Reference no: EM132587348

Feast E-Mart Sdn. Bhd. is an online grocery store that offers home delivery of groceries to customers around Changlun, Jitra, and Alor Setar. Feast E-Mart purchases their supplies of grocery products from suppliers in Kedah, Perlis and Penang. The shop is located at the new Kedah SME Industrial area beside the Kedah River. Installation of surveillance camera at entrance area is expected to be completed in two months. Due to a limited building space, a warehouse is built in a separate area behind the store. This warehouse consists of two large room with one main entrance. One room is rented by Feast E-mart, while another room is rented by other business selling electrical parts. Each room has a modern touch surrounded with glass windows and installed with glass door and air conditioner. There are two security guards hired to scout the area. Each of them work individually on a 12-hour shift basis.

The following paragraphs present the purchasing procedures of Feast E-Mart. Currently, the business adopts basic technology in its purchasing system with an independent system maintain in each department.

Inventory Control Procedures

Inventory status are retrieved from the Sales Management System. The inventory records include a quantity on hand and a desired quantity on hand for all grocery types in the inventory database. Each day, the inventory control clerk monitors the balance of inventories in the database, showing those items that have reached their reorder points. Then, the clerk prints a purchase requisition (PR) from the system and approves the reordering of inventory by signing the PR. Then, the clerk forwards the approved PR to the Purchasing Department.

Purchasing Procedures

Upon receiving the approved PR, the purchasing clerk keys in purchasing data to prepare purchase order (PO), selects a supplier from the registered supplier file in the purchase database, update the PO file and creates a purchase order on the purchasing system. Once the purchase order is saved, the completed purchase order is printed in four copies. PO1 is sent to the supplier, PO2 is sent to the Inventory Control Department, PO3 (blind copy) is sent to the Receiving Department and PO4 is sent to the Accounts Payable Department. The approved PR is filed. In certain situation, if the chosen supplier is unable to fulfill the order, urgent order request will be made to any other supplier available in Alor Setar area. No purchase requisition is issued in this situation.

Receiving Procedures

When the inventory arrives at the Receiving Department from the supplier, the receiving employees are expected to check and count the inventory, and compares the actual quantity to the quantity stated in the attached packing slip and PO3. This process is, however, unmonitored and based on trust to the employees. Then, the employee keys in the PO number and records the actual quantity of inventory received in the receiving database to create a receiving report (RR). Four copies of RR are printed from the database. The receiving clerk keeps PO3 and PS in a file. RR1 is sent to the Inventory Control department to update the inventory balances in the inventory database. RR1 is then filed in the Inventory Control Department. RR2 is sent to the Purchasing Department to be filed. RR3 is sent together with the inventory to the Warehouse. Finally, RR4 is sent to the Accounts Payable Department.

Accounts Payable Procedures

Earlier on, Accounts Payable Department received PO4 and RR4. Both documents are filed temporarily. When invoice arrived from the supplier, Accounts Payable clerk performs three-way match of PO4, RR4 and Supplier Invoice. After verifying the accuracy of invoice, the clerk keys in the invoice data into the Accounts Payable (AP) database to update purchase journal and AP subsidiary ledger. The three documents of PO4, RR4 and Supplier Invoice are filed. A journal voucher is printed and sent to the General Ledger Department.

REQUIRED:

Question A. Due to an expansion of the business and to overcome problems of errors, back orders and late payment involving its suppliers, the owner of Feast E- Mart is considering the use of an advanced and integrated purchasing and cash disbursement system in a near future. As a Business Systems Consultant, provide suggestion of a potential modern purchasing system to be adopted by Feast E-Mart Sdn. Bhd.

Your suggestion should contain the description of ONE (1) proposed modern purchasing system and ONE (1) benefit of the modern purchasing system. Please list the relevant references to support the discussion for this questions.

Question B. Discuss TWO (2) importance of system documentation to accountants. Please list the relevant references to support the discussion for this questions.