy with the customer and, on return to Be Arty (Pty) Ltd.'s premises, hands the second copy of each delivery note to Luna Lee, the bookkeeper. • Luna Lee files each delivery note in date order. If the customer collects an order from Be Arty (Pty) Ltd.'s despatch area, the customer signs both copies of the delivery note and keeps one copy which must be shown to the guard at the exit to the company's premises. The second copy goes to Luna Lee. Around the 25th of each month, Luna Lee prepares invoices to be sent to customers on her computer using a simple software package. Details of sales are taken from the delivery notes returned by the driver. Where an invoice must be made out to a customer who does not appear on the debtors' master file, Luna Lee makes the required addition to the master file. Once you had investigated the system, you asked Ben Joubert whether there were any constraints or specific requirements of which you should be aware before making your recommendations. He responded as follows: 1. The company should continue taking orders over the phone without written customer orders. 2. The company should continue to make only credit sales, i.e. no cash on delivery sales. 3. Due to his tight budget having just purchased the business, no costs are to be incurred on new computers or software or on hiring of additional staff, but that if necessary new or redesigned documentation (stationery) could be purchased (only Jackie Street and Luna Lee have computers). If necessary, Rose Mabangu, a competent clerical assistant, could be transferred to the warehouse. 4. Invoicing of customers should become much more frequent to improve cash flow. Required Recommend improvements to the company's business processes and control procedures/ activities, which should be introduced to address the weaknesses, considering the constraints and specific requirements listed above. (20 Marks)

Answer rating: 100% (QA)

To address the identified weaknesses in the revenue and receipts cycle of Be Arty Pty Ltd and considering the constraints and specific requirements provided by Ben Joubert the following recommendation... View the full answer