ACCOUNTING INFORMATION SYSTEM OF LOGISTICS INDUSTRY:

THE CASE OF CRYNST STONE, INC.

_______________________________________

An AIS Industry Case Study

Presented to the

Faculty of the Department of Accountancy

School of Business and Economics
University of San Carlos
Cebu City, Philippines
_______________________________________

In Partial Fulfillment
of the Requirements for the Course
(AC 2104 Accounting Information System)
_______________________________________

By
AC 2104 MW 730AM-9AM CLASS
1st Semester AY 2019-2020

CAGAMPANG, SHARIFA FOUZIYA S.

NECESARIO, CRESHA MAE S.
REBOQUIO, ALORA A.
SOLITARIO, LYRICA D.
TAN, MAXINE IRA C.
YU, ROBIN IAN T.

Class Adviser: GRACE SOCORRO LARCENA-YOMO, CPA, MBA

December 30 2019
  1  
  
 
   
REVISIONS   PAGE  NUMBER  
   
Organizational  Structure   4  
   
Duty  of  the  Finance  Manager  in  Internal  Control     37  
   
Risk  and  Control  Assessment   43  -­‐  47  

  2  
 A. INDUSTRY PROFILING

Company Name

CRYNST STONE, INC. is a company that franchises convenience stores and put
it up in Metro Cebu. It is composed of individuals who targets to give the community a
better and easier way of living in this busy world.
 
Trade Name
 
 
NONSTOP CONVENIENCE STORE
 
TIN
 
123-456-789-000
 
Company Description
 
In the society now, it is a big deal on how one purchases his or her own needs. A
lot of factors are to be considered and one of the most common is its convenience. Our
company’s mission is to give the convenience a customer needs and not just that, we will
provide it in a modern way that all of the people can access and can actually benefit from
it. Our company’s vision is to be the convenience store one would look for because we
would be providing goods for all that is affordable and at its best quality. That’s why this
company of ours is a company that franchises convenience stores and uses automated
systems in the daily course of the business. The nature of the business is a retail
business. We are buying different goods from a wide variety of suppliers or wholesalers
and sell it to customers. The customers would come to our store and pick goods and pays
directly to the cashier. Thus, putting up the stores in places near households, the
company could provide to its customers their needs without any hassle of going and line
in long lines. The company would be operating 24/7 to cater the needs of the people any
time. Even though our company is just starting, the company aims to provide everything
for the all the people.
 
 
 
 
 
 
 
 
 

  3  
Organizational  Structure  
 
 
 
 
 
 
 
  PRESIDENT/CEO  
 
 
   
  INTERNAL  
 
E   RISK  
  AUDIT   MANAGEMENT  
 

 
 
 
 
  TECHNICAL   CORPORATE   CHIEF   MARKETING   HUMAN  
TEAM   PLANNING  
  FINANCE   DIRECTOR   RESOURCE  
OFFICER   TEAM  

PROCUREMENT  
TEAM   GENERAL  
M MERCHANDISE  
R TEAM  
K FINANCE  AND  
E ACCOUNTING  
T TEAM  
I MARKETING  
N
G   TEAM  

  4  
 B. ACCOUNTING INFORMATION SYSTEM
 
Revenue Cycle
 
The revenue cycle starts when a customer purchased a product and make a payment
to the cashier. The cashier then records the purchased product through the use of Point
of Sale (POS) System. The system will total the price of the purchased product and will
print a bill or official receipt that will be given to the customer. Then, the sales transaction
details will be sent to the source document called Sales Transaction. Since the company
is using a POS System, the cashier will log in or out using his/her username and
password. The date and time he/she logged in and out will then be recorded. The
administration will update the product and category details. They are also responsible for
the registration of the user in the POS System using the details about the user. The user’s
registered information will then be stored in the user’s source document.
 
Purchasing Cycle
 
The purchasing cycle is the process in which you determine your business’ needs
and describes the passageway from which you order, obtain and pay for the items you
purchased.
 
The purchasing cycle starts with the monitoring of inventories. In here, the entity
identifies a need to update the inventory. It needs to decide how much products are
needed. Inventories are decreased by selling finished goods to customers. When
inventories drop to a fixed reorder point, a purchase requisition is prepared and sent to
the prepare purchase order function to start the purchasing process. Before the order can
be placed, for efficiency and control purposes, it usually requires some kind of authority
for its purchase as in the case of our company. The purchase requisition contains routine
ordering information taken from the inventory subsidiary ledger and valid vendor file. This
includes the name and address of the primary suppliers, quantity for each item ordered
and the standard or the expected unit cost for each item. The valid vendor file provides
an important control by listing only approved vendors. After the approval of the items
needed to be purchased, the order is placed and this becomes a contract between the
business and the supplier. The next event in the purchasing cycle is the receiving and

  5  
 inspection of products. Products arriving from the vendors are reconciled with the blind
copy of the purchase order. The purpose of the blind copy is to force the receiving clerk
to count and inspect inventories before completing the receiving report. Upon completion
of the physical count and inspection, the receiving clerk prepares s receiving report,
stating the quantity and condition of the inventories. The receiving report needs to have
four copies. One copy to the warehouse for safekeeping, the other one is filed to
open/closed purchase order file to close the purchase order, the third one is sent to set
the accounts payable function , where it is filed in the AP pending file and the fourth one
is sent to inventory control for updating the inventory records. This is where the next stage
comes in, the approval and payment. Usually within 30 days, the invoices are received
and paid. At this point, the purchasing ledger and stock records are updated. This is done
by an automated purchasing computer system.
 
Operating Expenditure Cycle
 
The expenditure cycle is the process of activities related to the acquisition of and
payment for goods and services.
 
After the company received goods, the operating expenditures cycle begins in
identifying the liabilities due. In the Accounts Payable department, the Accounts Payable
clerk reviews the open Accounts Payable file for items due for payment each day. This
file is organized by payment due date to ensure that debts are paid on the last possible
date without missing due dates and losing discounts. The clerk sends payment approval
in the form of the Account Payable packet to the cash disbursements department. The
Accounts Payable clerk summarizes the accounts payable for the period and prepares
cash disbursement. The cash disbursements clerk receives the Accounts Payable packet
and reviews the documents for completeness and clerical accuracy. For each
disbursement, the clerk prepares a check and records the check number, peso amount
and other data in the check register, which is also called the cash disbursements journal.
A portion of the check is mailed to the supplier and a copy of it is attached to the Accounts
Payable packet as proof of payment. There is also a check copy which is filed in the
department. The clerk marks the documents in the packet paid and returns them to the
Accounts Payable clerk. At this point, the cash disbursements clerk summarizes the

  6  
 entries made to the check register and sends a journal voucher. After the preparation of
the cash disbursements, there is a receipt of the paid Accounts Payable packet, the
Accounts Payable clerk removes the liability by debiting the vendor’s Accounts Payable
subsidiary ledger account. The Accounts Payable packet is then filed in the closed
Accounts Payable file and an account summary is prepared and sent to the general ledger
function. The next event is posting to the general ledger. The general journal function
receives the journal voucher from cash disbursements and the Accounts Payable
summary from accounts payable. These amounts inputted are reconciled with the
Accounts Payable summary and the Accounts Payable control and cash accounts in the
general ledger are updated accordingly. The approved journal voucher is then filed.
 
Payroll Cycle
 
Human Resource Department
 
 
The employee prepares a time record. The time record is a source document used to
 
keep track the employees’ time at work.
 
Accounting Department
 
 
The time record is then sent to the Accounting Department, the department can
calculate the employee’s gross pay with mandated deductions resulting to the employee’s
net pay. The department will then reconcile the check, prepare the paychecks, and post
it to the employee record. They will then create an employee check. Then, employee pay
slips are prepared, a pay slip is a piece of paper given to an employee to show how much
they have earned and any deductions. It will be given to the employee and to the
paymaster. A paymaster is an official who pays the employee. A check reconciliation will
be done.
 
Fixed Asset Cycle
 
The process starts when the user department recognized a need to obtain a new
asset or replacing an existing one. The department then prepares a purchase requisition
slip that will require authorization of the manager or the higher level management
depending on the asset’s value. After the approval, three purchase orders will be

  7  
 prepared, one copy will be sent to the vendor, the other one will go to the Accounts
Payable, and the last copy will be stored in the file. Upon the completion of the
physical count and inspection, the receiving clerk prepares a receiving report stating
the quantity and condition of the fixed asset. One copy of the receiving report goes to
the Accounts Payable and the other one goes to the Fixed Asset Accounting. The
Receiving Department then sends the fixed asset to the User Department.
 
Accounts Payable has received and temporarily filed copies of P.O., receiving
report and supplier’s invoice. When the invoice arrives, the AP clerk reconciles the
financial information with purchase order and receiving report. Once reconciled, the
AP will issue payment of the transaction and post it in AP subsidiary ledger. The AP
clerks will summarize the entries and prepares Journal Voucher that will be sent to
General Ledger.
 
The Fixed Asset Accounting receives the receiving report from the receiving
department and asset cost data from the Accounts Payable department. It also makes
depreciation schedule. And lastly, it performs the record keeping-function.
 
The cash disbursement clerk prepares a check in the check register. Then, the
department send the payment to the vendor.
 
The General Ledger receives a journal voucher from the Accounts payable, Cash
disbursement and Fixed Asset department. The general ledger process and posts the
data contained in the journal vouchers to the General Ledger account and this data
will then be stored.
 

  8  
 C. FLOWCHARTING

C1. Revenue Cycle

Narrative Description: Expenditure Cycle – Revenue Cycle

POINT OF SALE SYSTEM (POS)

Department Activity

Whenever a sale or transaction is started,

the cashier enters to the system the details
of the transaction. POS will automatically
record and calculate the purchased
product. After, it will start printing the name
Cashier of the products and their prices on it.

After the printing of the receipt, the

customer then pays the amount equivalent
to the transaction which the cashier
receives. An official receipt is given to the
customer as a proof of the sale transaction.

Before the start of the transaction, the

cashier needs to sign in to enter POS using
their username and password.

They update the details of the product and

category to be sold.
Administration
They also update the information regarding
the registered user of the POS.

After the sale transaction, all the

information which includes all the receipts
Accounting will be sent to the Accounting Department
which they make the necessary journal
entries and account balances.

  9  
REVENUE CYCLE

 
PROCESS  
sales   SALES   sales  transaction    
official  receipt   PAYMENT    
  CUSTOMER   input TRANSACTION   details  
AND  PRINT  
RECEIPT  
 

  payment   SALES  
RECEIVE  
TRANSACTION  
  PAYMENTS   total  bill  

 
payment  details   CALCULATE  
  PURCHASED  
PROUCTS  
  CASHIER   PRODUCTS  

  RECORD   total  items’  price   ADMINISTRATION  

PURCHASED  
  purchased  items  
PRODUCTS  
updated  product/  
category  details  
  ADD/UPDAT
E  PRODUCT  
AND  
  product/category  details  
CATEGORYV  

 
LOG  
username  and  password   IN/LOG  
 
OUT  

 
logged  in/out  date  and  time  
  date  and  time   LOGGED  TIME  

  RECORD  
LOGGED  
  IN/OUT  TIME  
USER  
  registered  user  information  

 
REGISTER  
user  details  
USER  

  10  
  

C2. Purchasing Cycle

Narrative Description: Expenditure Cycle – Purchasing Cycle

Department Activity

Purchasing They create and submit the

material receipt which request to obtain
goods. After the checking, they format
the material receipts using the manual
order file.

They check the material receipt

Warehouse before it should be approved to be
issued.

They also check the material

requisition slip by which the requisitioner
creates.

They match the issuing materials

by the material issue note which is sent
back to the requisitioner.
Accounting

They update the inventory files to

make statistical statements

  11  
 REQUISITONER  

PURCHASING CYCLE

 
MATERIAL  
PURCHASER  
  REQUISITION  SLIP  

  WAREHOUSE  
MATERIAL  RECEIPT   CHECK   KEEPER  
 

  WAREHOUSE  
KEEPER   APPROVED  
  CHECK   SHEET  

 
MATERIAL  ISSUE   ISSUING   WAREHOUSE  
 
MANUAL   FORMAT  MATERIAL   NOTE   MAERIALS   KEEPER  
ORDER   RECEIPTS  
 

  REQUISIITON  
WAREHOUSE  
KEEPER   FILES  
  OF  
VOUCHER   ACCEPTANCE  
MATERIAL  RECEIPT  
  UPDATE  
INVENTORY  FILES  
 

  RECEIPT  
INVENTORY  
FILES   ACCOUNTANT  
FILES  
 

  MAKE  INVENTORY  
SHEETS  
 

  MAKE  STATISTICAL  
STATEMENTS  
 

 
CHECK   DIRECTOR  
 

 
CHECKED  
STATEMENTS  
 

RELATED  
DEPARTMENTS  
  12  
  

C3. Operating Expenditure Cycle

Narrative Description: Expenditure Cycle – Operating Cycle

Activity

Department The company will identify all the

liabilities due using the source
document – AP Summary.

They prepare cash for disbursement as

Accounting a payment for the liabilities to the
suppliers and to vendors.

They update the accounts payable

records and post it to the general ledger.

  13  
 OPERATING EXPENDITURE CYCLE

   

IDENTIFY   VOUCHER  
A/P  
LIABILITIES  
JOURNAL   CHECK  PACKET  
DUE  

AP  
SUMMARY  

CHECK   SUPPLIER  

PREPARE    
A/P   CASH  
CASH     VENDOR  
JOURNAL   DISBURSEMENT  

JOURNAL    
VOUCHER  

A/P   UPDATE  
AP  RECORD  
JOURNAL  

POST  TO   GENERAL  

AP   GENERAL  
SUMMARY   LEDGER   LEDGER  

FILE  

  14  
C4. Payroll cycle

Narrative Description: Expenditure Cycle – Payroll Cycle

Department

Human Resource Activity

The employees fill up and follows the

procedures for completing timesheet. It
also need to obtain supervisor approval.

When the timesheet has been

completed which includes the time
record, employee’ signature and
supervisor’s approval, it is then send to
the Accounting Department.

They calculate the net pay of each

Accounting
employees which includes the gross pay
with the corresponding withholding
taxes.

After it has been calculated, the

Accounting Department will then create
an employee check which they issue an
employee pay slip to be given to the
paymaster then to the employee as their
payroll.

For the proper control and to prevent

any fraudulent acts, they will create a
check reconciliation file in which they
will use this file to reconcile all the
checks with check reconciliation record.

  15  
 PAYROLL CYCLE

 
HUMAN  RESOURCE   ACCOUNTING  
 
DEPARTMENT     DEPARTMENT  

EMPLOYEE  TIME   CREATE  

EMPLOYEE  
RECORD   EMPLOYEE  
CHECK  

EMPLOYEE  

CREATE  
CALCULATE  
EMPLOYEE  
GROSS  PAY   EMPLOYEE  PAY  
TIME  
RECORD   SLIP  

PAYMASTER  

TIME   CALCULATE  
WITHHOLDING   TAX  TABLE  
RECORD   TAX  

CALCULATE  
NET  PAY  

RECONCILE  CHECK,  
PREPARE  PAYCHECK  
AND  POST  TO   EMPLOYEE  
EMPLOYEE   RECORD  
RECORDS  

 
  16  
 

 
C5. Fixed Asset Cycle

Narrative Description: Expenditure Cycle – Fixed Asset Cycle

Department
Activity

The user department will create a purchase

User requisition about purchasing a specific asset for the
betterment and expansion of the entity. It is also
subject to approval before it can be issued.

Once the purchase requisition has been approved,

Purchasing the entity will then create three copies of the
purchase order. One copy will remain in the entity
and the other two will be given to the vendor.

They update the accounts payable with the use of

the purchase order copy that remained in the entity
and also when the company receives the supplier’s
or vendor’s invoice.

They also update the accounts payable subsidiary

ledger.
Accounting
After all the updates has been done, the entity will
then release money through disbursement of cash.

The entity will then account the fixed asset and

make a corresponding subsidiary ledger as well as
depreciation schedule.

They process company’s ledger using the different

voucher’s made base on the different transactions
that occurred and they immediately update the
general ledger.

Receiving Receive the specific fixed asset and create a

receiving report that will be used in updating the
accounts payable as well as the fixed asset
account.

  17  
FIXED ASSET CYCLE

  18  
  
C6. Documents and Forms  
 
REVENUE CYCLE
 
Cash receipt is the proof of purchase and is given to the buyer when the buyer buys
from the store and has paid in cash.
 
CASH RECEIPT
ID:

VAT REG TIN: 123-456-789-000

DATE:

CASHIER:

TIME:

ITEM PRODUCT PRICE QTY SUBTOTAL

         
         
         
         
         
TOTAL:

CHANGE:

 
 
PURCHASING CYCLE
 
Purchase order is the document issued to the seller by the entity consisting of the item,
quantity and the agreed price.
 

  19  
 Receiving report is the document that serves as proof that the buyer has received the
goods he purchased from the seller.
 
RECEIVING REPORT
COUNTY OF , Cebu
DEPARTMENT:
PURCHASE ORDER NO.:
REQUISITION NO.:
ITEM NO. DESCRIPTION QUANTITY UNIT PRICE EXTENSION
         
         
         
         
         
         
         
 
FREIGHT CHARGE:
TOTAL:
 
“I hereby certify that the material has been received, inspected
And found satisfactory for the purpose for which they were purchased.”
 
 
 
 
 
Date Received Inspector

  20  
 V e n do r ’s in vo ice is the document received by the buyer from the seller listing
of the documents the former owes.
 
VENDOR’S INVOICE
CRYNST STONE INC.
Address:
Phone No.:
Email:
BILLED TO:
INVOICE NUMBER:
INVOICE DATE:
DUE DATE:

DESCRIPTION PRICE QUANTITY TOTAL

       
       
       
       
       
       
 
SUB TOTAL:
TAX:
TOTAL:
 
 
 
 
 
SIGNATURE DATE

 
 
Vendor master list consists of all the vendors that have been supplying with the
company’s goods.
 

  21  
 OPERATING EXPENDITURE CYCLE
 
Payment voucher is document which is used as a proof that a monetary transaction or
payment has occurred between the two parties.
 

 
 
PAYROLL CYCLE
 
Employee time record are records the appropriate time and attendance records of the
employees
 

  22  
 Employee personal records is a personnel file maintained for each employee where it
contains employee’s personal information and a history of the employee’s job,
departments and other essential information.

Employee pay slip shows how much the employer has paid the employee which states
how much money the employee earned and how much deductions has been taken off.
 
 

  23  
 FIXED ASSET CYCLE
 
Purchase requisition is document generated by the user department to
purchase a certain fixed asset needed in the industry.

  24  
 Purchase order is source document used to place an order with a vendor or supplier. A
contract that a buyer drafts to purchase goods from a seller.
 

 
 
Journal voucher is used to record accounting transactions and the offsets created by
each transaction.
 
 

  25  
 D. PRESENTATION OF ACCOUNTING ENTRY/MEMO ENTRY
D1. Assumptions and Examples
 
 
REVENUE CYCLE
 
 
 

Cash   xx   This is a compound entry to record the sales where

COGS   xx   the money received is debited to Cash and also,
Sales   xx   debit Cost of Goods Sold the cost of the item in the
Inventory   xx   store. Then, credit the Sales that happened and
credit the Inventory at the value of its cost.
 
 
EXAMPLE: Suppose we are selling water bottles at a selling price of ₱20.00. We bought
the water bottles from the supplier for ₱15.00. When a customer would buy water bottle
in our convenience store and pays the cashier ₱20.00. The company would use sales
method to record the sales. The journal entry would be:
 
Cash   20  
COGS   15  
Sales   20  
Inventory   15  
 
 
 
 
 
PURCHASING CYCLE
 
 
 
 
 
  The first entry is to record the purchases of
  the company which is to debit Purchases
Purchases   xx  
and also, debit its Input VAT which 12% of
Input  VAT   xx  
Accounts  Payable   xx   the Purchases and then credit the
Withholding  Tax   Accounts Payable and withholding tax
  which is equals to 1% of the Purchases.
   
Accounts  Payable   xx   The second entry is to record the payment
Cash   xx   for the purchases done by the company.
Where we will close the Accounts Payable
account by debiting it and credit Cash in
Bank.

  26  
 EXAMPLE: Suppose we are going to purchase water bottles from our supplier. We bought
1 box of it, containing 100 water bottles for ₱15.00. The journal entry would be:
 
Purchases   1339.29  
Input  VAT   160.71  
Accounts  Payable   1486.61  
Withholding  Tax   13.39  
 
 
Accounts  Payable   1500  
Cash      in  Bank   1500  
 
 
 
 
 
 
  OPERATING EXPENDITURE CYCLE
 
   
Expense   xx   The entry to record an expense in
connection with cash disbursement
Cash  in  Bank   xx   includes a debit to the expense and a
credit to cash in bank.
 
 
EXAMPLE: The entity paid for the monthly rent of the building, P20, 000. The journal entry
would be:
 
 
Rent  Expense   20  000  
Cash  in  Bank   20  000  
 
 
 
 
 
 
PAYROLL CYCLE
 
 
 
 
Payroll   xx  
 
The journal entry to record the payroll
SSS  Contributions  Payable                                                   xx   of the employee includes a debit to
PhilHealth  Contributions  Payable                           xx   Payroll and a credit to the deductions
Pag-­‐IBIG  Contributions  Payable                                 xx   in the gross pay of the employee and
Withholding  Tax  Payable                                                       xx   a credit of Accrued Payroll which
Accrued  Payroll                                                                                         xx   equals to the net pay that the
employee will receive.

  27  
  
  Another journal entry to record is the payment of
Accrued  Payroll   xx   the accrued payroll which includes a debit to
Cash  in  Bank   xx   Accrued Payroll and a credit to Cash in Bank.
 
 
 
   
   
   
Work-­‐In-­‐Process   xx   A journal entry to record the distribution of the
Payroll   xx   payroll is made with a debit to Work – In Process
and a debit to Payroll.
 
 
Factory  Overhead  Control   xx    
  Another journal entry is made for the
SSS  Contributions  Payable                                                   xx   employers of the mandated
EC  Contributions  Payable                                                       xx   contributions.
PhilHealth  Contributions  Payable                           xx    
 
Pag-­‐IBIG  Contributions  Payable                                 xx    
Withholding  Tax  Payable                                                       xx    
   
   
 
SSS  Contributions  Payable   xx    
EC  Contributions  Payable   xx    
 
Cash  in  Bank                                                                                                     xx  
Another journal entry is also made for
Remittance  to  SSS  
  the remittances to different
  contributions. Remittances to SSS,
PhilHealth  Contributions  Payable   xx   PhilHealth, HDMF and to BIR for the
Cash  in  Bank                                                                                                   xx   Withholding Tax.
Remittance  to  PhilHealth  
 
 
Pag-­‐IBIG  Contributions  Payable   xx  
Cash  in  Bank                                                                                                     xx  
Remittance  to  HDMF  
 
 
Withholding  Tax  Payable   xx  
Cash  in  Bank                                                                                                      xx  
Remittance  to  BIR  

  28  
 EXAMPLE: The entity paid for the salary of the various employees:
 
Cashier P 45 000
Maintenance 28 000
Accountant 32 000
Warehouse Keeper 19 000
 
The following are deducted from their payroll for e mp loye e s ’ sh a re:
 
SSS – 32.05% of 10.4% The e mp loye r ’s sh a re:
 
Pag-IBIG – 2%
SSS – 67.95 of 10.4%
PhilHealth – 1.25%
Pag-IBIG – 2%
Withholding tax – 12%
PhilHealth – 1.25%
ECC – 1%
 
 
Payroll   124  000  
 

SSS  Contributions  Payable  (124  000x10.4%x32.05%)   4  133  

PhilHealth  Contributions  Payable   1550  
Pag-­‐IBIG  Contributions  Payable   2  480  
Withholding  Tax  Payable   14  880  
Accrued  Payroll   100  957  

 
 
 
Accrued  Payroll   100  957  
Cash  in  Bank   100  957  
 
 
 
 
Work-­‐In-­‐Process   124  000  
Payroll   124  000  
 
 
 
 
Factory  Overhead  Control  (124  000x11.3168%)   14  032  
 

SSS  Contributions  Payable  (124  000x10.4%x67.95%)   8762  

EC  Contributions  Payable   1  240  
PhilHealth  Contributions  Payable   2  480  
Pag-­‐IBIG  Contributions  Payable   1  550  

  29  
 SSS  Contributions  Payable   12  895  
EC  Contributions  Payable   1240  
 
Cash  in  Bank   14  135  
Remittance  to  SSS  
 
 
PhilHealth  Contributions  Payable   3  100  
Cash  in  Bank   3  100  
Remittance  to  PhilHealth  
 
 
Pag-­‐IBIG  Contributions  Payable   4  960  
Cash  in  Bank   4  960  
Remittance  to  HDMF  
 
 
Withholding  Tax  Payable   14  880  
Cash  in  Bank   14  880  
Remittance  to  BIR  
 
 
 
 
 
 
 
  FIXED ASSET CYCLE
   
Fixed  Asset   xx   The journal entry to record the acquisition of asset
Cash  in  Bank   xx   includes a debit to a Fixed Asset and a credit to
cash in Bank.
 
Depreciation  Expense   xx   Another journal entry also is used to
Accumulated  Depreciation   xx   record the depreciation of the fixed
asset
 
EXAMPLE: The entity acquired an equipment worth P 105 000 with a residual value of
P 5 000 and with a useful life of % years. The entity used a straight line depreciation
method.  
 
 
 
 
Fixed  Asset   105  000   Depreciation   20  000  
   
Cash  in  Bank   105  000   Accumulated  Depreciation   20  000  

  30  
 D2. Supporting Financial Schedules
 
REVENUE CYCLE
 
Daily cash register sales is the report where sales are being reconciled with the total
sales for the day and the inventory sold.
 
DAILY CASH REGISTER SALES
SALES DATA
       
TRANSACTION PRODUCT SALES TAX SALES
DATE TIME DESCRIPTION TOTAL
NUMBER NUMBER AMOUNT % TAX
                 
                 
                 
                 
                 
                 
                 
 
 
DAILY CASH REGISTER SALES
SALES REPORT
       
PRODUCT SALES
DESCRIPTION DATE SALES TAX TOTAL
NUMBER AMOUNT
           
           
           
           
           
           
 
 
DAILY CASH REGISTER SALES
INVENTORY
PRODUCT NUMBER DESCRIPTION
   
   
   
   
   
   

  31  
 PURCHASING CYCLE
 
Weekly purchase status report is the report that tracks the total inventory that is being
purchased every week by the company.
 
WEEKLY PURCHASE STATUS REPORT
COMPANY/SHOPPING MALL/ANY TREADING UNIT NAME
  LOGO:
ADDRESS:
DEPARTMENT NAME: DATE:
EMAIL ID: CELL NO.:
    TOTAL  

TOTAL
DATE PURCHASES DETAIL QTY
AMOUNT
PURCHASE
  QTY   QTY   QTY      
PRODUCT PRICE PRODUCT PRICE PRODUCT PRICE
A B C
                 
                 
                 
                 
                 
                 
                 
                 
 
 
 
Signature Purchaser Officer P urchase Manager

 
 
Accounts payable ledger keeps track of the amount to be paid by the entity because of
the purchase of goods every week.
 
ACCOUNTS PAYABLE LEDGER
   
  CURRENT
BUSINESS NAME: TOTAL DUE: ₱
DATE
   
INVOICE SUPPLIER TOTAL BALANCE PAYMENT PAYMENT
DATE DUE DATE
NUMBER NAME AMOUNT DUE 1 2
          ₱    
          ₱    
          ₱    
          ₱    
          ₱    
          ₱    
          ₱    

  32  
 OPERATING EXPENDITURE CYCLE
 
 
 
Cash disbursement journal is a detailed record of the cash payments made by the
industry. It itemizes when different types of disbursements are made, as well as the
amounts paid, the name of the payee and the accounts charged.
 

  33  
 PAYROLL CYCLE
 
Employee payroll sheet is consolidated list of workers which shows the gross,
deductions and net wages to them.
 
 
 

  34  
 FIXED ASSET CYCLE
 
 
 
Fixed asset lapsing schedule lists the year, rate, depreciation and other actions related
to a fixed asset. It shows the rate at which the book value of a fixed assets declines
over time.
 

  35  
 E. INTERNAL CONTROL SYSTEM
 
 
E1. General Statement of Principles and Control Policies
 
 
For CRYNST STONE Inc., it is important to protect assets, and ensure accurate
accounting data, information and records. Therefore, principles and control policies
are implemented and practiced in order to have efficiency and effectivity in the
company. Proper internal controls are set in place for each cycle to ensure that any
fraudulent actions are prevented and detected, and that the company will be at its full
capacity.
 
It is important to keep track of our inventories since they are prone to theft due to
the large and varied amount of products offered. Therefore, there are secure physical
security with strong authorization controls, separation of duties, and supervision to
mitigate and prevent the risk of theft. Secondly, CRYNST STONE Inc. will have a
strong system for its expenditures and disbursements, through access control and
supervision of the accounting records, since those are also very prone to fraudulent
practices. Furthermore, the use of independent verification can further increase the
validity of both the physical and the financial aspect of the company.
 
E2. Specific Control Policies
 
 
Revenue Cycle
 
 
Transaction Authorization
 
 
 Return Policy
 
In the company with a convenience store model, the merchandise, if
defective, may be returned and the managing personnel to input in the record the
return item. The cashier will also input the amount refunded to the customer.
 Remittance List
 
It is important to record the amount of sales per each transaction and the POS
 
system will record it in the system database.

  36  
 Segregation of Duties
 
 
The cashier receives the payment but cannot record the payment because the
system records the payment, then the accounting department confirms the record while
the money will be sent by the manager to the finance department to ensure that the money
will be deposited.
 
Supervision
 
 
The managers of each department have higher clearance when it comes to
checking the inflow of money through the revenue system thus, making sure
that the inflow of money starts and ends where it should be.
 
Accounting Records
 
 
Only the Accounting department, have access to the database system of
accounting records for the compliance of general financial statements and
managerial information. This information will be relayed to user and top
management respectively. Specifically, the accounting records will have the
data of sales and revenue from the current and previous financial year.
 
Access Control
 
 
This prevents the access of unauthorized personnel with the assets
pertaining to the revenue. This includes setting up security system in the
warehouse, depositing daily revenue and safely storing the daily revenue to
decrease the likelihood of theft.
 
Independent Verification
 
 
This includes the hiring of auditors to check the key point of the business.
These key points are the times fraud and theft are likely to happen. For
example, a key point is when there is an accumulated amount of money in the
register already and there is a need to deposit it.

  37  
 Purchasing Cycle
 
 
Transaction Authorization
 
 
As a franchising business, merchandise is kept as inventory in order for
resale. When inventory reaches its predetermined preorder point, the inventory
control authorizes purchases of inventory, and prepares a purchase
requisition. This ensures the legitimacy of purchase transactions in
accordance to the company’s needs. This includes keeping track of inventory
items in order to make sure there are no losses in transit. It also keeping of
inventory that is ready to be sold but stored at the warehouse.
 
Segregation of Duties
 
 
The detailed records of inventory are kept separated from the custody of
inventory. The inventory controls keeps the records, while the warehouse has
custody of the inventory. This is important in order to reconcile the inventory
records with the physical inventory. This ensures that the correct amount of
inventory is recorded, and that there will be no shortage or surplus of
inventory.
 
Supervision
 
 
The receiving clerk checks the items purchased for inventory with the use
of the blind PO. This ensures that the items received for inventory are in good
condition and at the correct quantity.
 
Accounting Records
 
 
Only the Accounting department and independent auditors, have access to
the database system of accounting records for the compliance of general
financial statements and managerial information. This information will be
relayed to user and top management respectively. These records would be
used to keep track of the cost of purchases of merchandising products.

  38  
 Access Control
 
 
This includes safeguarding the merchandise in the warehouse with a
security system. It also includes limited access of the checks paid and trade
payables given to the AP clerks.
 
Independent Verification
 
 
Auditors will have access to the amounts and data of how much the
company is paying to their suppliers in order to keep track of their debts and
make sure there is no theft of money meant to be used to pay debts.
 
Operating Expenditure Cycle
 
 
Transaction Authorization
 
 
There is a need for validation whether the expenditure is real and /or the
payment is correct. Thus there is a need for a physical checkup of the item by
a person from the franchise,
 
Supervision
 
 
In the inputting of liabilities the employees of the Cash Disbursement
department will need authorization of the managers to input a liability and the
respective manager will check the liability. Regarding the AP summary the
manager of the accounting department will also check the AP summary of the
employees of the Accounting department to further prevent alteration.
 
Accounting Records
 
 
All operational departments create documents for the liabilities incurred by
the company and it will all be compiled and sorted by department in the AP
summary. The following accounting records needed in the operating
expenditure cycle are the following: AP summary, journal voucher and the
general ledger, with the AP summary being the source document.

  39  
 Access Control
 
 
Only the Accounting department has the power to observe and adjust the
AP summary. If another department will adjust, then they will need the
permission of the top management and the accounting department.
 
Independent Verification
 
 
An auditor must check the process of inputting of the data of the operational
expense since it is most prone to alteration among employees. They must also
check the transaction between employee who made the transaction and the
third-party he just transacted from through the use of cash receipts.
 
Payroll Cycle
 
 
Transaction Authorization
 
 
Employee timesheets are made in order to keep track employee activity.
This timesheets include their time record, employees’ signatures and
supervisor’s approval, which ensures that only these time records are
processed.
 
Segregation of Duties
 
 
The Human Resource Department and Accounting Department has
separate duties in the payroll cycle. The Human Resource Department
handles the employee timesheet. The information provided will be the data
needed to compute for the employee’s pay, which is handled by the Accounting
Department. This is to prevent any fraudulent activity.
 
Supervision
 
 
There must be supervision for the filling up and completion of timesheets to
ensure that employees are working at the hours they have indicated, before

  40  
 the timesheets are submitted to the Accounting Department for calculation of
net pay.
 
Accounting Records
 
 
The records needed for audit trail are the employee time record, tax table,
employee records and the check reconciliation file.
 
Access Control
 
 
As the assets in this cycle are labor and cash, access control is important
in order to prevent fraudulent acts, such as cash embezzlement and
manipulation of time records. Therefore, there must be control over access to
all source documents and the check reconciliation file.
 
Independent Verification
 
 
Different verification processes are made in order for internal control. These
are the verification of time, distribution of checks to employees, accuracy of
payroll register and the overall process. Firstly, the time cards of the
employees must be verified in order to account for its accuracy by the
supervisor. Secondly, an independent paymaster distributes the checks.
Thirdly, the Accounting Department verifies the accuracy of the payroll. Finally,
the Accounting Department verifies the overall process by reconciling checks
with the check reconciliation record.
 
Fixed Asset Cycle
 
 
Transaction Authorization
 
 
Since the acquisition of Fixed assets are very costly, there is a need to
have a strong authorization control. So after the determination of needing a
fixed asset, the respective department that is in need of that asset must submit
a written request for that fixed asset.

  41  
 Supervision
 
 
Fixed assets are widely distributed within the company making it prone
to theft so safeguard these assets are top priority. These assets should have
a physical security to make it less prone to physical theft or inappropriate use.
These assets have their own monitors which can determine when, where, and
what purposes it is being used for.
 
Independent Verification
 
 
An internal auditor must check the procedure and maintenance of each
asset regularly. This includes both physical and financial aspects of the assets.
Specifically, the physical are its location and condition while, financial is its fair
value or its accumulated depreciation.

  42  
 E.3 Risk Assessment
 
Legend Rating (Probabilities & Impact):
 
1 - Lowest, 5 - Highest
 
Revenue
 
       
       
Risk Risk Factors (What Can Go Probabilities Impact
Wrong)

       
       
Alteration of receipts 3 Loss of Revenue 3 5
 
3 Inaccurate accounting records

       
       
Cash Revenue theft 3 Lesser Profit 5 4

       
       
Alteration of Sales 3 Loss of Revenue 1 2
Discounts  
3 Inaccurate accounting records

       
       
Alteration Refunding 3 Loss of Revenue 1 2
of returns  
3 Inaccurate accounting records

       
       
Theft of Goods from 3 Loss of Inventory 3 3
the store

  43  
 Purchases
 
       
Risks Risk Factor (What Can Go Wrong) Probability Impact

       
Excessive inventory 3 Revenue loss due to excess 3 5
due to unauthorized purchases
purchases  
3 Carrying excess store inventory
 
3 Write-offs from stale/obsolete
inventory

       
Failure to properly 3 Inaccurate quantity of inventory 3 5
inspect purchases  
for inventory 3 Inaccurate adjusted inventory

       
Time lag between 3 Inaccurate adjusted inventory 4 3
physical acquisition  
and recording of 3 Inaccurate accounting records
goods

       
Misappropriation of 3 Inaccurate accounting records 2 4
purchase discounts  
3 Loss due to inaccurate cash
disbursements

 
 
 
 
Operating Expense
 
       
       
Risk Risk Factor (What Can Go Wrong) Probability Impact

       
       
Unauthorized cash 3 Loss of Cash 4 4
disbursements  
3 Prone to theft

  44  
  
       
       
Loss of receipts 3 Inaccurate accounting records 5 3
 
3 More Prone to Cash Theft

       
       
Alteration of AP 3 Inaccurate accounting records 1 4
summary  
3 Leads to more Fraud

       
       
Alteration of 3 Inaccurate accounting records 2 3
Receipts  
3 Leads to more Fraud

 
 
 
 
Payroll
 
       
Risks Risk Factor (What Can Go Wrong) Probability Impact

       
Submission of 3 Incorrect record of personnel 2 4
invalid time records  
3 Wrong distribution of pay to
invalid employee
 
3 Loss due to incorrect
distribution of pay

       
Manipulation of data 3 Loss due to inaccurate net pay 2 3
record and employee check
 
3 Inaccurate record of employee
labour hours

       
Misappropriation of 3 Loss due to inaccurate 3 3
salaries and calculation of net pay
bonuses

  45  
  

  3 Inaccurate distribution of net    

pay

       
Alteration of 3 Inaccurate employee records 3 3
employee records  
3 Inaccurate calculation and
distribution of net pay,

       
Alteration of 3 Inaccurate accounting records 3 5
accounting records such as check reconciliation file
 
3 Irreconciliation of checks with
check reconciliation record

 
 
 
 
Fixed Assets
 
       
       
Risk Risk Factor (What Can Go Wrong) Probability Impact

       
       
Inappropriate use of 3 Further Depreciation 5 3
fixed assets (not in  
accordance to 3 Inaccurate accounting records
company policy)  
3 Risk of Loss Due to accidents

       
       
Theft of cash from 3 Theft of Cash Disbursed 2 5
acquisition and  
disposal of fixed 3 Theft of Cash Earned from
asset disposal

  46  
  
       
       
Alteration of 3 Inaccurate Deprecation 3 3
depreciation recorded
schedule  
3 Inaccurate accounting records
 
3 Leads to more Fraud

       
       
Alteration of Records 3 Inaccurate accounting records 3 5
for asset acquisition  
and Disposal 3 Leads to more Fraud

       
       
Unidentified physical 3 Complete Loss of Asset 2 5
location of the asset

  47  
 F. THE GENERAL FINANCIAL STATEMENTS

F1. Chart of Accounts

CRYNST STONE, INC.

Chart of Accounts
 
ASSETS (100-399)
  100 Cash
  110 Regular Checking Account
 
  120 Payroll Checking Account
  130 Savings Account EQUITY (500-599)
Current 140 Accounts Receivable 500 Capital
Assets 150 Other Receivables 510 Drawing
160 Supplies Inventory  
170 Prepaid Expenses
180 Employee Advances REVENUE (600-699)
190 Other Current Assets 600 Sales
Non- 200 Investments 610 Other Income
Current 210 Notes Receivable 620 Income Summary
Assets 220 Other Non – Current Assets 630 Sales Return and Allowances
 
230 Furniture and Fixtures 640 Sales Discount
 
  240 Equipment  
  250 Building
  260 Other Depreciable Property EXPENSES (700-899)
  270 Land 700 Advertising Expense
 
280 Accumulated Depreciation, 710 Bank Fees
Fixed
Furniture and Fixture 720 Depreciation Expense
Assets
290 Accumulated Depreciation, 730 Depreciation Expense
Equipment 740 Employee Benefit Expense
300 Accumulated Depreciation, 750 Income Tax Expense
Building 760 Insurance Expense
310 Accumulated Depreciation, 770 Interest Expense
Other 780 Legal and Professional Expense
  790 Miscellaneous Expense
  800 Office Expense
LIABILITIES (400-499) 810 Other Taxes
  400 Accounts Payable 820 Rent Expense
  410 Accrued Expenses 830 Repairs and Maintenance Expense
  420 Salaries Payable 840 Salaries Expense
Current
430 Rent Payable 850 Supplies Expense
Liabilities
440 Income Taxes Payable 860 Supplies Expense, Office
450 Other Taxes Payable 870 Taxes and Licenses
460 Other Current Liabilities 880 Utilities Expense
Non- 470 Investments 890 Other Expense
Current 480 Notes Receivable  
Liabilities 490 Other Non – Current
Liabilities

  48  
 F2.  The  Financial  Statement  Format  
 
 
CRYNST  STONE,  INC.  
INCOME  STATEMENT  
For  the  Year  Ended  December  31,  2019  
 
REVENUES:  
 
Sales  Revenue                                                                                                                                                                                                                 xx  
Other  Revenue                                                                                                                                                                                                               xx  
Less:  Sales  Return  and  Allowance                                                                                                                                           (xx)  
Net  Sales:                                                                                                                                                                                                                                 XX  
 
Less:  Cost  of  Goods  Sold                                                                                                                                                                           (xx)  
Gross  Sales                                                                                                                                                                                                                            XX  
 
 
EXPENSES:  
 

Advertising  Expense   xx    
Bank  Fees   xx  
Depreciation  Expense   xx  
Depreciation  Expense   xx  
Employee  Benefit  Expense   xx  
Income  Tax  Expense   xx  
Insurance  Expense   xx  
Interest  Expense   xx  
Legal  and  Professional  Expense   xx  
Miscellaneous  Expense   xx  
Office  Expense   xx  
Other  Taxes   xx  
Rent  Expense   xx  
Repairs  and  Maintenance  Expense   xx  
Salaries  Expense   xx  
Supplies  Expense   xx  
Supplies  Expense,  Office   xx  
Taxes  and  Licenses   xx  
Utilities  Expense   xx  
Other  Expense   xx  
   
 
TOTAL  EXPENSES   XX  
   
 
NET  INCOME  BEFORE  TAXES   XX  
   
Less:  Income  Tax  Expense   (xx)  
   
 
NET  INCOME   XX  

  49  
 CRYNST  STONE,  INC.  
STATEMENT  OF  FINANCIAL  POSITION  
As  of  December  31,  2019  
 
 
 
ASSETS   LIABILITIES  
Current  Assets:   Current  Liabilities  
Cash   Accounts  Payable  
Regular  Checking  Account   Accrued  Expenses  
Payroll  Checking  Account   Salaries  Payable  
Savings  Account   Rent  Payable  
Accounts  Receivable   Income  Taxes  Payable  
Other  Receivables   Other  Taxes  Payable  
Supplies  Inventory   Other  Current  Liabilities  
Prepaid  Expenses   TOTAL  CURRENT  LIABILITIES  
Employee  Advances    
Other  Current  Assets   Non  –  Current  Liabilities:  
TOTAL  CURRENT  ASSETS   Investments  
  Notes  Receivable  
Non  –  Current  Assets:   Other  Non  –  Current  Liabilities  
Investments   TOTAL  NON  –  CURRENT  LIABILITIES  
 
Notes  Receivable    
Other  Non  –  Current  Assets    
Furniture  and  Fixtures   OWNER’S  EQUITY  
(Accumulated  Depreciation)   Capital  
Equipment   Drawing  
 
(Accumulated  Depreciation)    
Building    
(Accumulated   Depreciation)    
 
Other   Depreciable   Property    
(Accumulated   Depreciation)    
Land    
 
TOTAL  NON  –  CURRENT  ASSETS    
 
TOTAL  ASSETS   TOTAL  LIABILITIES  AND  OWNER’S  
EQUITY  

  50  
  
CRYNST  STONE,  INC.  
STATEMENT  OF  CHANGES  IN  OWNER’S  EQUITY  
For  the  Year  Ended  December  31,  2019  
 
 
    Company,  Capital,  January  1     xx  
Investments  during  the  year   xx    
Net  Income  for  the  Year   xx    
Total   XX    
Less:  Withdrawals   (xx)    
 
   
Net  Increase  in  Owner’s  Equity   XX  
   
 
    Company,  Capital,  December  31   XX  

  51  
 CRYNST  STONE,  INC.  
Statement  of  Cash  Flows  
For  the  Year  Ended  December  31,  2019  
 
 
 
Operating  Activities:  
Net  Income                                                                                                                                                                 xx  
Depreciation  Expense                                                                                                                             xx  
Increase  in  Accounts  Receivable                                                                                     (xx)  
Decrease  in  Inventory                                                                                                                             xx  
Decrease  in  Accounts  Payable                                                                                             (xx)  
 
Net  Cash  from  Operating  Activities   XX  
 
 
 
Investing  Activities:  
Capital  Expenditures   xx  
Purchase  of  property,  plant  and  equipment   xx  
 
Net  cash  from  Investing  Activities   XX  
 
 
 
Financing  Activities:  
Investment   xx  
Note  Payable   (xx)  
 
Net  Cash  from  Financing  Activities   XX  
 
 
 
Net  Increase  in  Cash   XX  
Cash  at  the  beginning  of  the  year   XX  
 
 
 
Cash  at  the  end  of  the  year   XX  

  52  
 G. CONCLUSION
 
 
An accounting information system is typically a computerized accounting program
that provides detailed information of the company’s overall transactions. This is important
because all transactions of a business are automatically posted to the corresponding
accounts and anytime certain information is needed, it can be located easily. In order for
an accounting information system to be used effectively in an industry, proper governance
is needed for it is a pivotal part in the whole process. Proper governance in accounting
information system is the deliberate and at the heart of any successful industry. It affects
a business’ performance, its appetite for risk and ability to innovate. It is an integral part
of the accounting information system applied for an industry to achieve its objectives and
drive improvement as well as maintain legal and ethical standing in the eyes of its
stakeholders.
 
Like any other computerized systems, accounting information system also has its
setbacks. Learning the said system can often be difficult and time consuming which can
cause a disadvantage to the company in terms of time and manpower. The probable
solution for this drawback is that individuals must be trained enough before putting them
to actual work station to be efficient in using the system. Since accounting information
systems are usually computerized, there is always the risk of losing information caused
by system crashes. The company needs to take precautionary actions for this problem by
backing up their files regularly and performing standard maintenance on all computer
system. To keep up in a demanding world, a company often change its way of doing
business. The changes done may impact the accounting information system that is why
in order to keep up with the changes, the accounting information systems in the company
must be re-evaluated often.
 
Internal controls are processes put into place by management to help the company
operate efficiently and effectively to achieve its objectives. Management at all levels of an
organization is responsible for ensuring that these controls are setup, followed and
reviewed regularly. By creating internal controls, it brings order and cohesiveness to an
industry as everyone knows what is expected. Furthermore, the establishment of internal
controls help prevent or mitigate the occurrence of fraud and theft within the company. It

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also keeps the financial and management information organized which can increase
productivity and prepare the business if there is a need to grab information for compliance
reviews or audits. In addition, it reduces errors which can help the business save money
and protect their reputation. As a company implements its internal controls, it should be
mindful that all of the control systems are dependent upon people. The effectiveness of
internal controls is directly proportional to the employee and staffs’ willingness to adhere
to them.

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