Accounting Information System for Cash Flow System

Question: Discuss about the Accounting Information System for Cash Flow System. Answer: Introduction The report explains the risk analysis of cash flow system of JK Saddlery. The risk assessment shows the factors for risk in cash flow system (Li 2014.). The cashiering system in JK Saddlery has to undergo risk management for assessing the risk factor of their commercial operations. According to Chen et al. (2012), the control plan made in the report would help in decreasing the effect of risk in factor. Part A: Systems Documentation Context Level DFD Figure 1: Context Level DFD of JK Saddlery (Source: Created by the author) Explanation of Context Level DFD of JK Saddlery The context DFD of JK Saddlery shows a single process flow. The customers and the cashiers are the main elements of the context diagram. The operations of data flow diagram are, Customer places the sales order Cashier notes down the order details Cashier create receipts/invoices for the sales Customer collects the payment/Invoice receipt Level 0 DFD Figure 2: Level 0 DFD of JK Saddlery (Source: Created by the author) Explanation of Level 0 DFD of JK Saddlery Sales person is responsible for preparing the sales order in the sale process. The cashier collects the sales order. Cashier makes the invoice receipt for the customers. The customers make the payment to the cashier by cash, cheque or credit card. The cahier again is responsible for the collecting the cash from the bank. Process Map of JK Saddlery Figure 3: Process Map for JK Saddlery (Source: Created by the author) Explanation of Process Map for JK Saddlery The process diagram for JK Saddlery has shown that there are three levels of operations. Cashier is responsible for maintainsing all the major operations in the system of JK Saddlery. The operations include Checking and maintaining sales record and emails, payment procedure and invoicing system, and reporting of all the processes. The customer and sales person are also the part of the process system. Part B: Analysis Narrative Risk factors and consequence in JK Saddlery According to Guerron-Quintana (2012), any business operations consist of risk and uncertainty. The cash flow system of JK Saddlery also have various risk factors for information and cash management. According to Schneider et al. (2012), these include theft and misplacing of money, dishonesty of employee, inadequate separation of activities in JK Saddlery, and error of the cash management. Theft or misplace of money: the money collected at the cash counter could be stolen or misplaced or even stolen if proper attention is given (Brushwood et al. 2014). Manual cash system has the major risk factor of cash being misplaced or lost. It has been seen many times that the cash from the locker may get lost. Sometimes, the burglars or thieves get into the shop for stealing the money by force. It is a very common risk factor that has been noticed in the retail shops and stores. Dishonesty of Employee: Since only one employee is responsible for maintaining the cash and credit card transaction there is always a probability for error (Jehn and Scott 2015). The risk factor of dishonesty of employee would have serious offense on the cash flow transaction of the company. JK Saddlery may have to face problems like cash or product lost due to dishonesty of the employee. The employee may take or use some money for personal gain and it would cause negative effect on the business operations of the JK Saddlery. Inadequate separation: The pressure of keeping track of all the information and money may lead to miss of information storage (Tubaldi Barbato and Ghazizadeh 2012). The employee might miss track of any commodity. As the data entry is not automatic, the information has to be stored manually in the operations of JK Saddlery. It would cause storing the information with any error of fault. Hence there is a risk of storage of data and information. The data and information storage would cause in diluting the chances of steady flow because the data is maintained by single authority. Error in cash flow management: The risk factor can affect the data management of the JK Saddlery. The management and maintenance of operations in sales invoicing of the JK Saddlery can be helpful for sorting this error (Shah et al. 2016). The lack of information system can largely effect the process of managing the data and information about cash maintenance. However for JK Saddlery, the information has to be manually maintained, which may result in occurrence of error. The employee and the managers of JK Saddlery would have to manage the situation of faults that may arise from the errors in management of cash flow operations. Control plan for managing the risks of JK Saddlery The control plan for managing the risk factors of JK Saddlery can be managed by the implementation of integrated information system management (Satyadi 2014). It would help in forming a system that would be capable of maintaining the information system in JK Saddlery. It would enhance the system management of sales invoice of JK Saddlery. There are 5 principles that could be implemented for managing the cash handling system of JK Saddlery. Record and document the transactions: the transactions of the JK Saddlery should be managed by recording and documenting of the day to day transactions (Rault and Loughman 2013). Hence, the chances of the loss of data by any means could be stopped. The JK Saddlery can manage the transactions by the implementation of information system. Authorization in transaction management: the authorization feature would prevent the theft of cash or information (Ginter et al. 2013). The data and information system of the JK Saddlery can be managed by the use of information system. The problems faced by the theft of information could be easily stopped by implementing the authorization function available in information system. Reviewing the Documents: The reviewing and verification of the documents can be easily implemented by the information system management (Wang et al. 2012). It would be helpful for sorting out the errors in management of invoice system. The billing and invoice system had been managed solely by an employee in JK Saddlery. However, if information system is implemented, the system would be faster and accurate for managing the cash flow system of JK Saddlery. Segregate Duties: The duties and responsibilities of information system management could be managed by implementing the information system over the operations of billing and invoicing of JK Saddlery (Svrakic et al. 2013). The managers and the employees are responsible for managing the information and cash system of JK Saddlery. But being a human they are liable for making mistakes and errors. However, the information system is fault free mechanism and there is no scope for errors. Time Saving: The information system perform all the operations without any errors and faults (Kallhoff and Byrne 2015). The time taken for storing the information on the information system would be comparably less that manual entry. Hence, it would save much time of operations. The JK Saddlery would require less time for forming the information database of the sales invoice and cash flow. Conclusion The report had stated the risk assessment of manual cash system in JK Saddlery. It has resulted in forming the errors by the risk factors like theft and misplacing of money, dishonesty of employee, inadequate separation of activities in JK Saddlery, and error of the cash management. These risk factors have resulted in causing problems and issues in cash flow system of JK Saddlery. However, the five principles such as record and document the transactions, authorization in transaction management, reviewing the documents, segregate duties, and time saving. References Brushwood, J.D., Dhaliwal, D.S., Fairhurst, D.J. and Serfling, M.A., 2014.Property theft and the cost of equity capital. Working Paper, The University of Arizona. Retrieved from https://aaahq. org/AM2014/display. cfm. Chen, C.W., Tseng, C.P., Hsu, W.K. and Chiang, W.L., 2012. A novel strategy to determine the insurance and risk control plan for natural disaster risk management.Natural Hazards,64(2), pp.1391-1403. 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