GROUP 3:

ABE PLUMBING INC.

(Centralized Small Business Accounting System)

SECTION: 2-AIS1

GROUP MEMBERS:

Dimaliuat, Thea
Indulos, Kate Princess
Manglo, Hannah Justine
Murillo, Gennica
Percal, Romalyn
Sosa, Lyracyl

SUBMITTED TO:

Prof. Jomar Rosario

INTRODUCTION
 CONTEXT (BACKGROUND)
ABE Plumbing Inc. opened on 1979. A wholesale supplier of plumbing equipment, tools and parts
in the Allentown-Bethlehem Easton metropolitan area.
Customers:
 Hardware stores
 Home-improvement centers
 Professional plumbers
Employed over 200 people as technical representatives, buyers, warehouse workers, sales, and
office staff. Successful and huge companies are facing thousands of hardships and conquering
them is what they do. It could lead the company to its demise or downfall if they aren't able to
apply proper solution to its problems. As per ABE Plumbing, Inc. They are having a hard time
facing the challenge of expenditure cycle due to fierce competition from online discount stores
(such as Harbor Freight and Northern Supply) and operational inefficiencies caused by an
outdated system.

 PURPOSE - WHAT IS THE CASE STUDY TRYING TO ACHIEVE?

This case study aiming to analyze the problems and issues that happening in the internal control
and how it can affect the expenditure cycle.

DISCUSSION/ANALYSIS
 Identification of issues and problems and explanation of causes or implications of the
issues identified
1. There is no supervision in the receiving department - The most critical part of receiving an
adequate supervision. Supervising should be done by those receiving goods from vendors.
Supervision is of highest importance in the receiving department, where the inventory arrives.
When the goods arrive the receiving department supervisor takes the packing slip that comes with
the goods. The receiving department clerk then completes the PO by counting the goods. The
completed PO is then reconciled to the packing slip by the supervisor.
2. Clerk does not physically count inventory - It is one of the issues on the receiving
department because if the clerk does not count the inventory physically, it can lead to inaccurate
inventory records and financial statements. It is the most important thing in receiving inventory to
ensure the accuracy of inventory records and it helps to keep the inventory up-to-date. It also
helps the inventory to identify the discrepancies and helps to prevent theft and other types of fraud.
3. Clerk does not physically inspect condition of inventory - Inspection is one of the issues in
this company because they lack inspection of inventory. Inspecting the items are a way to ensure
the company’s inventory management system is accurate and to make sure that the goods are not
lost or stolen. Also in the receiving department it is one of the way to see if there is damages of
goods , and if it is the correct item.
4. Limited automation - While the system is described as "almost entirely paperless," several
steps still involve printing hard copies of documents such as purchase orders, receiving reports,
and checks.

- Possible issues are the time of process of receiving the items. How long it takes since accounting
system is kind of outdated and they still normalize using hard copies of receipt and purchase
orders. For example, processing of purchase and printed purchase receipt might be delayed as
well as the orders. It can be not well integrated or data processing malfunctions such as submitting
data but not yet recorded in the system. Since they are still using manual process, there are
tendency of slow production and delays of delivering orders as well as giving the information of
purchasing to other department.

5. Potential data security risk - Although they mention a centralized computer file server, it does
not provide details or added information about data security measures.

- From the word itself, the information system is centralized, or all of the records are kept in one
place, which is run by a small data processing department. All accounting records are maintained
centrally and stored on a file server in the data processing department.
How can you be so sure that the data records are secured enough and compatible enough not to
get hacked? It is obvious that its foundation is not that strong because it runs a small department.
Paperless is not applicable to all because there's a possibility that it will get hacked and lose all the
records. It should be automated and have a backup file or plan so that we can secure the safety of
all the data records.

6. Centralized accounting system - They indicated the centralized accounting system as for
managing inventory purchases and recording transactions. All records are kept in one place so it
may become more vulnerable since they are stored in one central location. This makes of capable
to loss of all records, in theft, and other risks. Another disadvantage is it can cause a delay in
bringng documents or records if the office staff requires to bring several documents at a time.

CONCLUSION
 MAIN LESSONS LEARNED
System Upgrade: The case study emphasizes how crucial it is to upgrade the current information
system with a more up-to-date and integrated. This would eliminate paper-based procedures,
reduce errors, and enhance overall operational efficiency.
Digital Document Management: Establishing a centralized accounting information system would
simplify things and reduce the need to print paper copies. It would be more efficient and less
expensive to have electronic access to purchase orders, receiving reports, invoices, and payment
records.
Automation and Integration: It can increase accuracy and efficiency by automating procedures
and integrating the systems of multiple departments. Time might be saved and manual errors
would be decreased by automating the closing of purchase orders, updating ledger accounts, and
creating payment records.

 BEST SOLUTIONS AND REASONS WHY

Implement a Standard Operating Procedure (SOP) for receiving products:
Establish a clear set of standards and processes for receiving items. This should contain
instructions on how to examine the quality and quantity of the items received, how to record the
receipt of goods, and how to manage any discrepancies or difficulties that may emerge.
Upgrading Internal control using digital document management system:
The clerk can compare the packing slip and the purchase order using a digital document
management system. The two documents can be scanned, uploaded, and compared side by side
once in the system. The technology can also highlight any inconsistencies or mistakes, making it
simpler for the clerk to find and fix problems. The system can also save the reconciled papers for
future auditing and reference needs.
Use data analytics:
Implement data analytics tools to identify patterns and anomalies in financial data. This will help to
identify potential misrepresentations and errors. To find any inaccuracies or misrepresentations,
conduct routine audits of financial statements. For objectivity's sake, the audit should be carried
out by a neutral third party.

RECOMMENDATIONS
 ACTION PLAN/POSSIBLE SOLUTIONS/ACTIONS TAKEN

1. Ensuring accurate invoice.

- Vendor's invoice should manually and systematically check and validate to prevent redundancy
and free from errors and to ensure the accuracy of the vendor's invoice.

2. Implementing Data Analytics

- The role of data analytics is to extract and catalogue data, so that organisation can easily
pinpoint, evaluate relationships ,patterns,draw conclusions based on the data and can be used to
make decisions. It can also help to create new opportunities that can help the company's growth.
3. Implementing a Standard Operating Procedure.
- It includes properly inspecting the quality and quantity of the items. One of its advantage is it can
help you to easily determine any discrepancies of the items.

GROUP PARTICIPATION
MEMBERS TASK REMARKS REPORTED PARTS
Dimaliuat, Thea Marie Conclusion Done Main lessons learned
Indulos, Kate Princess Recommendations, PPT Done Action Plans/ Possible
presentation solutions
Manglo,Hanna Justine Discussion and Analysis, Done Discussion and analysis
Written report drafting (5-6)
Murillo, Gennica Discussion and Analysis, Done Discussion and analysis
Finalized and editor of (1-4)
written report
Percal, Romalyn Introduction Done Context (Background)
Purpose - what is the case
Joyce
study trying to achieve?

Sosa, Lyracyl Conclusion Done Best solutions and

reasons why