Accounting Information System for Merchandising Business

Accounting Information System for Merchandising Business I. INTRODUCTION Most people buy their needs in a retail merchandising. In buying, the buyer wants a product with a reasonable price. Therefore they choose different variety of products available for sale in such a way to have many choices and them to entice to make a purchase. Entrepreneur in merchandising business is establishing working relationships with manufacturers who will provide the goods or services that are ultimately sold by the retailer. This type of buying involves determining what products will be carried in the establishment, negotiating and arranging for the delivery of those goods. Business activities done by the merchant are: interacts with the seller, puts efforts into proper relation between selling offices, selling agents agency and seller exporter in terms of executing an order.

In order to be successful with retail merchandising, it is necessary to provide consumers with a couple of key benefits. First, the products must be of high quality; this helps to ensure the customer will return for more purchases in the future. Along with the quality, the retailer must also sell the products at prices the consumer finds reasonable. By providing quality products at affordable prices, the retailer has a much better chance of standing out from the competition and remaining in business for many years to come. This paper purports the developed and designed accounting information system suitable or compatible for small/medium-sized merchandising business, with the system focusing on expenditures, disbursement and revenue-generating activities.

II. INVENTORY CLASSIFICATIONS

Inventories to be sold consist from household items to office supplies and other commodities. They may be classified into fast-moving and slow-moving products. Fastmoving products are: well-known brands or considered as a necessity with a high demand in the market, high-quality, and affordable; and these are divided into two groups: (1) seasonal demand and (2) continuous Demand. While slow-moving products, are those products that have low-market share/demand or new brands that have low popularity, or products that have poor consumer rating as to its purpose. For fast-moving products, particularly—in the seasonal demand, it includes products which are easily sold associated to or during a particular period, event or occasion. Examples are: pasta which have high demand during/few months before December and condensed or evaporated milk for making halo-halo during summer season. On the other hand, continuous demand includes those products that are demanded all throughout the year. Examples are milk, soap, condiments and other items. In short, products with continuous demand are those commodities that are considered as daily needs. Another classification of product is the slow-moving products, with this type of classification, products have low market share, low demand, may be new products, and those with high price tag which consumers find it unreasonable to buy. Also, slowmoving products may indicate that those products have low quality or not much needed by consumers and that they but that product rarely seldom or those products with no definite pattern of demand. Also, a merchandising business with slow-moving products would just set the business on the rocks since only small revenue would be generated arising from sales.

III.

PERSONNEL

INVENTORY MANAGER: Responsible for all inputs related to inventory (sale, purchase, and returns). Responsible for monitoring inventory levels and making sure that the re-order point is met before ordering Responsible for issuing purchase order Responsible for managing “Inventory Database” and “Suppliers Database” GENERAL MANAGER: May refer to the owner of the business establishment Approves transactions that require his/her approval Responsible for decision-making in case of serious matters Administrator of the information system INVENTORY INSPECTOR: Responsible for inspecting the delivered inventory if the quality, quantity, and good physical appearance is met Responsible for inspecting returned items (sold) that is found to be spoiled or damaged by the buyer. Supports the function of inventory manager CASH MANAGER: Monitors cash levels (inflows and outflows) Monitors expenditures Manages the “Accounts Receivable Database” and “Accounts Payable Database” Also monitors “Payroll Database” and “Expenses Database”

PAYROLL MANAGER: Manages the “Payroll Database” CASHIER: Responsible for the holding of cash arising from the sale of inventory ACCOUNTANT: Responsible for the preparation of financial statements that may be needed by regulatory agencies Has the authority to access all databases that are relevant in the preparation of financial statements. Has the authority to check source and operational documents needed in the preparation of financial statements To further understand the flowcharts shown on the subsequent pages, use this legend to identify the persons responsible for the different tasks within the system. Inventory Manager General Manager Inventory Inspector Cash Manager Payroll Manager Cashier Accountant

IV.

MANAGEMENT OF ASSETS SYSTEM

Under this system, the monitoring of inventory levels, inspection and identification of spoiled goods and management of fixed asset is undertaken. In managing inventory, FIFO-Perpetual method is used since it is reasonable for goods that are acquired first to be sold or disposed first and the acquired inventory is inputted in the inventory database. For goods that are replaced by the supplier due damage or found to have defects is inputted to the inventory database to update the inventory count. For spoiled goods that are found after the sale, meaning the customer had found it to be damaged, defective, upon receipt of the establishment; it is further inspected by the inventory inspector to ensure that it is really damaged or defective. After the inspection done by the establishment, the returned item would be inputted to the spoiled goods database for record-keeping purposes. Also, after it has been proven to be defective by the entity, the customer will be given an option to refund or replace the item. If the customer would opt to replace the item then an update to the inventory database is necessary. However, if the customer would opt to refund the payment of the returned merchandise then the transaction must be reflected in the sales and cash database. Then, generation of return slip will follow and thus notifying the supplier that spoiled goods was detected

then when it is approved for replacement, upon the receipt of the replaced item, it would be inputted to the inventory database. On the other hand, if the good is not found to be damaged or defective, then it will be rejected thus returned to the customer. For fixed assets—in a merchandising business, it composes of the following: building, computers, etc. The reason why fixed assets is included in the management system is because of the reason that this information system is related to accounting and it is known that in accounting we account for non-current assets since it gives benefit and so in relation to merchandising business, necessary accounting treatments to fixed assets are entered/inputted to the non-current assets database.

V.PURCHASING SYSTEM

The purchasing section manages the entire inventory acquisition process, from requisition, to purchase order, to product receipt, to payment. Purchasing systems are a key component of effective inventory management in that they monitor existing stock and help companies determine what to buy, how much to buy and when to buy it. The process starts with checking the reorder point that is referred to the inventory database and followed by the issuance of a purchase order that indicates the types, quantities, and additional supplier information that is extracted from the suppliers’ database. This purchase order must be approved by the firm’s inventory manager and the supplier. In the event that the supplier didn’t approve the order, a follow-up is required that can be made through phone call. If it has been approved, a reciprocal obligation of delivery of the goods and payment of the account will arise. If the goods have been delivered, it must undergo inspection which is done by the inventory inspector. If it passes the inspection, the inventory inspector must inform the inventory manager regarding the result of the inspection. Then, an update must be made in the inventory database. If it fails during the inspection point, the goods must be returned to the supplier with the issuance of a return slip approved by the inventory inspector and inventory manager. If the supplier has fulfilled its obligation to deliver, the purchaser must also fulfill its obligation to pay. If the cash available in the firm’s account is enough to pay the purchased goods, it can pay in cash. If not, the account is left on credit or by issuing a post-dated check which is similar to notes payable. In either ways of payment, a record of it must be inputted in the system thereby reflecting it in its appropriate databases and archive the receipt of invoice. An optional task is to make an entry in the e-journal system of the database of the entity, either to make: Merchandise Inventory (Dr.) and Cash/Accounts Payable (Cr.).

VI.DISBURSEMENT SYSTEM

This system purports the financial outlays related to the expenses incurred. Also, this system does not include the purchase of inventory for the fact that inventory is not expensed outright because it is still an asset on the time of the purchase and expensed (cost of sales) once sold. In a business, there are different sources of expenses—some come from utilities, payroll, other miscellaneous expenses, acquisition of fixed assets. The disbursement of these expenses may be outlaid by cash or petty cash fund. Expenses outlaid by cash are those expenses that have huge amounts. On the other hand, expenses outlaid using petty cash fund are those expenses that have small

amounts or are immaterial. For disbursement using cash, the entry would just be: Expense account (Dr.) and Cash (Cr.). For disbursements using petty cash fund, the imprest system is used for control purposes. On the imprest system, expenses are recognized at the time of replenishment thus the entry made will be: Expense account (Dr.) and Cash (Cr.).

In the process of disbursement for expenses, the first step is to identify the amount to be paid which can be obtained by check the billing statement issued, extracting payroll data from the payroll database, or any unexpected disbursements. After the amount of payment is identified, this amount must be approved by the general manager and cash manager, so if there are suspicious figures included then the general manager should verify and make sure that the amount reported is correct and justifiable. Then after the amount due is verified, the general manager will notify manager to authorize him to disburse payment in order to settle the obligation. The invoice received arising from payment of utilities expense will be used for future use since there are situations that require documents as proofs for proper presentation and reporting like: during replenishment of petty cash fund and payment of income tax wherein it is better to choose the itemized method of taxation but before it financial statements must be prepared especially the income statement because tax is based on the operating income of the firm. For acquisition of fixed assets, the fixed asset to be bought must be tested to ensure that it functions properly, then after it has been proven that it is working properly, the general manager would notify the cash manager regarding the amount to be disbursed thus the cash manager would reflect the transaction in the cash database. Another approach is that if he is knowledgeable of basic accounting procedures, he can reflect the transaction in the e-journal system by: Fixed Asset Account (Dr.) and Cash/AP (Cr.). Any official receipt received after payments had been made is stored for auditing purposes.

VII.

SELLING SYSTEM

In a merchandising business, the main and only revenue-generating activity is selling because that’s what it is intended to do. In selling goods, pricing and the presence of promos are considered. In the first consideration which is pricing, any cost attributable for the acquisition of goods and incremental mark-ups are inputted in the inventory database. For the second consideration which is the promo, it may be in two types namely: promo mandated by the supplier and promo mandated by firm. The promo being referred here pertains to giveaways or premiums. For the first type, if the giveaway if provided by the supplier, it needs to be inputted to the giveaway database

and a record book must be made for redemption purposes. For the second type, the giveaways/premiums acquired/purchased are inputted also in the giveaway database. If the promo implemented is price-related (discount) it is just treated as a reduction in the inventory database since the inventory database shows all information related to the products. Under this type an entry is necessary, for the purchase of premiums (Premiums (Dr.) and Cash (Cr.)), for the distribution of premiums to customers (Premium Expense (Dr.) and Premiums (Cr.)), and at the end of the year where premiums are still outstanding (Premium Expense (Dr.) and Estimated Premium Liability (Cr.). In the sale of inventory, there can be two types of payment either by cash or credit card. For sales paid by cash the entry would just be, Cash (Dr.) and Sales (Cr.) while for credit card sales the entries are, Accounts Receivable (Dr.) and Sales (Cr.), then if notice has been given by the bank for payment then the entity would now make an entry for the receipt of cash and paying the corresponding collection fee which is : Cash and Collection Expense (Dr.) and Accounts Receivable (Cr.).

VIII.

AIM OF THE PROPOSED ACCOUNTING INFORMATION SYSTEM

The aim of the accounting information system created is to:

1. Shorten/streamline the process with control thus making it efficient. 2. Improve/enhance the timeliness in the preparation of financial statements and other necessary information. 3. Improve the relevance of information generated. 4. Improve the reliability of the information that would contribute effectiveness in decisions made. 5. Create strong relation(s) between management and employees. 6. Show the importance and impact of technology in business.

IX.

ADVANTAGES AND DISADVANTAGES OF THE PROPOSED SYSTEM

Advantages:     

Provides efficiency with control Rapid generation of reports Less reliance to accountant in terms of recording transactions Back-up can be made easily Lessens paper works

Disadvantages:  

Costly Not user-friendly

X. ANALYSIS

Based on the system of the entities we have interviewed, we have found out that their systems are mostly performed manually and as well as the processing of information and there is weak relationship between employees and management and this is because the management is reluctant in giving their trust to their employees since they thought that maybe this employees are not trustworthy since there are a lot of cases wherein businesses suffers downfall because of the malpractices committed by the employees. Since this happens sometime, we want to design a system that would view the performance of the employees and at the same time create a division of labor so that efficiency is enhanced and at the same time there’s control of the problems since there is segregation of tasks that would help determine the cause of the inefficient function of the overall system.

Based on the system designed and formulated for medium-sized merchandising business, we have noticed that there are less paper-works maintained which would result in streamlined processes. Also, since the activities of a merchandising business is only few, its subsystems are only few thereby the generation of financial and nonfinancial information is done in a short-period of time. Furthermore, since this system is mainly designed for medium-sized merchandising business wherein owners still have full control of the processes, then the owner don't necessarily have to maintain records that are partially-relevant since all are being inputted to the database and computations can be generated immediately when necessity arises. Since the aim of AIS (Accounting Information System) is to ensure the reliability and timeliness of information, the designed system can achieve this quality of information because of the presence of databases that stores, updates, and correlates data in order to generate documents that would aid the management in decision-making, that would eventually result to the achievement of its goals.

XI.

CONCLUSION

As a conclusion, the influence of information technology really improved the competitiveness and enhanced sound decision-making of different businesses and as well as increased its efficiency. Since one of the vital ingredient for a successful business operation is information since this contains processed data that serve as a feedback of past operations which in turn aids the management n how to enhance their performance. Also, since information must be needed when making decision, timeliness is another relevant factor in decision-making since this refers to the availability of information at the time it is needed. So, to achieve timeliness of information, computer systems, databases, and servers are used in order to streamline the flow of data and information. Furthermore, with the aid of technology—transmission of information would be fast, easy, reliable, and timely that would contribute to a sound decision making.

SUBMITTED BY: Go, Joebert Villamor, Rica Isabel Bergonio, Phillip Jodil Mercado, Loraine Ladipe, Jessa Mae Mendoza, Ma. Almera Opeña, Ara Graciela Vicera, Chelsea Mae Verecio, Myra Dublin, Remelito Oblimar, Danelle Jane Natulla, Athena Dimaangay, Jay Rose

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