ACC 315 Module 2 Business Process Documentation Assignment Example

Documenting the Revenue Cycle at a Composite Propane Distributor: Narrative, Flowchart and Data Flows

[Student Name]

Southern New Hampshire University

ACC 315: Accounting Information Systems

Module Two Assignment

[Instructor Name]

[Date]

The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.

Documenting the Revenue Cycle at a Composite Propane Distributor: Narrative, Flowchart and Data Flows

Introduction

Documentation is how accountants and auditors see a process they did not design. Romney et al. (2021) describe three complementary tools: narratives, which explain a process in words; document flowcharts, which show who handles which documents; and data flow diagrams, which show how data moves among processes and stores regardless of who does the work. This assignment uses all three to document the revenue cycle at a composite propane and heating oil distributor in central Vermont with about 5,400 accounts, nine delivery trucks and a five-person office. The company uses a route software package on drivers' tablets and a separate accounting package in the office.

Process Narrative

The revenue cycle runs as follows.

1. Each morning the route software produces a delivery list of automatic-delivery customers whose tanks are estimated to be at or below 30 percent, based on degree days and each customer's usage factor. Will-call orders taken by phone are added by the dispatcher.

2. The dispatcher prints a route sheet for each driver and assigns trucks.

3. At each stop the driver fills the tank, reads the truck meter and writes the gallons, price code, tank percentage and any service notes on a three-part paper delivery ticket.

4. The driver leaves the white copy at the customer's door, keeps the yellow and pink copies and marks the stop complete on the tablet.

5. At day's end the driver drops yellow copies in the billing tray and keeps pink copies in the truck book.

6. The next morning, a billing clerk sorts the yellow copies by route and keys each ticket into the accounting package, selecting the customer and typing the gallons and price code.

7. The accounting package prices the delivery, creates an invoice and posts it to the customer's account, debiting accounts receivable and crediting propane revenue.

8. The clerk files the yellow copies by date.

9. Invoices for customers not on a budget plan are printed and mailed weekly; budget plan customers receive a monthly statement showing their fixed payment and balance.

10. Payments arrive by mail, by phone card payment and through the bank's online bill pay.

11. The second billing clerk opens the mail, lists checks on a remittance log and posts payments to customer accounts.

12. The same clerk prepares the deposit slip and takes checks to the bank.

13. Card payments taken by phone are entered in the card terminal and posted by the same clerk.

14. At month end the controller reviews the aged receivables report and a revenue report by product, and compares gallons sold with gallons purchased.

Document Flowchart

The document flowchart uses four columns, one for each area of responsibility. Table 1 describes its elements in order so that a reader can follow it without the drawing.

Table 1. Document Flowchart Elements by Column

Data Flow Diagram

The level-zero data flow diagram ignores who performs each step and shows only how data moves. Hall (2019) stresses that a data flow diagram shows logical processes, so a clerk and a computer program performing the same function appear as one process.

Table 2. Level-Zero Data Flow Diagram Elements

Weaknesses Found While Documenting

Documenting the process revealed four weaknesses that the control analysis in the next module will address. First, at steps 3 and 6, gallons are written by hand and retyped, so a misread digit becomes a billing error with no check. Second, nothing compares the meter totals in the pink copies with gallons billed from the yellow copies, so a ticket that never reaches billing, whether lost or diverted, would go unnoticed. Third, at steps 11 through 13, one clerk opens the mail, posts payments and makes the deposit, and the same clerk can issue account credits, a combination that would allow cash to be taken and hidden with a credit. Fourth, at step 6, price codes are typed rather than pulled from the customer file, so a customer could be billed at a lower commercial price. Doyle et al. (2007) found that material weaknesses in internal control are more common in smaller and more complex firms with fewer resources for control, which describes a five-person office well.

Conclusion

The revenue cycle at this distributor works, but it depends on paper and memory at the two points where value changes hands: the meter and the mail. Documenting it in three forms made those points visible. The flowchart shows where documents go; the data flow diagram shows that delivery data is stored in two places that never meet. The next module will design controls for the four weaknesses identified here.

References

Doyle, J., Ge, W., & McVay, S. (2007). Determinants of weaknesses in internal control over financial reporting. Journal of Accounting and Economics, 44(1-2), 193-223. https://doi.org/10.1016/j.jacceco.2006.10.003

Hall, J. A. (2019). Accounting information systems (10th ed.). Cengage Learning.

Romney, M. B., Steinbart, P. J., Summers, S. L., & Wood, D. A. (2021). Accounting information systems (15th ed.). Pearson.