Learning objective: Demonstrate an understanding of
essential accounting information systems, standards, and controls.
Assume you are a CPA with a small local practice. You have three professional
employees, all relatively new CPAs, and an office manager. Your practice
consists primarily of tax and write-up work. You have a new client—a homeowners'
association consisting of 150 homeowners—and you have contracted to perform the
following services:
- billing: Each quarter, you will send each homeowner an
itemized bill. Dues are $50 per month ($150 per quarter). Late fees are one
percent per month of the unpaid balance. The bills will be mailed the first day
of the last month of the quarter. Payment is due by the end of the quarter.
- collection: You rent a post office box and will receive the
checks there. You are responsible for depositing the checks (you have opened a
checking account for the association).
- payment: You will write about five checks a month. Besides
your own monthly fee, there are monthly checks to a lawn maintenance company and
a refuse removal company. There are also checks written for taxes, postage,
supplies, and the like.
- reporting: You will be responsible for reporting on all
collections, all checks written, outstanding homeowners' balances, and quarterly
financial statements.
- tax payment: You will be responsible for preparing the
association's federal and state tax returns.
- advising: You will be responsible for advising the board on
an as-needed basis, especially in the areas of budgeting, purchasing, and
investment.
You are hoping to expand this new area of your practice. You want to
computerize the main functions of this system, concentrating especially on the
billing and reporting aspects. Assume that the tax preparation, financial
statements, and checking account will not be computerized initially; only the
billing and collections portions will be computerized for now.
Required: Using the methodology developed in this course,
document and illustrate the system (describe inputs, outputs, controls, and so
on); don't overlook manual functions. Consider what reports will be necessary;
what kinds of documents/forms will be needed (such as invoices and receipts);
and what the reports, documents, and forms will look like. Design at least three
documents (reports and/or forms), and provide them as appendices.
Include a
discussion about problem areas that could arise, assuming that you will
eventually have many more clients and several more employees