MA1 Transaction Processing and Coding PDF

CHAPTER 5 MA 1 TRANSACTION PROCESSING AND CODING MANAGEMENT INFORMATION MA1  By end of lecture, you must be able to: Transaction processing systems Describe the material control cycle (including the concept and calculation of “free” inventory) and the...

CHAPTER 5 MA 1 TRANSACTION PROCESSING AND CODING MANAGEMENT INFORMATION MA1  By end of lecture, you must be able to: Transaction processing systems Describe the material control cycle (including the concept and calculation of “free” inventory) and the processes necessary to order, receive, store and issue materials. Describe the systems used to ensure the correct procedures required to ensure correct authorisation, coding, analysis and recording of: Direct and Indirect Material costs Direct and Indirect Labour and expenses Sales MA1  By end of lecture, you must be able to: Coding system Explain and illustrate the use of codes in categorizing and processing transactions Explain and illustrate different methods of coding data (including sequential, hierarchical, block, faceted and mnemonic). Identify and correct errors in coding of revenue and expenses. MA1  Documents for Buying and Selling MA1  Stores Department Functions: MA1  Materials Control Cycle Control of Purchasing MA1  Materials Control Cycle Materials Control Personnel Purchasing Agent - responsible for buying the materials Receiving clerk- responsible for supervising the receipt of incoming shipments; checks quantity, quality and price Storeroom keeper- sees the materials are properly stored and maintained. The materials must be placed in stock and issued only on properly authorized requisitions Production Department Supervisor- prepare or approve requisitions designating the quantities and kinds of materials needed for the work to be done in the department MA1  Overview of Procedures Production Department The user of the goods Issues goods Orders from the stores to production departments using a department materials requisition note Stores Department Requisitions goods from Delivers goods the purchasing to stores department using a department purchase requisition Orders goods from external supplier using a purchase order External supplier Purchasing Department MA1  Documents for Buying and Selling Prepared by the person who wants to buy the goods Send to the supplier by the purchasing department Sent by the supplier for the buyer to sign upon receiving the materials Contains the details of the materials delivered Contains the details of the of the amount to Purchase Invoice be paid. MA1  Purchase Requisition Form Number: 62 Date: 21-02-2009 Quantity Description Suppliers Purchase Supplier Catalogue Order No. No. 25 Executive EX 320 489 Desks’r’Us Desk Signed:........................ Approved:................ Authorized:.................. MA1  Documents for Buying and Selling Purchase Requisition Copies of the Purchase order are sent to the following: Purchase Order The Supplier – to ask for the goods Delivery Note The accounts department – for checking against the invoice when it arrives Goods Received Note The Store section – for updating the inventory records. The Goods received section – so that Purchase Invoice they expect the goods MA1  Purchase Order Form Abacus Ltd 24 Smith Street London Order Number : 489 SE119JT Date : 1-3-2008 Tel: 020 7868 9375 To: Desks’r’Us 19 Croydon Road Balham CR8 6BZ Please supply 25 Executive desks Catalogue number BX 320 Price Each $320 Delivery by road Signed:.................................... To the above address (Buyer) MA1  Documents for Buying and Selling Purchase The accounts department – for Requisition checking against the invoice when it arrives The Store section – for updating the Purchase Order inventory records. The Buyer – to confirm that the goods ordered have arrived. Delivery Note The Goods received section – so that they expect the goods Goods Received Note Copies of the Goods received note are sent to the following: Purchase Invoice MA1  Goods Received Note Number 547 Supplier: Desk’r’Us 19 Croydon Road Balham CR8 6BZ Date Received 3-9-2008 Quantity Description Order Number 25 Executive Desk 489 Carrier Received by Checked By: Location Desk’r’Us....................................... Bay 5 Condition of good: 1 desktop badly scratched Distribution: Accounts ✓ stick control Buyer MA1  Question When materials are received by a business what is the internal document completed by the receiving department? A Purchase requisition B Goods received note C Invoice D Despatch Note MA1  Purchase Invoice From: Desk’r’Us Number: 1340 19 Croydon Road Date/Tax Pont: 3-10-2008 Balham Sales tax reg number: 774-5513-23 CR8 6BZ Tel: 020 8775 0679 To: Abacus. Ltd 24 Smith Street London SE11 9JT You order Number 489 Quantity Description PriceTotal 25 Executive desk Catalogue no. EX 320 $200 Each 5,000.00 Vat at 17.5% 875.00 Total Due 5,875.00 Terms: Payment in 30 Days Delivered on 3-9-2008 MA1  Discounts Trade Discount is given for large orders or special customers and will be shown as a deduction in the invoice Cash Discount is usually given for prompt payments within a stated period. It cannot be shown as a deduction until payment has been made NOTE If Sales Tax is calculated and added to the invoice only after the discounts are deducted from the cost of the good. MA1  Question Statement 1: A cash discount is given for large orders or special customers and will be shown as a deduction on the invoice. Statement 2: A trade discount is given for prompt payment within a stated period. It cannot be shown as a deduction until payment has been made. A Both statements are false. B Both statements are true. C Statement 1 is true and statement 2 is false D Statement 1 is false and statement 2 is true MA1  Question The sales tax inclusive amount (rather than the net amount) should be coded on a purchase invoice. Is this true or false? TRUE OR FALSE MA1  Documents For Recording Materials MA1  Bin card A simple record of receipts, issues and inventory balances in hand kept by storekeepers, recorded in quantities of materials. Bin card records the running balance of stock on hand; maintained within the warehouse MA1  Documents for Recording materials BIN CARD Description: reels (30 cm diameter Bin No. 232 Code No: R4089 Stock units: Units Receipts Issuance Balance Date Reference Quantity Date Reference Quantity Quantity 2003 1 May 40 5 May GRN 0067 200 240 7 May MR 296 30 210 10 May MR 304 20 190 11 May MR 309 50 140 13 May MRN 127 10 150 MA1  Stores Ledger Account Similar to bin cards Records the quantity and value of receipts, issues and the current balance of each item of inventory; kept by the costing department; subsidiary ledger of cost ledger account. MA1  Arranging and Locating Inventory A location code for each stock item must 24 indicate rows, shelf and bin info. MA1  Documents for Recording Materials Materials Requisition Note ✔Completed when materials are needed from the stores by the production department ✔this document authorizes the storekeeper to release the goods. ✔Used as a source document for: 1. Updating the bin card in stores 2. Updating the stores ledger account 3. Charging the job that is using the materials MA1  Documents for Recording Materials MATERIALS REQUISITION Materials required for: No 309 (job) Department: Date: Quantity Description Code No Price per Amount Unit Foreman: MA1  Documents for Recording Materials Materials Returned Note Used for recording materials returned to the Stores Recorded in a document similar to Materials Requisition but in different color “Goods Returned Note” Document is signed by User Department and the Storekeeper Must be checked against the actual goods returned MA1  Ordering Inventory When the store keeper places an order for materials the amount that will be ordered will be dependent upon the sales and or manufacturing plans for the immediate future Example: order amounts – finished goods A business buys and sells Deltas/ At the beginning of June the stores manager realizes that there are only 35 Deltas in stock and decides to place an order for more. He ascertains from the sales department that planned sales for the next three months in units are as follows June July August Planned Sales 120 150 130 The stores manager feels that at the end of August there should be 50 Deltas remaining in stock. How many Deltas must he order? MA1  Ordering Inventory Solution Units Sales (120 + 150 + 130) 400 Less: opening inventory (35) Add: closing inventory requirement 50 Order quantity 415 MA1  Controlling Inventory Levels Is the inventory that is in stores Free or on order from the supplier Inventory which has not yet been requisitioned for a specific use Free Inventory is calculated as follows: Free Inventory = Inventory in Stores + Inventory on Order – Inventory already requisitioned for use MA1  Documents For Labour Costs MA1  Labour Cost Classification Salary Wages MA1  Labour Costs How are your attendance recorded? CLOCK CARD MACHINE CLOCK CARD MA1  Timesheets MA1  Time Sheet MA1 35  Timesheets The purposes of timesheets: Provide management with information (eg product costs) for further analysis. Provide a basis for billing of services Used to record hours spend and so support claims for authorised overtime payments. MA1  Question Which one of the following is not a purpose of a timesheet? A Provide management with information for analysis B To use as a record of hours spent C To be used as a basis for billing for services D Authorising holiday time MA1  Job Cards MA1 MA1 39  Coding Job Costs For analysis develop codes that include: Employee number and grade Pay rate Department or location if company has different branches Job type (example: different codes for audit, tax and finance work in an accounting firm) Client number MA1 40  Example : Job costs MA1 41  Coding MA1  COST CODES A cost code is a brief reference designed to help with the classification of items by assisting with entry, collection and analysis A code is a system of words, letters, figures or symbols used to represent others. MA1 43  ADVANTAGES OF A CODING SYSTEM a) A code is usually briefer than a description, thereby saving clerical time in a manual system and storage space in a computerized system. b) A code is more precise than a description and therefore reduces ambiguity. c) Coding facilitates data processing. MA1 44 AN EFFICIENT & EFFECTIVE CODING SYSTEM MA1 45  TYPES OF CODES (a) Sequential (or progressive) codes (b) Block (group classification) codes (c) Mnemonic codes (d) Hierarchical codes (e) Faceted codes MA1 46  TYPES OF CODES (a) Sequential (or progressive) codes Numbers are given to items in ordinary numerical sequence. There is no obvious connection between an item and its code. For example: Employee number. MA1 47 MA1 48  Question A company uses the following coding system. 000062 Salaries 000063 Postage 000064 Stationery Which type of coding system is this? a. Block b. Mnemonic c. Sequential d. Heirarchical MA1  TYPES OF CODES (b)Block (group classification) codes These are an improvement on simple sequences codes. A digit (often the first one) indicates the classification of an item. Example: 4NNNN Nails 5NNNN Screws 6NNNN Bolts MA1 50 MA1 51  TYPES OF CODES (c) Mnemonic codes Meaning of mnemonic is a learning technique to aid the memory. The code means something, an abbreviation of the object being coded. Example: Coding of Airports LAX Los Angeles MNL Manila PNH Phnom Penh MA1 52  TYPES OF CODES (d)Hierarchical codes Each digit represents a classification. Each digit further to the right represents a smaller subset than those to the left.. For example: Dewey decimal code used in Libraries. Syllabus coding. MA1 53 MA1 54  TYPES OF CODES (e) Faceted codes These are refinement of group classification codes. Each digit of the code gives information about an item: For example: Chart of Accounts Coding of Products MA1 55  Faceted code Facet 1 (2 digit) Facet 2 (2 digit) Facet 3 (4 digit) Code Region Code Department Code Expense 01 USA 01 Sales 0244 Salaries 02 Europe 02 Production 0245 National Insurance 03 Asia 03 Administration 0246 Bonuses To post an expense for a bonus paid in production department of US region, the code would be: 01 02 0246 01=US; 02=Production; 0246= bonuses MA1 MA1 57 MA1 58 MA1 59  Coding of Costs in Practice ✔ Timing of Coding ✔ Receiving an Invoice ✔ Choosing the correct code ✔ Indirect Costs ✔ Cheque and Cash payments ✔ Payment of wages and salaries MA1  Coding Income ✔ Sales Invoices ✔ Cash Sales MA1  Problems with Coding ▪ Deciding on the cost centre and analysis code to use ▪ Apportionment of sharing of costs ▪ Wrong code used ▪ Wrong organisation MA1  Sample coding problem MA1  Sample coding problem MA1  Question MA1  Question MA1  MA 1 END OF LECTURE MA1