Bell Studio Case Study Report: Analysis of Transaction Cycles, HI5019

This report presents a comprehensive analysis of the Bell Studio case study, focusing on its accounting information system and operational processes. The report examines the company's purchases, cash disbursement, and payroll systems, utilizing data flow diagrams and system flowcharts to illustr...Read More

Bell Studio Case Study Report
Student’s name
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Table of Contents
Table of Contents.............................................................................................................................1
Executive Summary.........................................................................................................................3
Introduction......................................................................................................................................4
Data flow diagram of purchases and cash disbursements systems..................................................4
Data flow diagram of payroll system...............................................................................................7
System flowchart of purchases system............................................................................................8
System flowchart of cash disbursements system...........................................................................10
System flowchart of payroll system..............................................................................................11
Internal Control..............................................................................................................................13
Conclusion.....................................................................................................................................15
References......................................................................................................................................16
Table of Figures
Figure 1: Data flow diagram of purchases and cash disbursements systems...............................................4
Figure 2: Data flow diagram of payroll system...........................................................................................6
Figure 3: System flowchart of purchases system.........................................................................................7
Figure 4: System flowchart of cash disbursements system..........................................................................9
Figure 5: System flowchart of payroll system...........................................................................................10
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Executive Summary
This is a report analyzing the Bell Studio Company which outsources its various
inventories from manufacturers around the world including New Zealand, Japan, China, and
Australia. Bell Studio uses a centralized accounting system that has networked terminals at each
of the company’s different locations. The report analyses the three main departments at Bell
Studio organization which are the purchases system, cash disbursement system and the payroll
system. The case study describes Bell Studio’s expenditure cycle procedures and their use of an
accounting information system.
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Introduction
The report is prepared by a business analyst for use by the management and the decision
makers of Bell Studio. The report analyses the Bell Studio case study by describing the various
transaction cycles, financial reporting, e-commerce, and management reporting systems (Trigo,
Belfo, & Estébanez, 2014). The case study has identified three main departments that need
describing these departments are the payroll system, cash disbursement system and the purchases
system.
The report will be structured by having a cover page, an executive summary, an
introduction, the conclusion and the main body where these three systems will be described, that
is the purchases system, the cash disbursement system and the payroll system. The report will
use both data flow diagrams and system flowchart diagrams for easier analysis of the system. At
the end of the report, the internal control weakness in each of these three systems and the risk
associated with the identified weaknesses.
Data flow diagram of purchases and cash disbursements
systems
The use of accounting software has enabled the timely provision of financial statements
to the decision-makers for Bell Studio. For instance, the balance sheet shows the financial
position of the company in terms of asset, liabilities and equity availability (Belfo & Trigo,
2013). Since the previous data is also provided, the management of Bell Studio is able to notice
any favourable or unfavourable changes in the company’s assets, liabilities and equity levels. It,
therefore, eases the identification of items that exhibit unfavourable changes. For example, a
trend showing a reduction in the net profit of the company could be used to make decisions and
implement strategies that increase the cash flow generation for Bell Studio. Thus, the accounting
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information system has significantly reduced a great deal of the workload in the accounting
department of Bell Studio (Worrell, Gangi, & Bush, 2013)
Forecasting sales, profit/loss - using the historical information contained in the
Company’s financial statement, it is possible to forecast items such as sales level and profit or
loss in order to determine the future level of sales and profit/loss. Companies can, therefore, use
negative forecast information to make decisions and implement loss minimization strategies and
increase the profitability level (Brandas, Megan, & Didraga, 2015).
Figure 1: Data flow diagram of purchases and cash disbursements systems
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Figure 1 shows the data flow diagram of the purchases and the cash disbursement
department of bell studio. The process begins when the purchasing clerk checks the inventory
and the Subsidiary Ledger. Upon determination that the inventory does not contain all the needed
materials, the purchasing clerk selects a vendor from a valid vendor file that is readily available
at the purchasing department. The purchasing clerk then prepares a digital purchase order and
print several hard copies. A copy of the printed digital purchase order is sent to the vendor and
another one filed at the department for reference purposes (Patasiene, Zaukas, & Patasius, 2015).
The receiving clerk is responsible for receiving goods from the various vendors and
inspecting them when they arrive. The receiving clerk prepares hard copies of the receiving
report and sends these goods to the inventory warehouse where they are shelved. The receiving
clerk updates the inventory subsidiary ledger and sends the receiving report to the account
payable department (Worrell, Wasko, & Johnston, 2013). The account payable clerk is
responsible for receiving the report from the receiving clerk and waits until they have received
the supplier invoice after which the accounting payable clerk reconciles the digital purchase
order, the receiving report, and the supplier invoice. The accounts payable clerk updates the
digital account payable subsidiary ledger, the accounts payable control account and inventory
control account in the General Ledger. The process ends when the clerk sends the invoice, the
receiving report and the digital purchase order to the cash disbursement department
(Ponisciakova, Gogolova, & Ivankova, 2015).
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Data flow diagram of payroll system
Figure 2: Data flow diagram of payroll system
Figure 2 shows a data flow diagram for the payroll department of Bell Studio Company.
The payroll department processes starts when the payroll clerk receives time card from various
employees and inputs the data to the accounting system. The payroll clerk prints hard copies of
the time cards and posts the same to the digital employee’s record. The payroll clerk is also
responsible for filing these time cards in the payroll department (McLaren, Appleyard, &
Mitchell, 2016).
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The payroll clerk sends cheque to the department supervisors for signing. Also, the
payroll clerk sends copies of the payroll register to the accounts payable department which is
responsible for reviewing them and then manually preparing disbursement vouchers. The
account payable clerk sends the payroll register and the disbursement voucher to the general
ledger department after which the general ledger department post these documents to the general
ledger and files a copy for use in the department (Spånberg & Shahnazarian, 2019).
System flowchart of purchases system
Figure 3: System flowchart of purchases system
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Figure 3 shows the system flowchart for the purchases system. The purchasing
department of Bell Studio has the longest process that cuts across the purchasing department the
receiving department and the accounts payable department. Therefore, the purchasing clerk the
receiving clerk and the accounts payable clerks are involved in the major processes (Ghasemi,
Shafeiepour, Aslani, & Barvayeh, 2011).
The process starts when the purchasing clerk checks the inventory subsidiary ledger for
any goods or materials that are not enough or need refiling. Upon determining which materials
need to be ordered from the vendors, the purchasing clerk selects the most suitable vendor from a
list of vendors that is available at the purchasing department. The purchasing clerk prepares a
digital purchase order and print two copies. The digital purchase order is sent to the vendor and
the other one filed at the purchasing department for reference purposes. After this, the receiving
clerk takes on the process by inspecting the goods that are coming from the various vendors
against the digital purchase order and the packing slip (Thomas, 2016).
The receiving clerk is responsible for preparing a manual copy of the receiving report.
Two copies are prepared, and a copy of the receiving report is sent to the accounts payable
department. After preparing this report, the receiving clerk sends goods to the inventory
warehouse where they have shelved. The receiving clerk updates the inventory subsidiary ledger
and files a copy of the receiving report for use in the department. From here the accounts payable
clerk is responsible for the next phase of the process.
The accounts payable clerk is responsible for receiving the receiving report and files it
awaiting the arrival of the supplier invoice. On its arrival the accounts payable clerk reconciles
the three documents, that is, the receiving report the digital purchase order and the supplier's
invoice (Lapinskas & Shubentseva, 2014).
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The accounts payable clerk then update the digital accounts payable subsidiary ledger,
the account payable control account and the accounts payable inventory control account in the
general ledger. The process ends with the accounts payable clerk sending the receiving report,
the invoice and the purchasing order to the cash disbursement department.
System flowchart of cash disbursements system
Figure 4: System flowchart of cash disbursements system
Figure 4 shows the system flowchart of the cash disbursement department. The process
starts when the cash disbursement clerk receives documents from the account payable
department and then files the received documents (Edmonds, Miller, & Savage, 2019).
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The cash disbursement clerk prepares a cheque for the invoiced accounts and then sends
this cheque to the department supervisors who are responsible for signing them. The clerk then
updates the check register, the accounts payable subsidiary ledger and the accounts payable
control account. When this is done the cash disbursement clerk handles the process to the
receiving clerk who files the invoice, the digital purchase order, the receiving report and a copy
of the cheque (Trigo, Belfo, & Estébanez, 2016).
System flowchart of payroll system
Figure 5: Payroll Department System flowchart
Figure 5 shows a system flowchart for the payroll department of Bell Studio Company.
The payroll department has its processes starting when the payroll clerk inputs data and time
card as received from various employees. The payroll clerk goes ahead to print hard copies of the
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time cards and posts the same to the Digital employee’s record (Olszak & Kisielnicki, 2018).
The payroll clerk is also responsible for filing these time cards in the payroll department and
sending cheque to the department supervisors for signing. Also, the payroll clerk sends copies of
the payroll register to the accounts payable department which is responsible for reviewing them
and then manually preparing disbursement vouchers. The account payable clerk sends the payroll
register and the disbursement voucher to the General Ledger department after which the general
Ledger department post these documents to the general Ledger and files a copy for use in the
department (Chiu, Liu, Muehlmann, & Baldwin, 2019).
Internal Control
Reliability- the previously used method of processing accounting information, the manual
method, poses a great risk to the accuracy level of the organization’s financial information. The
hand recorded method has the following disadvantages: ineligibility of handwritten work,
recording errors and errors in calculations. Poorly written document minimizes the ability to
interpret the financial information accurately. Therefore, decision-makers are at risk of making
decisions based on the findings of the wrong data. Since the manual process involves multiple
recording of data in various accounts, there is a possibility of making incorrect entries thereby
reducing the accuracy level of the financial information of Bell Studio (Dellisola et al., 2017).
However, when using the accounting software, the occasions requiring data entry are
minimized, thus, increasing the accuracy of the information. Last, the accounting software
automatically makes relevant ledger entries and provides accurately calculated figures; thus,
increasing the accuracy of the Bell Studios’ financial information. From another point of view,
the use of accounting software increases the security of the information. Using the software, Bell
Studio is able to store financial information on hard drives and other suitable storage devices
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where it is safe from the forces that cause destruction or alteration like a natural and man-made
disaster. Therefore, the accounting software improves the security of the financial statements in
Bell Studio. The fewer the number of manual recording, the lesser the data errors since most
errors occur during data entry. Thus, the higher the reliability of the financial statements of Bell
Studio (Thomas, 2016).
Increasing the number of shareholders – using the accounting software, the internal
control of Bell Studio is improved, and the operating costs are reduced (reduced paperwork and
salaries). A reduction in such costs reduces the overall operating costs of Bell Studio. In turn, the
level of net income is increased. In addition, the software eases forecasting, ratio and trend
analysis. Forecasting of sales, various costs, and profitability levels help Bell Studio managers to
formulate more effective strategies to increase the sales; thus, the profitability levels of the
banks. An organization like Bell Studio makes high profits and has greater capabilities of either
paying cash dividends or making more investments in viable projects. Investors prefer investing
their money in organizations whose net income is high because such firms are capable of paying
a higher rate of return. Therefore, more shares will be purchased thus increases the number of
shareholders. It is true that companies that make high profits attract more investors based on the
fact that such firms are able to pay high dividends (Brandas, Megan & Didraga, 2015).
The accounting system of Bell Studio as a whole contains various internal control
weaknesses which are present in all the three departments that make up the accounting section of
Bell Studio. This internal control weakness includes having one person who is responsible for a
lot of activities and no one to counter check or verify their work. For instance, the payroll clerk
after receiving data from the employee's, inputs this data to the system and no one else verify
whether this data is correctly inputted into the system or not (Trigo et al., 2014).
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Privacy and security - E-commerce and accounting information systems used in
organizations like Bell Studio is online, thus accessible to different users. The increase in
cybercrime has also seen an increase in security threats in e-commerce. As such, e-commerce has
suffered the resultant liabilities, loss of trust and additional cost for clean-up. This calls for an
effective security systems that would protect consumers and merchants from such losses. Such a
system would be pegged on a complex interaction of several database management systems,
applications development platforms, and network infrastructure and systems software. This
encompasses preservation of integrity, confidentiality and availability of computer and data
resources, referred to as the security triad. Further to this, there would be need for non-
repudiation, access control and privacy (Lapinskas & Shubentseva, 2014).
The first way in which e-commerce has been secured and protected against fraud is
through access control. Physically, access control would involve the restriction of an
unauthorized person into a building, property or room. In a similar manner, e-commerce has
applied several technologies that control access to Internet resources, including authorization,
authentication and audit.
Conclusion
The report has analyzed the Bell Studio case study by using data flow diagrams and
system flowchart diagrams. Bell Studio has three departments that are purchased, cash
disbursement department and the payroll department. At the end of the report, a description of
the internal control weaknesses and the risks associated with these weaknesses have been
provided. The method of using data flow diagrams and system flowchart diagram to analyze case
studies is effective as even stakeholders that have no knowledge in Business Analysis can be
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able to view the various processes and data flows graphically. This report can be used by the
management of Bell Studio to make critical decisions affecting the company.
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