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22107 Lecture Notes - Lecture 8: Management Accounting, Strategic Planning, Financial Accounting

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UTS 2014 – Accounting for Business Decisions A
Page 40
LECTURE 8 – INTRODUCTION MANAGEMENT ACCOUNTING & COSTING
LEARNING OBJECTIVES – INTRODUCTION TO MANAGERIAL ACCOUNTING
Describe the contemporary view of accounting information systems and describe and
give examples of financial and non-financial accounting information.
Traditionally, an accounting information system was simply a transaction-processing system
that captures financial data resulting from accounting transactions within a company.
From this perspective of an AIS, accounting information simply represents financial
information (e.g. net income) expressed in terms of AUDs or other monetary units.
Other, non-financial information, such as the number of budgeted labour hours to produce a
product, were likely collected and processed outside the traditional AIS.
The use of multiple information systems within a company causes a number of problems. It
is costly. More importantly, it is difficult to integrate info from various systems and to make
decisions for a company with multiple sources of information.
In addition, other useful information (e.g. quality of the material purchased) may not be
captured at all and thus not evaluated by management.
Recently, enterprise resources planning (ERP) systems integrate the traditional AIS with
other information systems to capture both quantitative and qualitative data to collect and
organise into useful information.
ERP systems also help transform that information into knowledge that can be
communicated throughout an organisation.
To provide managers with the information they need to make effective decisions, financial
data must be linked to non-financial data, transformed into useful information/knowledge
and communicated throughout an organisation. This is also important as non-financial data
usually represents leading indicators of future financial results.
Compare and contrast managerial accounting with financial accounting and distinguish
between the information needs of external and internal users.
Financial accounting is the area of accounting primarily concerned with the preparation and
use of financial statements by creditors, investors, and other users outside the company.
While managerial accounting is primarily concerned with generating financial and non-
financial information for use by managers in their decision-making roles within a company.
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UTS 2014 – Accounting for Business Decisions A
Page 41
This information is not usually shared with those outside the company.
Although both financial accounting and managerial accounting information are generated
from the same AIS, the information is used in different ways by the various stakeholders of
the company. A stakeholder is any person or group that either affects or is affected by the
company’s actions and decisions.
EXTERNAL USERS
External users are shareholders, potential, investors, creditors, government taxing agencies,
regulators, suppliers, customers, and others outside the company.
What types of information do external users need?
Shareholders and potential investors might want information to help them analyse the
current and future probability of an organisation. Companies that have issued shares to
public provide this information in the form of annual reports, registration statements,
prospectuses and other reports issued to shareholders, potential investors and the ASIC.
The required information in these reports and accounting methods used to prepare them
are governed by the AASB and ASIC. Although information is primarily financial, it also may
include non-financial information such as market share or units shipped.
It also may include qualitative information typically described in the ‘Management’s
Discussion and Analysis’ section of annual reports.
o External users of financial information, such as banks or potential donors to non-profit
organisations, still need accounting information to make proper decisions about lending and
donating. However, their needs might differ from those of shareholders/potential investors.
Creditors generally want to assess a company’s overall financial health and may be
particularly interested in a company’s cash flow or ability to repay their loans.
Potential contributors to non-profit organisations may have a need for both financial (e.g.
how much of budget spent for charity) and non-financial information (e.g. how many
women with children are served by the local homeless shelter of Mission Australia).
Government agencies have very specific information needs, including the measurement of
income, payroll and assets for purposes of assessing taxes.
This accounting information is typically provided on income tax returns, payroll reports and
other forms designed specifically to meet the requirements of each agency.
Generally, accounting information provided to shareholders, creditors and government
agencies is characterised by a lack of flexibility (content often dictated by user), the
reporting of past events using historical costs (financial statements for previous 3 years) and
an emphasis on the organisation as a whole.
Suppliers’ and customers’ accounting information needs are likely to be very different from
those of other external users and may be more clearly aligned with needs of internal users.
E.g. Suppliers of car parts to GM Holden Australia need information on inventory levels of
specific parts in order to know when to manufacture and ship parts.
This type of information needs to be much more detailed and timely than that provided to
most other external users. Source of information – usually from limited access databases.
INTERNAL USERS
Internal users are individual employees, teams, departments, regions, top management and
others inside the company – often referred to as managers.
Managers are involved in three primary activities – planning, operating and controlling.
Planning involves the development of both the short-term (operational) and long-term
(strategic) objectives and goals of an organisation and the identification of the resources
needed to achieve them.
o Operational planning involves the development of short-term objectives and goals
(typically, those to be achieved in less than one year).
E.g. for Max Brenner Café – this includes planning the raw material and production needs for
each type of chocolate for the next annual period.
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UTS 2014 – Accounting for Business Decisions A
Page 42
Operational planning includes determining current cash needs, meeting customer service
expectations, sales quotas and time budgets.
o Strategic planning addresses long-term questions of how an organisation and distinguishes
itself from competitors.
Long-term decisions about where to locate plants and other facilities, whether to invest in
new production equipment and whether to introduce new products or services and enter
new markets are strategic planning decisions.
Strategic planning also involves the determination of long-term performance measures, such
as market share, sales growth and share price.
Operating activities refer to the day-to-day operations of a business.
Operating decisions for manufacturing companies include whether to accept special orders,
how many parts or other raw materials to buy (or whether to make parts internally),
whether to sell a product or to process it further, whether to schedule overtime, which
products to produce and what prices to charge.
Other operating decisions affecting all organisations include assigning tasks to individual
employees, choosing whether to advertise (& predicting corresponding impact of advertising
on sales/profits) and choosing whether to hire full-time employees or to outsource.
Controlling activities involve the motivation and monitoring of employees and the
evaluation of people and other resources used in the organisation’s operations.
The purpose of control is to make sure the goals of the organisation are being attained.
It includes incentives + other rewards to motivate employees to accomplish organisation’s
goals and using mechanisms to detect + correct deviations from those goals.
Control often involves the comparison of actual outcomes (e.g. cost of product, sales, etc.)
with desired outcomes (as stated in organisation’s operating + strategic plans).
Control decisions include questions of how to evaluate performance, what measures to use
and what type of incentives to implement.
THE FUNCTIONAL AREAS OF MANAGEMENT
The operations and production function produces the products or services that an
organisation sells to its customers.
o Operations and production managers need accounting information to make planning
decisions affecting how and when products are produced and services are provided.
The marketing function is involved with the process of developing, pricing, promoting and
distributing goods and services sold to customers.
The finance function is responsible for managing the financial resources of the organisation.
o Finance managers need accounting information to answer questions such as whether money
should be raised through borrowing (issuing bonds) or selling shares.
The human resource function is concerned with the utilisation of human resources to help
an organisation reach its goals.
Source of accounting information for all these function managers include cost reports,
budgets and other internal documents.
THE INFORMATION NEEDS OF INTERNAL AND EXTERNAL USERS
Due to the varying needs of internal users, managerial accounting is more flexible than
financial accounting. While financial accounting is geared toward the preparation of financial
statements and other reports according to GAAP and other rules, managerial accounting can
be customised to a specific company or segment of a company.
While financial is primarily concerned with reported on the company as a whole, managerial
accounting emphasises the various segments of a company.
Because of the decision focus of internal managers, managerial accounting information must
focus on the future rather than the past. Although the timeliness of information is
paramount, managerial accounting information frequently is less precise than financial
accounting information and often includes the use of estimates.
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Document Summary

Lecture 8 introduction management accounting & costing. Describe the contemporary view of accounting information systems and describe and give examples of financial and non-financial accounting information. Traditionally, an accounting information system was simply a transaction-processing system that captures financial data resulting from accounting transactions within a company. From this perspective of an ais, accounting information simply represents financial information (e. g. net income) expressed in terms of auds or other monetary units. Other, non-financial information, such as the number of budgeted labour hours to produce a product, were likely collected and processed outside the traditional ais. The use of multiple information systems within a company causes a number of problems. More importantly, it is difficult to integrate info from various systems and to make decisions for a company with multiple sources of information. In addition, other useful information (e. g. quality of the material purchased) may not be captured at all and thus not evaluated by management.

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Related Questions

This is for AC1420: Week 2 trial balance (ITT Tech) not sureexactly where to start if someone can help

Based on the lesson presentation and readings for this week,prepare a one- to two-page document listing a minimum of fiveadjusting entries to a trial balance, explaining the purpose ofeach of these entries.
Make sure you include both the debit and credit entry for eachadjusting entry. Specify in your response whether these entrieswill increase or decrease the profits in the current period.

Accounting Information Systems
Throughout the chapters of this book, you have been keeping trackof Team Shirts’ transactions using an accounting equation worksheet. We can do that in a simple world with a small number oftransactions. In the real world, that wouldn’t work very well. Acompany in the real world needs a better system to keep track ofthe large number of transactions represented in the four basicfinancial statements. A company may have an accounting system thatgathers only accounting information—just recording the informationthat applies to the financial statements—and other informationsystems gathering information for marketing, production, and otherparts of the company. Alternatively, a company may have a single,integrated information system in which all company information isrecorded—data about suppliers, employees, operations; and theaccounting information is simply a small part.
The firm’s accounting information is kept in the firm’s generalledger. The general ledger is the collection of a company’saccounts where the amounts from the firm’s transactions areorganized and stored. You can think of it as a big book with a pagefor every asset, liability, equity, revenue, and expense account.Later in this appendix, you will learn how transactions getrecorded in a company’s general ledger. For years, the generalledger system was maintained by the accounting department as aseparate information system; and the other functional areas of thebusiness—marketing, production, sales, etc.—each had its own systemfor keeping track of the information it needed. Since thedevelopment of computers and software programs that can managelarge amounts of information, more and more companies are using asingle, integrated information system. Thus, instead of keepingtheir data separately, accountants may get rprise-wide resourceplanning system (ERP).
No matter how it is related to the rest of a firm’s informationsystem, the accounting system is still called the general ledgersystem. The same financial statements are produced with both thegeneral ledger and the integrated types of information systems. Inthis appendix, we will use the general ledger system, which wasdesigned as a manual system, to demonstrate how transactions arerecorded, classified, and summarized for the financialstatements.
The General Ledger Accounting System
Keeping track of financial information with a traditionalrecord-keeping system is often called bookkeeping. As transactionsoccur, they are recorded chronologically by a bookkeeper in a bookcalled a journal. When we prepare an accounting equation work sheetshowing the effect of each transaction on the accounting equation,we are doing something similar to recording a transac- tion in ajournal. The resources exchanged are shown with their dollaramounts. The journal con- tains a record of each transaction as itoccurs. An example is shown in Exhibit B.1. In the next section,you’ll learn how the “debits” and “credits” columns are used. Fornow, just notice that all of the accounts affected by thetransaction are used in a journal entry. Most companies use morethan one journal; each department may have its own journal. Commonjournals are the (1) sales journal, (2) cash receipts journal, and(3) cash disbursements journal. For simplicity, we’ll use a single,general journal for all our transactions.

ge 4: General Journal
Ref.
J-1
J-2
Date Journal entry Debits Credits
June 1 Cash . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 65,000 Sales . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 65,000
To record the collection of cash for sales. June 4 Equipment . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . 20,600
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . 20,600 To record the purchase of equipment for cash.
The journal entries are recorded chronologically. Then, theindividual items are “regrouped” by account as they are posted tothe general ledger. Trace the cash amounts in the journal entriesto the general ledger cash account shown in Exhibit B.2 on page566. The amounts for sales and equipment will be posted to theirown general ledger accounts

Because a company may have hundreds or even thousands oftransactions during an account- ing period, it would be difficult,probably impossible, to try to gather and use the information froma chronological record such as the journal. To be useful, theinformation needs to be reorganized, grouping together transactionsthat involve the same account. For example, when all the transac-tions that involve cash are grouped together, then the company’scash balance can be easily deter- mined. As you can see from thatexample, it is useful for similar transactions to be groupedtogether. The transactions from the journal or journals aretransferred to another book called the general ledger through aprocess called posting the transactions to the general ledger.Posting is done periodically; it could be daily, weekly, ormonthly, depending on the size of the company.
The general ledger is the primary record of the financialinformation of the business. It is organized by accounts. As youread earlier in this book, an account is the basic classificationunit of accounting information. You can think of each financialstatement item as an account, and each account as a page in thegeneral ledger. On the page for a particular account, we record allthe additions to, and deductions from, that account.
For example, one account in the general ledger is cash. On the cashpage in the general ledger, we find every cash collection and everycash disbursement made by the company. If there are moredisbursements or collections than can fit on one page, they will berecorded on as many following pages as needed, all comprising thecash account. To make it easy to find the amount of cash on hand,the cash account has a running balance. That means a new balance iscalculated after every entry. Think about your own checkbook—that’sthe record you keep of each check you write (a subtraction); eachdeposit you make (an addition); and the resulting total remainingin your checking account (that’s your running balance). If you keepa running balance, it is much faster to find out how much cash youhave in your account. (Have you discovered what happens when youfail to keep your checkbook balance current?)
Accounts in the general ledger include cash, accounts receivable,inventory, prepaid insurance, equipment, accumulated depreciation,accounts payable, notes payable, contributed capital, and retainedearnings. (Notice, these are given in the order in which theyappear on the balance sheet.) How many accounts does a companyhave? Every company is different, and the number of accountsdepends on the detail the company wants in its financial records.For example, one company could have an account called utilitiesexpenses in which many different utility-related expenses could beaccumulated. Another company might prefer to have a separateaccount for each type of utility expense—a separate page in thegeneral ledger for electricity expense, gas expense, water expense,etc. The number of accounts is determined by the amount of detail acompany wants to be able to retrieve from its records. If a companyuses very little gas or water, it would be a waste of time andspace to keep a separate account for those expenses. A company thatuses water in its production process, on the other hand, woulddefinitely want to keep a separate account for waterpurchases.
Companies also have subsidiary ledgers. These are detailed recordsthat support the bal- ances in the general ledger. For example, theaccounts receivable subsidiary ledger will have details about thecredit customers—sales, receipts, and account balances for everycustomer. The total dollar amount of accounts receivable in theaccounts receivable subsidiary ledger will be the total in thegeneral ledger.
Most companies have a large number of accounts, and they combinethe similar ones for the financial statements. When we look at thefinancial statements, we can’t really tell how many individualaccounts a company has in its general ledger. Many smaller accountsmay be com- bined for financial statement presentation.
Anyone in the firm with access to the accounting records who wantsto know the balance in any account at any time can find it bylooking in the general ledger. A list of the balances in all theaccounts of a company is called a trial balance.
Before the financial statements can be prepared, adjustments to therecords must be made. We discussed those adjustments and how tomake them in Chapter 3. Adjustments are needed because of thenature of accrual accounting. On the financial statements, we needto include revenues that have been earned and expenses that havebeen incurred, even if we have not yet received the cash earned orpaid the cash for the expenses incurred during the accountingperiod. These adjustments are called accruals. The action has takenplace, but the dollars have not been exchanged.
We also need to be sure to include on the income statement for theperiod any revenue we’ve earned or expenses we’ve incurred forwhich the dollars were exchanged at a previous time. These arecalled deferrals. The dollars were already exchanged, and werecorded the receipt of the cash when we received the cash.However, we did not recognize any revenue or expense at that time.At the end of the accounting period, we have to recognize anyrevenue we have earned and any expenses that we’ve incurred.
No matter what kind of accounting system a company uses, theinformation produced by that system must be adjusted before thefinancial statements can be prepared. After the adjustments aremade, the financial statements are prepared. We have actually doneall this—recording the transac- tions, making the adjustments, andpreparing the financial statements—using the accounting equationwork sheet. The general ledger system is simply a more feasible wayto do it in an actual business.
Debits and Credits
To use the general ledger system and to understand the informationit makes available, we must learn a bit more accounting language.Don’t panic over the terms debit and credit. You will find themeasy to understand, but only if first you get rid of any notions ofwhat you already think debit and credit mean. In accounting, eachterm has a very specific meaning that should not be confused withits more general meaning.
In accounting, when we say debit, we mean the left side; when wesay credit, we mean the right side. (This should be easy toremember.) Left is the only thing that the word debit means andright is the only thing that the word credit means—unless we applythe terms to specific accounts.

A general ledger has been traditionally composed of amulticolumn page, similar to the one shown in Exhibit B.2. TheDebit column on the right shows the running balance in the cashaccount. You would almost never see a credit balance in thisaccount. The general ledger is often computerized in a similarformat.
In the balance columns, the column on the left is called the debit(DR) column, and the column on the right is called the credit (CR)column. As a shortcut to using formal preprinted two-column paper,accountants often draw a T-account to represent a page in thegeneral ledger. T-accounts shown in Exhibit B.3 are ourrepresentation of the general ledger shown in Exhibit B.2. OneT-account such as cash, shown next, represents a single page in thegeneral ledger. The left side of a T-account is the debit side, andthe right side of a T-account is the credit side.
Cash
Debit Credit
Numbers we put on the left side of the account are called debits,and putting a number in the left column is called debiting anaccount. Debit is a wonderful word that can be an adjective, anoun, or a verb. The same goes for the word credit. The right sideof the account is called the credit side, the numbers we put on theright side are called credits, and putting a number in the rightcolumn is called crediting an account.
In the fifteenth century, a monk named Fra Luca Paccioli wroteabout a system that uses debits and credits with the accountingequation. In his system, the accounting equation stays in balancewith each transaction and the monetary amounts of debits andcredits are equal for each transaction. Here’s how it works:
1. For the accounting equation, the balance in the accounts on theleft side of the equa- tion (assets ) will increase with debits;and the balance in the accounts on the right side of the equation(liabilities and shareholders’ equity ) will increase with credits.It follows that the balance in an asset account will decrease withcredits. Liability and equity account balances decrease withdebits. Putting that together,
• asset accounts are increased with debits anddecreased with credits. • liability and shareholders’equity accounts are increased with credits and decreased
with debits.
This means that when we want to add an amount to our cash balance,we put the number of that amount on the left (in the left column ofthe two columns in the general ledger account for cash)—so that’s adebit. When we disburse cash and want to subtract the amountdisbursed from the cash account, we put the number of that amounton the right side—so that’s a credit. The increase side of anaccount is called its “normal” balance. Cash has a normal debitbalance. Because we put the cash we receive on the debit side andthe cash we disburse on the credit side, it makes sense that ourcash account will normally have a debit balance. (It’s not normalto dis- burse more cash than you have—it’s pretty unusual.)
In accounting, we do not literally add and subtract from an accountbalance—we debit and credit an account to accomplish the samething. If we make an error, we do not erase the mistake and replaceit with the correct answer. Instead, we debit or credit the accountto cor- rect the error and make the account balance correct. Whenaccounting records are kept by hand, all entries are made in ink sothat no entries can be erased or changed. This has been traditionalin accounting to keep the records from being altered. Recordingevery increase to, and decrease from, an account balance gives acomplete record of every change made to the account.
2. Because shareholders’ equity is increased with credits, allaccounts that increase share- holders’ equity will increase withcredits. Revenue accounts increase with credits and decrease withdebits. When we make a sale, we credit the sales account.
3. Because shareholders’ equity is decreased with debits, allaccounts that decrease share- holders’ equity work in the oppositeway as revenue accounts work. For example, expense accounts—where alist of our expenses is kept—increase with debits. As we incurexpenses, we put the amounts on the left side of expenseaccounts.

The Accounting Cycle
The process that starts with recording individual transactions,produces the four basic financial statements, and gets our generalledger ready for the next accounting period is called theaccounting cycle. Some of the steps in the accounting cycle won’tmake any sense to you yet, but this appendix examines each indetail. By the end of this appendix, you should be able to explainand perform each step. The steps in the accounting cyclefollow:
1. Record transactions in the journal, the chronological record ofall transactions, from source documents such as invoices. These arecalled journal entries.
2. Post the journal entries to the general ledger. 3. At the end ofthe accounting period, prepare an unadjusted trial balance. 4.Prepare adjusting journal entries and post them to the generalledger. 5. Prepare an adjusted trial balance. 6. Prepare thefinancial statements. 7. Close the temporary accounts. 8. Prepare apostclosing trial balance.
Let’s look at each of these steps in detail.
Step 1: Recording Journal Entries
In the normal course of business, many transactions must berecorded in the accounting system. Let’s look at how thetransactions for a company’s first year of business would berecorded in a jour- nal. The transactions for the first year ofClint’s Consulting Company, Inc., are shown in Exhibit B.4.

Step 1: Recording Journal Entries
In the normal course of business, many transactions must berecorded in the accounting system. Let’s look at how thetransactions for a company’s first year of business would berecorded in a jour- nal. The transactions for the first year ofClint’s Consulting Company, Inc., are shown in Exhibit B.4.
The first transaction in Clint’s first year of business is his owncontribution of

Due Week 9 and worth 200 points

Before approaching this assignment, be sure that you have watched the following video.

https://www.youtube.com/watch?v=frh3I2rVDzs. YouTube. PLEASE USE DATA FROM VIDEO OR MAKE UP YOUR OWN DATA

Babycakes, a specialty bakery, is the company that will be considered for all parts of your budget planning and control report. For this assignment, you will develop a three to four (3 – 4) page paper in which you address the following.

Briefly discuss the ways a realistic budget will benefit the owner of Babycakes versus having no budget at all. Be sure to use Babycakes as the company and any specific product details in your explanation.

Prepare a sales budget for the LA Babycakes store for the 4th quarter of 2016. Present the number of units, sales price, and total sales for each month; include October, November, and December, and a total for the quarter. Use one-half of the Valentine’s Day sales as the basis for a usual day in the new quarter. Use 30 days for each month. Calculate the total sales for each month for October, November, and December.

Create three (3) new products, one (1) for each of the three (3) holiday seasons in the 4th quarter. Estimate the sales units, sales price, and total sales for each month. Describe the assumptions used to make these estimates. Include an overview of the budget in the report, presenting the actual budget as an appendix with all data and calculations. Add these amounts to your sales budget.

The owner of Babycakes is interested in preparing a flexible budget rather than the static budget she currently uses. She does not understand why, when sales increase, her static budget often shows an unfavorable variance. Explain how a flexible budget will overcome this problem. Use the details of your newly prepared budget for the 4th quarter of 2016 to address her concern.

Imagine that Babycakes is facing a financial challenge that is causing the actual amount of money that it spends to become significantly more than its budgeted amount. Include a discussion of your own unique cause of the overspending. Explain the corrective actions needed to address these challenges.

Integrate relevant information from at least three (3) quality academic resources in this assignment. Note: Please do not use your textbook as an academic resource. Also, Wikipedia and other Websites that are unreliable do not qualify as academic resources.

Your assignment must follow these formatting requirements.

Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; references must follow APA or school-specific format. Check with your professor for any additional instructions.

Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required page length.

An abstract is not required.

The specific course learning outcomes associated with this assignment are:

Evaluate management control systems and examine their relationship with accounting and planning, including feedback and non-?nancialperformance measurements.

Evaluate decision-making tools for capital investments, budgeting, and budgeting controls.

Analyze financial accounting tools and techniques that convert financial accounting data into information for decision making.

Use technology and information resources to research issues in financial accounting for managers.

Write clearly and concisely about financial accounting using proper writing mechanics.

Grading for this assignment will be based on the quality of your responses, logic and organization of the paper, and language and writing skills. Please review the Rubric for the Assignment: Budget Planning and Control.

Robatelli's Pizzeria Case StudyIntroduction On the morning of October 31st, Elaine Black, Chief Information Officer at Robatelli's Pizzeria, was waiting for both Jim Saxton, database administrator, and Peter Greyton, operations manager, to come to her office for a meeting. While waiting, Elaine was thinking about the surge of telephone and Internet orders expected to be received through the company's customer order center within the next 12 hours. Halloween had always been the most popular day of the year for people in the greater Pittsburgh area to order pizza from Robatelli's. There were 53 restaurant locations to serve these customers, but only one location to receive all of the orders and forward them to the right restaurant. Elaine's thoughts were interrupted as Jim and Peter entered her office. The following conversation took place: ELAINE Well, guys, it's here again, our biggest day of the year. Not only is Halloween a busy day, but we have the upcoming day after Thanksgiving, the week before Christmas, and Super Bowl Sunday. Can our current computer system's infrastructure and people keep pace with the orders we expect? JIM I think our systems are all running at peak performance. We shouldn't have any computer concerns for today or those other busy days. PETER Everyone in the customer order center is focused on making sure that our customers get their pizzas as ordered. We have plenty of people scheduled to work tonight, so we're good to go. ELAINE Terrific. But every time we face one of these peak sales days, I start wondering about the long-term capacity and effectiveness of our computer systems. Jim, we need to think long term about our computer system. I was just reading an article that I'd like you to take a look at. It's about Anheuser-Busch Companies and their use of data mining. JIM I do agree with you, Elaine; we should always be thinking about how newer IT systems can help us. Could you e-mail me the link to the article? ELAINE Sure, and I would like you to think about how we might use the same approach in our business. Peter, your order center people are doing a great job, but again there's something I'd like us to think about in the long run. As you know, we now have to manually enter all customer order center sales and store sales into our general ledger (GL). I think we could improve a lot of things if those sales are automatically fed into our GL software. Why don't you think about any advantages you see for an automatic interface, and we'll look at the costs compared to those advantages. How's that sound? PETER I'll do that. I'll give it some thought and work on a report about an automatic interface between our GL software and the point of sale systems in our restaurants as well as the phone and Internet sales. How soon do you want to meet again to look at these issues? ELAINE Let's say, in two weeks at the same time. As Jim and Peter left her office, Elaine continued to think about the features of the company's accounting information systems and whether or not data extracted from these systems could facilitate the multiple needs of the company. The focus had always been on providing accurate financial accounting information from the various locations; however, the company's aggressive growth strategies meant increased emphasis on the system's ability to analyze detailed customer information that could be translated into increased sales opportunities. Elaine knew the challenges they faced could very well affect the company's ability to maintain its competitive advantage. She realized that her department must continually improve the company's information systems to help it achieve growth strategies. Operating state-of-the-art systems was imperative to position the company to execute those growth plans. However, she was concerned about the possibility that restrictions of the current information systems could actually prevent the company from doing what it wanted to do. Allowing restrictive systems to prevent them from achieving business strategies was a risk that Elaine would not tolerate!

Review the Robatelli's Pizzeria Case Study.

Develop an internal controls system in Robatelli's Pizzeria sales and cash business areas.

Prepare a 12- to 16-slide presentation describing the typical activities and outlining an effective system of internal controls for the Sales, Sales Returns, and Cash Collections business areas. Include any associated risks in these areas.

Describe specific internal controls that include authorization of transactions, segregation of duties, adequate records and documentation, security of assets, and independent checks and reconciliation for each business area.