Module 5: Accounting Information Systems and Controls: Pt 2

Question 1

What are the phases of the stock cycle?

Answer 1

1. Receive goods
2. Stock movements
3. Stock holding
4. Stock valuation
5. Order fulfilled

Question 2

Stock movements

Answer 2

Stock moving between locations in the warehouse. GRNs and GDNs can be used to indicate where stock is moved around the warehouse or from the warehouse to the stock room.

Question 3

Stock holding

Answer 3

Company must ensure that stock is safeguarded against loss, theft or damage. Stock records must reflect whats physically there.

Question 4

Stock valuation

Answer 4

Stock should be held at lower cost of NRV. Slow moving/obsolete stock should be identified.

Question 5

What procedures should take place to ensure stock counts are performed effectively?

Answer 5

Management should produce clear instructions detailing how the stock count should be carried out and provide it to staff

The count should be carried out in line with the instructions

Stock movements should be ceased until the stock count is complete

Stock count sheets should be provided to all counters, with items to count included but quantities excluded.

Should be counted by two members who are not involved in daily handling of stock

Completed in pen and signed by stock counters

Items should be marked when counted

Any differences should be investigated.

Question 6

Fixed asset cycle

Answer 6

Similar to purchase cycle, however there is a risk that due to higher value and less frequent nature of fixed asset purchases, additional risks may arise.

Question 7

What are the additional controls associated with fixed asset cycle?

Answer 7

Maintenance of fixed asset register (FAR), with details of all assets held,

Accounting policies in regards to depreciation and revaluations should be approved by board.

Authorisation for significant fixed asset purchases should be completed by board of directors at monthly meeting

Asset disposal forms to be completed for any disposal/sale of a fixed asset and passed to the finance team for recording

Fixed asset counts performed

Question 8

What transactions can occur in payroll cycle?

Answer 8

Salaries and hourly wages 
Comissions 
Bonuses 
PAYE deductions 
NI deductions 
Pension contributions 
Employee benefits

Question 9

What procedures does payroll cycle encompass

Answer 9

The recording of work done
The recognition of the payroll liabilities and preparation of the payroll listing
The payment of payroll liabilities and the recording of payroll on the nominal ledger

Question 10

Payroll cycle and documents involved

Answer 10

1. Work done and time recorded, involving timesheets
2. Calculation of payroll liability, using HR master file for hourly rate or salary
3. Payment of payroll liability, involving payroll listing/summaries and using payslips.

Question 11

Fixed asset cycle phases

Answer 11

1. Identify the need for asset
2. Seek management
3. Order asset
4. Receive asset/transfer ownership
5. Receive invoice
6. Make payment

Question 12

Phases of monthly financial reporting?

Answer 12

1. Month-end journals
2. Month-end reconcilliations
3. Stock counts
4. Production of management accounts
5. Production of financial statements