Problem Definition A large engineering firm employing 40 engineers uses two separate accounting systems. One accounting system is used to account for transactions affecting the firm; the other is used to account for all client funds. The separate systems are used to avoid comingling funds. Both systems are on a cash basis. The firm has recently standardized and centralized its billing and accounts receivable operations, and the consultant has been asked to review the billing and accounts receivable functions. Since implementation of centralized billing by the office manager, the firm has experienced cash flow problems. The managing partner has requested a review of the valuation and completeness of billing and accounts receivable. Systems Analysis Description of Firm's Accounting System When billed to the client, charges are recorded as memo entries in the firm's system. Cash advances to clients are recorded in a like manner. Upon receipt of the clients' remittances of billed amounts, appropriate cash, revenue and contract accounts are actually debited and credited. Monthly memo entries are manually reconciled to the accounting entries by the firm's office manager. A memo subsidiary ledger of accounts receivables is then produced. Description of Clients Funds Accounting System Retainers and other deposits of funds with the firm by clients are recorded by appropriate entries in the client accounting system. When any part of these funds are earned, appropriate entries in both the client system and firm's system are made. Although all attorneys are salaried, gross billings and net receipts are major determinants of year-end bonuses. Attorney time charges are based on standard rates and actual clock time in 15-minute increments, and they are reported for billing purposes on each attorney's time sheet.
Problem Definition A large engineering firm employing 40 engineers uses two separate accounting systems. One accounting system is used to account for transactions affecting the firm; the other is used to account for all client funds. The separate systems are used to avoid comingling funds. Both systems are on a cash basis. The firm has recently standardized and centralized its billing and accounts receivable operations, and the consultant has been asked to review the billing and accounts receivable functions. Since implementation of centralized billing by the office manager, the firm has experienced cash flow problems. The managing partner has requested a review of the valuation and completeness of billing and accounts receivable. Systems Analysis Description of Firm's Accounting System When billed to the client, charges are recorded as memo entries in the firm's system. Cash advances to clients are recorded in a like manner. Upon receipt of the clients' remittances of billed amounts, appropriate cash, revenue and contract accounts are actually debited and credited. Monthly memo entries are manually reconciled to the accounting entries by the firm's office manager. A memo subsidiary ledger of accounts receivables is then produced. Description of Clients Funds Accounting System Retainers and other deposits of funds with the firm by clients are recorded by appropriate entries in the client accounting system. When any part of these funds are earned, appropriate entries in both the client system and firm's system are made. Although all attorneys are salaried, gross billings and net receipts are major determinants of year-end bonuses. Attorney time charges are based on standard rates and actual clock time in 15-minute increments, and they are reported for billing purposes on each attorney's time sheet.
Accounting Information Systems
10th Edition
ISBN:9781337619202
Author:Hall, James A.
Publisher:Hall, James A.
Chapter13: Systems Development And Program Change Activities
Section: Chapter Questions
Problem 1P: ANNOUNCING A NEW INFORMATION SYSTEM The AJAX Company is considering implementing a new accounting...
Related questions
Question
100%
Process Re engineering
What is the step by step solution on this exercise?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Pkg Acc Infor Systems MS VISIO CD
Finance
ISBN:
9781133935940
Author:
Ulric J. Gelinas
Publisher:
CENGAGE L
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Pkg Acc Infor Systems MS VISIO CD
Finance
ISBN:
9781133935940
Author:
Ulric J. Gelinas
Publisher:
CENGAGE L