USING I.T. IN ACCOUNTING PROCEDURES
SECTION 1
Using information technology in accounting procedures
Information technology (IT) is the outcome of the convergence of
computers and telecommunications; it is the technology of automated
information processing and communication.
We live in the information age; modern businesses must treat
information as a valued resource in order to prosper. Much more
information must be generated than the historical profit or loss incurred
during each accounting period. A steady stream of information is
needed to enable firms to make sound planning decisions and to
control their operations. Businesses that use information effectively can
take advantage of their opportunities and gain ground on their
competitors.
Organisations use policies and procedures to ensure that tasks and
problems are dealt with in the same way each time they are carried out.
The various procedures carried out by different departments must allow
themselves to be interrelated to ensure processed information is
available for managerial decision making.
The development of computers and improved communications has
enabled businesses to collect, process and transmit information much
more quickly, and as an integral part of this system, accounting has had
to move with the times away from the concept of management and
financial accounting with its main focus on historical information to a
situation where a central computerised system allows up-to-the-minute
information to be available on a 24-hour basis. This new concept is
known as a management information system (MIS) and the accounting
information system (AIS) will be a specialised subsection of this whose
purpose is to collect, process and report information related to financial
transactions.
The AIS will allow data to be picked up in the departments, as close to
the transactions as possible. From there it is transferred to a central
computerised system where it is used to produce up-to-the-minute
information for all departments. Formal reports and summaries will
continue to be produced at regular intervals but now user departments
will be able to access the system directly and obtain answers to their
questions directly from the system. The development of improved
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
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USING I.T. IN ACCOUNTING PROCEDURES
communications and better computers linked with developments in
office services is what is termed ‘information technology’.
This change can result in the accountant’s role changing within the
workplace to the point where an accountant is an information manager
supplying relevant, accurate and up-to-date information whenever
required.
Accountants process accounting data to produce accounting
information. The process starts with unsorted transactions which must
be processed into information which will enable users to see how a
business is progressing.
Inputs
Reports
!
Accounting
System
Outputs
!
!
Amendments
!
Transactions
Processes
Statements
Basic Principle of any Accounting System
In traditional manual systems, data has to be entered several times, not
only by the accounting department but the same data would be
recorded by other departments such as sales. This duplication costs
businesses a large amount of time and money. Developments in data
processing have sought to reduce this duplication and reduce the
volume of work involved as well as producing more information from
the same data in a shorter length of time.
Advances in computer technology have seen systems developing which
have allowed a reduction in routine work and data backlog. Initially
these systems were built up as businesses grew, meeting their
requirements at the time. Unfortunately it usually resulted in
departments continuing to keep their own information within their own
systems as each department catered for its own specific needs. Over
time, however, the advantage of centralisation has been recognised,
allowing data to be shared by all departments with users accessing
information as required. These improved data systems allow data to be
stored on a central system and ensure updated information is constantly
available to all departments and users internally as well as externally
through being connected to local and wide area networks.
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USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
USING I.T. IN ACCOUNTING PROCEDURES
An example of how this data processing can be effective is the issue of
overdue accounts which has long been a substantial problem to
businesses. Data about sales made on credit would be input, processed
by storing in the appropriate file, and automatically output by
periodically sending statements to these customers.
The data processing cycle used within accounting information systems
can be illustrated as follows:
Input
Collect data
Storage
!
Check accuracy
of data
Processing
!
Classify: group data
according to category
(type of goods sold,
department where sold,
salesperson who sold
them)
Accumulate data
for later use
Calculate: add, subtract,
divide, multiply to yield
particular piece of
information
Sort: arrange data in a
sequence (alphabetical,
chronological or
numerical)
!
Summarise: reduce data
to a concise and usable
form
Output
Communicate
information to
users in
appropriate form
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
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USING I.T. IN ACCOUNTING PROCEDURES
Computerised data processing is widely used to great advantage within
retail establishments.
The use of scanners and bar codes has dramatically changed the
procedures carried out in retail. The input is when the goods are
scanned at the till. The label is read by the scanner which processes this
information by linking back to the central server and provides a unique
code which identifies the country of origin, supplier, article size and
article itself. The stock record for the item is automatically reduced by
one and the price is transmitted back to the cashier where it is visually
displayed as well as printed on a till roll together with the description.
The output is a till receipt with the transaction description and the
transaction total.
It has also allowed switch and credit card transactions to be widely
available in retail outlets as a result of electronic funds transfer (EFT).
Instead of using paper, money can be transferred electronically. EFT
uses the computer networks to transfer money – in the case of retail,
the money is transferred from the purchaser’s account directly to the
shop’s account, this is known as electronic funds transfer at point-of-sale
(EFTPOS). The code number is input by running the card through the
swipe where the code number is first checked against a list of stolen
cards. The card itself is then authenticated to prove it is valid. The
process is then continued by reading the cardholder’s account balance
and matching this with the transaction total of the bill. The output is
then a visual sign ‘Accepted’ and a transaction voucher is printed.
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USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
USING I.T. IN ACCOUNTING PROCEDURES
Tasks
1.
What is the main change to accounting procedures resulting from
the introduction of computerised information systems?
2.
Explain the main change to an accountant’s role in the workplace
with the implementation of an AIS.
3.
Explain why a business would decide to computerise their
accounting system?
4.
Describe the input, process and output of using a Visa credit card
to buy a new washing machine.
5.
Identify and explain seven characteristics of good quality
information.
6.
Write a memo to your supervisor to explain how using IT would
enhance each of the seven characteristics listed above.
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
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USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
USING INTEGRATED SOFTWARE IN ACCOUNTING
SECTION 2
Using integrated software in accounting
The outputs from an accounting system are information on which
decisions are based. This information has added value if it reduces a
decision maker’s uncertainty concerning a decision and yields marginal
benefits greater than marginal costs. The use of computers within this
process adds value to the quality of the information made available in
terms of accuracy, timeliness, conciseness, clarity, quantifiability and
consistency.
It is possible for a business to develop its own software which is
customised to meet its exact needs. However, the cost and time
involved is usually prohibitive to small and medium-sized firms which
would normally attempt to find a ready-written software package which
operates to meet their needs.
The advantages of buying in ready-written software can be seen in terms
of:
• Time saved in not having to develop customised software
• Customised software development is very costly whereas general
packages can be purchased fairly cheaply
• Most software packages are user-friendly and allow information to be
transferred between applications.
There are of course disadvantages:
• Poorly designed manuals or telephone support can cause problems
• All the features required may not be available.
Ready-written software products incorporating spreadsheets, databases
and word processors can be used very effectively bringing many
advantages to businesses. Let’s consider the role of each application
within accounting procedures.
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
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USING INTEGRATED SOFTWARE IN ACCOUNTING
Word processing
Word processing can be described as a superior form of typing. This
application can be used to create, store and manipulate text. Text can
be edited, rearranged, formatted, margins justified, page breaks defined
and documents merged.
The following tasks can be carried out using a word processor:
• individual letters to clients regarding their financial position
• standard letters can be sent to a large number of customers using the
‘mail merge’ facility and linking to a database of client details which
can be searched to match specific criteria
• replicated financial reports to senior managers
• complex legal documents can be produced using standard paragraphs
of previously prepared text
• price quotations, invoices, etc. can be produced simply from stored
templates
• text such as salary lists, price lists, etc., can be regularly updated.
Spreadsheets
This application is made up of a series of rows and columns with each
intersection forming a cell. Each cell has a unique reference number
and is used to store data either in the form of a value, a constant or a
formula. In addition it displays data in a form familiar to accountants
and eliminates the onerous chore of manual calculating. Formulae can
be used to add, divide, multiply as well as handle more complicated
‘what if’ scenarios. Thus if a forecast sales estimate increases from 1% to
3% per month, the spreadsheet formula will automatically recalculate
the expected sales levels. A further benefit is that any change in the
variable will be reflected in all of the formulae used whether direct or
indirect. Facilities including cut & paste, deleting and adding rows and
columns and replicating formula all add value to the use of this
application in accounting procedures.
The following can be created using a spreadsheet:
•
•
•
•
•
•
Trading, Profit & Loss Accounts
Balance Sheets
Cash Flow Statements
Cash Flow Forecasts
Charts and Graphs
Templates to prepare consolidated financial statements.
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USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
USING INTEGRATED SOFTWARE IN ACCOUNTING
Databases
Although within accounting financial reporting is emphasised, data
collection is an integral part of the full accounting cycle. A database is
an electronic filing system made up of a collection of related records
which allows data to be manipulated as records and fields. Once a
database has been created it is simple to find, add, edit, delete and sort
records. It is also relatively easy to search large amounts of data and list
records to match specific criteria within seconds.
A database can be used to perform the following tasks:
•
•
•
•
•
store client details
search client details for those in debit exceeding a given figure
prepare information for financial management decision making
perform calculations such as salary payments
present records in various styles such as lists, reports and forms.
Tasks
7.
Describe the following computer applications in terms of their use
within accounting procedures:
• Word processing
• Databases
• Spreadsheets
8.
Identify the most suitable applications for each of the following
accounting problems presently being carried out manually and
highlight the advantages in each case of using computerised
applications.
• A letter to be sent to all clients currently in one month’s arrears
of payments.
• A report to be sent to shareholders displaying forecast financial
position in graph form.
• Legal contract issued to all members of staff outlining their
conditions of service and salaries.
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
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USING INTEGRATED SOFTWARE IN ACCOUNTING
9.
A local garage provides a discounted yearly car winter service to
regular customers. However, the time taken to inform all
customers that this service is available is prohibitive as it involves
looking through numerous files to identify those who have used
the garage services over the last year, accessing their personal
details and writing letters individually to each customer.
Explain by using an input, process and output model how using
information technology could be advantageous to this small
business. Each input, process and output should be pertinent to
the problem stated.
10.
Jenny Jones Designs produces unique pieces of jewellery for
discerning customers. Trade has really increased as a result of a
recent advertising campaign. Jenny makes the jewellery herself
and also has to deal with invoicing customers. This involves
accessing customer details, calculating cost price, adding VAT and
profit margin then writing out an invoice to each client.
Using an input, process and output model illustrate how Jenny
could use information technology to beneficial effect within her
business ensuring each item in each category is relevant to the
problem in hand.
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USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
WHY USE INFORMATION TECHNOLOGY?
SECTION 3
Why use information technology?
The use of information technology can be seen to be breaking down
barriers between departments and providing far more information than
ever previously available. It can also be said to be responsible for
bringing accountants into the mainstream of strategic management. It
allows accountants to be free from much of the routine day-to-day work
previously undertaken manually and ensures top quality information can
be communicated when it is needed.
Computers are able to process data more effectively than humans, not
only performing computations with lightning speed but also with
extreme accuracy.
A computer can process hundreds of transactions
without making a single error in the time that a human requires to
process a single transaction. Computers are more dependable in that
they do not become tired, bored, emotional or ‘hung over’. Computers
can save time, for example a word processing operator can correct a
stored version of a document rather than having to re–key the whole
document.
As computers can process information quickly and transmit the resulting
information without delay, information can be shared more widely and
effectively throughout an organisation.
Computers can have diverse effects on individual employees. Although
the cost of implementing IT can be very high, in the long run companies
see cost savings. Many of these tend to come from replacing humans
with computers. Middle-level managers in particular may see their job
security weakened when computers are installed as some businesses lay
off staff. Nevertheless, many employees learn new skills related to the
use of computer technology thereby increasing their job satisfaction and
enhancing their employability status.
Another benefit is the reduced need to travel. More and more people
can work from home (teleworking) which reduces the number of car
journeys taken and consequently reduces pollution of the atmosphere.
Similarly, the introduction of video conferencing facilities has made it
easier for colleagues to ‘meet’ to discuss ideas without them all having
to travel to the same place.
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
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WHY USE INFORMATION TECHNOLOGY?
However, equipment faults can happen and can result in a loss of
information which might be damaging for the organisation. It could
result in the loss of clients or damage to its reputation.
Without computers a firm’s data can be scattered in files, folders and
drawers throughout various department with much data being
duplicated or difficult to find. Computers can consolidate this data.
Consequently security is of paramount importance. The consolidation
of data which occurs when using an IT system means that lots of data is
stored in a central unit which can be easily moved or removed. If the
computers are linked via networks, access can be gained relatively easily.
To improve security businesses must use two types of control: physical
control which includes locking doors, storing data in safes and issuing
ID cards to users, and logical control which includes using a password
system with regular password changes and setting different access levels
for different members of staff.
Advantages
• Large amounts of routine data can be processed quickly with a great
deal of accuracy
• Space can be saved by storing data on disk
• Files can be secured from improper access through the use of
passwords
• Stored figures can be used over and over again
• Data can be revised and printed out in many forms such as an invoice,
a statement chasing up payment or a letter threatening legal action if
payment is not received
• Information can be shared widely throughout the organisation
• Manually complex tasks such as comparisons can be produced simply
• Increased job satisfaction for employees as new skills are learned
• Improved reporting and analysis which can lead to more effective
decision-making
• Reduced need to travel
• Increase in teleworking.
Disadvantages
• Costs of buying hardware and software can be high
• Systems can be entered electronically and contents removed or
damaged
• Heavy reliance on computers makes businesses vulnerable to damage
or breakdown.
• Some employees may find it difficult to adapt to changes in their
working procedures
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USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
WHY USE INFORMATION TECHNOLOGY?
• Training is required at some level for all staff which can be costly in
terms of time and money
• Some redundancies may occur causing anxiety amongst staff.
Tasks
11.
Why has information technology resulted in accountants being
more involved in strategic management?
Use the world wide web and search engines to determine answers to the
following questions:
12.
What are the advantages of the reduced need to travel?
13.
What are the advantages of an increase in the number of people
working from home?
14.
Identify an example of where people have lost jobs due to the
introduction of computers.
15.
Identify a situation where jobs have been created as a result of
computer implementation.
16.
Working in groups prepare a presentation either for or against
computerising your organisation’s accounting system.
Use PowerPoint or some form of visual display to present your
findings to the class.
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
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USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
SPECIALISED ACCOUNTING PACKAGES
SECTION 4
Specialised accounting packages
An application package is a suite of programs together with the
appropriate systems documentation. Initially customised accounting
software was often specially written for specific firms and adapted in an
attempt to suit other companies. This resulted in incompatibility with
existing manual procedures requiring drastic changes to be made to
how a firm conducted its business.
Nowadays specialist accounting software is designed to offer as much
flexibility as possible, providing a range of options which can be tailored
to suit a variety of needs. Furthermore, it is user–friendly, allowing
users a series of choices through menu screens with help screens
available for the new user. Modern packages are also designed to deal
with general office tasks such as producing reports and for general
business calculations.
A starting point for a business when selecting a specialised accounting
package is to assess exactly what tasks it wants carried out. Thereafter,
costs such as hardware and software, installation and training should be
considered and the most appropriate package identified.
The benefits of using a package are that the expertise involved is tried
and tested and system documentation is provided with the package.
Packages can be obtained for a variety of applications such as:
•
•
•
•
payroll
purchase ledger
stock control
sales accounting.
Popular examples of accounting packages are Sage, Omni Accounts and
Moneysoft.
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
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USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
USING SPREADSHEETS
SECTION 5
Using spreadsheets for recording and apportioning cost
elements
The following problems will illustrate the use of spreadsheets within
accounting and finance. The first problem will be solved step-by-step to
allow you to understand the layout and formulae used.
Task 17
S Watson owns a business producing wrought iron goods. The
production is split into three departments, Moulding, Assembly and
Packing.
The budgeted costs for the next year are projected as follows:
Job No 2811 Information 1
Allocated Overheads
Indirect Costs
£8,500
£5,540
£4,415
Moulding
Assembly
Packing
£18,455
Overhead Apportioning
Rent and Rates
Heat and Light
Building Insurance
Canteen Costs
£50,000
£45,000
£12,000
£6,000
£113,000
£131,455
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
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USING SPREADSHEETS
The departmental absorption rates are as follows:
Basis
Area (m2)
Direct Labour
Hours
Direct Machine
Hours
No of Employees
Moulding
400
Assembly
300
Packing
100
15,000
30,000
1,000
15,000
3
25,000
2
2,000
3
Job No 2811
Information 2
Job No 2811 Information 3
The production overhead costs have to be recovered on the
following basis:
Moulding – direct machine hours
Assembly – direct labour hours
Packing – direct labour hours
The following job has to be costed:
Job Card for Job No 2811
Job No 2811 Information 4
Moulding – 2 hours
Assembly – 3 hours
Packing – 1 hour
Direct raw materials used – £60
Direct labour – 4 hours at £6.50 per hour
Direct expenses – £40 for administration
Profit margin – 15% of cost price for the job
Open up a spreadsheet and save as S Watson – Job No 2811
Set up the spreadsheet template as follows:
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USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
USING SPREADSHEETS
A
1
B
C
D
E
F
Moulding
Assembly
Packing
Total
Basis
Total
Moulding
Assembly
Packing
£
£
£
£
£
Basis
Total
Hours
Absorption Rates
Dept
Rate
Applied
Hours
O/Hs
Absorbed
Hours
Rate
S Watson –
Overhead Analysis
2
3
4
Area (sq m)
5
Direct Labour Hours
6
Direct Machine Hours
7
No of Employees
8
9
Overhead to be
Apportioned
10
Overhead
11
12
Indirect Costs
13
Rent & Rates
14
Heat & Light
15
Building Insurance
16
Canteen Costs
17
Dept Totals
Allocated
18
19
Overhead
Absorption Rates
20
Overhead
21
Moulding
22
Assembly
23
Packing
24
25
26
JOB NO 2811
Overheads
27
Moulding
28
Assembly
29
Packing
30
Total
31
32
Direct Materials
33
34
Direct Labour
35
Direct Expenses
36
37
Total Cost
38
39
Profit Margin
40
41
Job Price
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
19
USING SPREADSHEETS
Using the data given in the four Information Boxes at the beginning of
the task complete the following steps:
(a)
Key the data for cells B4–D7 directly from the departmental
absorption rate table contained in Information card 2.
(b)
Apportion each overhead by allocating the most appropriate basis
into cells B13–B17 from the four methods available in Information
card 2.
(c)
Key in the Indirect Costs for each area into cells D12–F12 from the
information given on Allocated Overheads on Information card 1.
(d)
Key in the total overheads given in the previous information on
Information card 1 for each item in cells C12–C16.
Check your spreadsheet with the following:
A
1
B
C
D
E
Moulding
Assembly
Packing
Total
F
S Watson –
Overhead Analysis
2
3
4
Area (sq m)
400
300
100
5
Direct Labour Hours
15,000
30,000
1,000
6
Direct Machine Hours
15,000
25,000
2,000
7
No of Employees
3
2
3
Basis
Total
Moulding
Assembly
Packing
£
£
£
£
£
Allocated
18,455
8,500
5,540
4,415
8
9
Overhead to be
Apportioned
10
Overhead
11
12
Indirect Costs
13
Rent & Rates
Area (sq m)
50,000
14
Heat & Light
Area (sq m)
45,000
15
Building Insurance
Area (sq m)
12,000
16
Canteen Costs
No of Emp
17
Dept Totals
20
6,000
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
USING SPREADSHEETS
Formulae must now be entered to complete the spreadsheet.
(e)
Enter the formula into cell E4 to total the three departments
=SUM(B4:D4).
(f)
This formula can then be
replicated into cells E5:E7
(click on F4, move mouse
to bottom left hand corner
and drag down).
(g)
To apportion overheads a
formula must be input to
divide the total overhead by
the total of the indirect
costs then multiplying this
by the indirect costs of the appropriate department.
However, to ensure that the cells being referenced within the formula
are constant we make the total overhead cell and the total indirect costs
cell absolute by pressing F4 after inserting the cell reference. This
allows formulae to be copied across the row whilst making certain that
the correct cell is referenced in the formula.
To calculate the Rent and Rates overhead to be apportioned to the
Moulding department a suitable formula must be keyed in:
• In cell D13 key in = to begin the formula
• Click on the cell containing the total Rent and Rates overhead, that is
C13
• Click on the F4 key to make this cell absolute
• Click on the divide sign /
• Click on the cell containing the total absorption rate for the
appropriate apportioned basis, that is Area – cell E4
• Click on the F4 key to make this cell absolute
• Click on the multiplication sign *
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
21
USING SPREADSHEETS
• Click on the cell containing the overhead absorption rate for the
department being apportioned, that is Moulding – cell B4 (this cell is
not made absolute as it will change to the appropriate department
when copied across)
The formula in the formula bar should read: =$C$13/$F$4*B4
(h)
Now replicate this formula across to apportion the Rent and Rates
overhead to each department.
(i)
Continue to apportion all overheads to all departments ensuring
the appropriate basis is accessed each time.
(j)
Insert a suitable formula to add each department total in cells
C17–F17. Check your results with the following:
9
Overhead to be
Apportioned
10
Overhead
11
Basis
Total
Moulding
Assembly
Packing
£
£
£
£
£
12
Indirect Costs
Allocated
18,455
8,500
5,540
4,415
13
Rent & Rates
Area (sq m)
50,000
25,000
18,750
6,250
14
Heat & Light
Area (sq m)
45,000
22,500
16,875
5,625
15
Building Insurance
Area (sq m)
12,000
6,000
4,500
1,500
16
Canteen Costs
No of Emp
6,000
2,250
1,500
2,250
17
Dept Totals
131,455
64,250
47,165
20,040
The next part of the spreadsheet to be completed is the absorption of
overheads into the production areas.
(a)
Key in the basis of absorption for each area identified on
information card 3 into cells B21–B23.
(b)
Cells C21–C23 should contain the totals previously calculated for
each area, therefore it is necessary to refer these cells back to the
original total cells to ensure any changes that may be made to
totals will be incorporated throughout the whole spreadsheet.
Click in cell C21, key in = then click on the cell containing the
total overheads to be allocated to the Moulding department, that is
D17 and press enter. Continue with the other two totals, that is,
cell C22 =E17 and so on.
(c)
The hours for each area are again referenced back to previous
figures in the spreadsheet. Account must be taken of the area and
the basis of absorption. Cell D21 should contain the number of
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USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
USING SPREADSHEETS
hours to be taken account of in the Moulding department. As the
basis of absorption is direct machine hours, the cell containing the
direct machine hours for the Moulding department should be
referenced, that is, B6, therefore D21 should contain the formula
=B6. Assembly department basis of absorption is direct labour
hours, therefore the cell should be referenced to the direct labour
hours for the Assembly department, that is C5. Complete the
Packing department’s hours.
To calculate the amount to be
absorbed, the total overhead should
be divided by the hours. The
formula to be entered in E21
therefore is =C21/D21. This formula
can be copied down cells E22 and
E23. The figures appearing in these
cells may not be whole numbers. To
format them to whole numbers,
highlight cells E21–E23, right click
mouse and select Format Cells.
(e)
Select Number and 0 decimal places.
(f)
In cells F21–F23 insert the appropriate label for the absorption,
that is, per machine hour or per labour hour.
!
(d)
Check with the figures below:
19
Overhead
Absorption Rates
20
Overhead
Basis
Total
Hours
Absorption
Rates
21
22
Moulding
Dir m/c
64,250
15000
4
per m/c hr
Assembly
Dir l/h
47,165
30000
2
per l/h
23
Packing
Dir l/h
20,040
1000
20
per l/h
You are now ready to complete the Job Card for Job 2811.
(a)
Cells C27 to C29 contain the rate to be used to absorb overheads
and should be referenced back to the absorption calculated
previously in cells E21 to E23. Click in Cell C27 and key in = then
click on cell E21; continue until all three cells are filled.
(b)
Cells D27 to D29 can be completed using the job costing
information on Information card 4 giving the number of hours
relevant to each department.
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
23
USING SPREADSHEETS
(c)
The figures in the cells for overhead absorbed (E27 to E29) are
determined by inserting a formula to calculate rate multiplied by
hours. Therefore into cell E27 would be keyed in = click on C27 *
click on D27. Complete this column for all three departments
formatting cells to whole numbers as before.
(d)
The total for all three overheads absorbed should be entered into
cell F30.
(e)
The direct materials previously stated as £60 on Information card
4 should be entered in F32.
(f)
The direct labour figure is calculated by multiplying the hours by
the rate. The hours as previously stated are 4 and the rate £60.
The formula should be entered in F34.
(g)
Direct expenses were expressed as £40 on Information card 4
which should be entered in F35.
(h)
The total cost should be entered in F37. This should be the sum of
cells F30–F36.
(i)
The profit margin which will be entered in F39 is 15%. The
formula for this should read =F37*15% (ensure the answer is a
whole number).
(j)
The Job Price is calculated by adding the Total Cost plus the Profit
margin. The Job Price should read £426.
(k)
Insert your name and task number in a footer – select View/Header
and Footer/Custom Footer.
(l)
Before printing it is
necessary to ensure that
gridlines and column
headings are turned on –
select Page Setup/Sheet and
click on Gridlines and Row
and column headings.
24
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
USING SPREADSHEETS
(m) Click on Print Preview to check the spreadsheet fits onto the page
– at this point you could change orientation to landscape if portrait
is too narrow. Print copy of spreadsheet showing figures.
(n)
To print copy of
spreadsheet showing
formulae we must change
the orientation as the
formulae take up more
space – select Tools/
Options and click on
Formula/OK.
(o)
Select Page Set Up/ Page.
The formulae should be
printed in landscape and
the option Fit to 1 page
wide by 1 page tall should
be selected. Select print.
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
25
USING SPREADSHEETS
Task 18
S Watson would also like to forecast the Job Cost of Job 2811 if the
following overheads were increased by 10%:
•
•
•
•
Rent and Rates
Heat and Light
Building Insurance
Canteen Costs
As they still want to retain the original analysis it is necessary first of all
to make a new copy.
1.
Highlight the completed spreadsheet and click on copy.
2.
Click on Sheet 2 at the
bottom of the page
and click paste.
3.
To differentiate
between the two
sheets it is necessary
to give them a suitable
name.
4.
Right click on Sheet 1
and select rename –
call this original forecast.
5.
Right click on Sheet 2 – call this 10% increase on O/hs.
6.
Click on cell C13.
7.
In the formula bar
click before 5000 and
insert =.
8.
Click after 50,000 and
insert +(50,000*10%).
26
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
USING SPREADSHEETS
9.
Press Enter.
10.
Continue to increase each overhead by 10%.
You will notice the spreadsheet will automatically update all formulae
and the Job Price will change to take account of this new information.
The Job Price should now read £432.
Print a copy of the spreadsheet figures with a suitable footer.
Task 19
Calculate the Job Price if Indirect Costs for each of the three
departments were raised by 20%. Each individual department cost
should be increased to allow the formula in cell C12 to automatically
update.
Remember to make a new copy of the original spreadsheet on a new
sheet, renaming the sheet with a suitable title.
Give the spreadsheet a suitable footer and print a copy of the formulae.
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
27
USING SPREADSHEETS
Task 20
Vagabonds Ltd are a medium-sized business manufacturing walking
boots. There are three production departments, namely machining,
Assembly and Finishing. The overheads budget for next year is set out
below together with the department details.
You should produce a Job Price for Job No 3112.
Job No 3112 Information 1
Allocated Overheads
Machining
Assembly
Finishing
Indirect Costs
£125,000
£152,500
£109,500
£387,000
Overhead Apportioning
Rent and Rates
Heat and Light
Insurance (machinery)
Insurance (building)
Supervision
£60,000
£6,000
£4,250
£6,550
£42,000
£118,800
£157,500
28
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
USING SPREADSHEETS
The departmental absorption rates are as follows:
Basis
Machining
Assembly
Finishing
Area (m2)
600
400
300
Direct Labour Hours
30,000
25,000
35,000
Value of Machinery
55,000
45,000
25,000
No of Employees
6
6
4
Job No 3112
Information 2
Job No 3112 Information 3
The production overhead costs have to be recovered on the
following basis:
Machining – direct machine hours
Assembly – direct labour hours
Finishing – direct labour hours
The following job has to be costed
Job Card for Job No 3112
Job No 3112 Information 4
Machining – 5 hours
Assembly – 8 hours
Finishing – 3 hours
Direct raw materials used – £260
Direct labour – 14 hours at £6.50 per hour
Direct expenses – £80 for administration
Profit margin – 25% of cost price for the job
1.
Produce an Overhead Analysis Sheet to calculate the Job Price for
Job No 3112.
2.
Create a template as overleaf then carry out each necessary
calculation to determine the final Job Price.
3.
Print a copy of both figures and formulae showing gridlines and
column headings with suitable footer.
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
29
USING SPREADSHEETS
A
1
B
C
D
E
F
Machining
Assembly
Finishing
Total
Basis
Total
Machining
Assembly
Finishing
£
£
£
£
£
Basis
Total
Hours
Absorption Rate
Department
Rate Applied
Hours
Overheads
Hours
Rate
Vagabonds Ltd –
Job No 3112
2
3
4
Area (sq m)
5
Direct Labour Hours
6
Direct Machine Hours
7
No of Employees
8
9
Overhead to be
apportioned
10
Overhead
11
12
Indirect Costs
13
Rent and Rates
14
Heat and Light
15
Insurance (Machinery)
16
Insurance (Building)
17
Supervision
18
Departmental Totals
19
20
Allocated
Overhead
absorption rates
21
Overhead
22
Machining
23
Assembly
24
Finishing
25
26
JOB NO 3112
27
Overheads
28
Machining
29
Assembly
30
Finishing
31
Total
32
33
Direct Materials
34
35
Direct Labour
36
Direct Expenses
37
38
Total Cost
39
40
Profit margin
41
42
30
Job Price
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
Absorbed
USING SPREADSHEETS
Task 21
Set up a new worksheet to show the Job Price if the Insurance for
Buildings and Machinery were increased by 12%.
Print out a copy of the figures.
Task 22
Set up a new worksheet to show the Job Price if Rent and Rates were
decreased by 5%.
Print a copy showing formulae.
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
31
32
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
USING WORD PROCESSING AND SPREADSHEETS
SECTION 6
Using word processing and spreadsheets to solve accounting
problems
Use Microsoft Word and Microsoft Excel to carry out the following tasks:
Task 23
Send the memo below to Senior Management to inform them of the last
six months’ sales figures in the form of a graph.
The figures for the graph are as follows:
July
£28,000
August
£25,000
September
£34,000
October
£32,000
November
£27,000
December
£24,000
(a)
Open up an Excel spreadsheet and key in the above information.
(b)
Produce a column chart with appropriate Title and Axes Titles.
(c)
Save the spreadsheet.
(d)
Open up a Microsoft Word document and key in the following:
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
33
USING WORD PROCESSING AND SPREADSHEETS
MEMORANDUM
To: Senior Management
From: Your name
Subject: Yearly Sales Figures
Date: Today’s Date
Following our recent meeting please find detailed below the
information you requested with regard to last year’s sales figures.
I have produced the information in graph form for your
convenience.
Please let me know if I can be of any further assistance.
(e)
Return twice after the end of the memo.
(f)
Right click on the graph you created in the spreadsheet and copy.
(g)
Return to Memorandum, right click, paste.
(h)
Print a copy of the document with your name and task number in a
footer.
34
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
USING WORD PROCESSING AND SPREADSHEETS
Task 24
Send a memo to the Managing Director illustrating the company’s
shareholding position at the end of December 2003.
The information should be displayed as a pie chart with the data shown
as percentages.
Cadbury Schweppes Ltd
£154,680
Virgin Enterprises
£324,590
Coca Cola Ltd
£232,456
The Burton Group
£124,532
Axa Insurance Group Ltd
£435,628
Task 25
Send a memo to the Finance Director illustrating the requested
departmental budget figures for the six months from 1/3/2004 to
31/8/2004. Choose a suitable chart type.
Human Resources
2,450
Sales
1,345
Purchases
5,346
Administration
2,389
ICT
6,789
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
35
36
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
SOLUTIONS TO TASKS
SECTION 7
1.
• Accounting procedures are computerised and linked integrally
with the whole organisation.
• Move from focus on historical information to up-to-the-minute
information being available 24 hours per day.
2.
Accountant no longer deals with historical information but is now
an information manager supplying information whenever required.
3.
• To save on time and money as no duplication would be required
and systems and procedures would be completed more quickly
electronically than manually.
• To allow up-to-the-minute information to be available for
effective decision making.
• To allow all information to be available to all users.
• To standardise procedures.
• To keep up-to-date with competitors’ working procedures.
• To supply relevant and accurate information to users.
4.
Input
Process
Output
• Card swiped
• Code number
input into system
• Card checked
against list of
stolen cards
• Cardholder’s
account balance
matched with
transaction total
1. Accept sign
2. Transaction
voucher printed
for signature
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
37
SOLUTIONS TO TASKS
5.
Relevant
Relate to intended purpose
Accurate
Not misleading or containing errors
Cost-effective
The cost of obtaining the information should not
outweigh the benefits of having the information
Timely
Right information available when decisions are being
made
Concise
Quality information giving as much information as
possible in as few words as possible
Meaningful
Should be clear and easily understood
Up-to-date
Information should be fresh and not old
6.
Students would have individual responses on this questions based
on above characteristics.
7.
Word processing is used to send individual letters, mail merged
letter or replicated documents. Templates can be made up for
quotes and invoices.
Databases are used to store client information which can then be
searched to meet specific criteria. Calculations such as salary
payments can be carried out and records printed out in the
required form.
Spreadsheets are used to carry out basic and complex calculations
and can be used to prepare monthly and annual accounts as well as
to prepare forecast budgets or ‘what if’ scenarios.
38
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
SOLUTIONS TO TASKS
8.
Word processing and database
Database can be searched for
appropriate list of clients which
can be merged with standard letter
keyed into word processing
document.
Word processing and spreadsheets
Spreadsheets used to create graph
automatically from keyed in data.
This can be copied and pasted
onto report prepared as word
processing document.
Word processing and database
Standard paragraphs can be used
from previously prepared text and
merged with database of staff
details.
9.
Input
Process
Output
Database of customer
details including
account details
Database searched for
Mail merged letter to
regular users; standard regular customers
letter prepared as word
processing document
and merged with
search on database
10.
Input
Process
Output
Key in spreadsheet
template with relevant
formula
Access template and
key in customer
details
Calculated invoice
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
39
SOLUTIONS TO TASKS
11.
Accountants are now involved in strategic management as they are
not so tied down with the preparation of accounts and working
procedures previously carried out manually and can use computer
technology to access up-to-the-minute financial information for
decision-making.
12.
Less rush hour traffic
Reduced traffic pollution
Money saved in travelling expenses
Employees less stressed
13.
Employees more motivated as they can structure their own
working day
Less time and money lost on absenteeism and bad time-keeping
Money saved as space saved in office
Employees experience job satisfaction
14.
Students will have individual response.
15.
Students will have individual responses.
16.
Students will have individual responses.
40
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
SOLUTIONS TO TASKS
17.
A
1
B
C
D
E
F
S Watson –
Overhead Analysis
2
Moulding
Assembly
Packing
Total
4
3
Area (sq m)
400
300
100
800
5
Direct Labour Hours
15,000
30,000
1,000
46,000
6
Direct Machine Hours 15,000
25,000
2,000
42,000
7
No of Employees
3
2
3
8
Basis
Total
Moulding
Assembly
Packing
£
£
£
£
£
8
9
Overhead to be
Apportioned
10
Overhead
11
12
Indirect Costs
Allocated
18,455
8,500
5,540
4,415
13
Rent & Rates
Area (sq m)
50,000
25,000
18,750
6,250
14
Heat & Light
Area (sq m)
45,000
22,500
16,875
5,625
15
Building Insurance
Area (sq m)
12,000
6,000
4,500
1,500
16
Canteen Costs
No of Emp
17
Dept Totals
6,000
2,250
1,500
2,250
131,455
64,250
47,165
20,040
18
19
Overhead
Absorption Rates
20
Overhead
Basis
Total
Hours
Absorption
Rates
21
Moulding
Dir m/c hr
64,250
15,000
4
per m/c hr
22
Assembly
Dir l/h
47,165
30,000
2
per l/h
23
Packing
Dir l/h
20,040
1,000
20
per l/h
Dept
Rate Applied
Hours
O/Hs
Moulding
4
2
9
24
25
JOB NO 2811
26
Overheads
Absorbed
27
28
Assembly
2
3
5
29
Packing
20
1
20
30
Total
33
31
32
Direct Materials
33
60
Hours
Rate
4
60
34
Direct Labour
240
35
Direct Expenses
40
Total Cost
373
Profit Margin
56
Job Price
429
36
37
38
39
40
41
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
41
SOLUTIONS TO TASKS
A
1
B
C
D
E
Moulding
Assembly
Packing
Total
F
S Watson –
Overhead Analysis
2
3
4
Area (sq m)
400
300
100
=SUM(C5:E5)
5
Direct Labour Hours
15,000
30,000
1,000
=SUM(C6:E6)
6
Direct Machine Hours 15,000
25,000
2,000
=SUM(C7:E7)
7
No of Employees
2
3
=SUM(C8:E8)
3
8
9
Overhead to be
Apportioned
10
Overhead
11
Basis
Total
Moulding
Assembly
Packing
£
£
£
£
£
18,455
4,415
12
Indirect Costs
Allocated
8,500
5,540
13
Rent & Rates
Area (sq m) 50,000
=$D$14/$F$5*C5
=$D$14/$F$5*D5 =$D$14/$F$5*E5
14
Heat & Light
Area (sq m) 45,000
=$D$15/$F$5*C5
=$D$15/$F$5*D5 =$D$15/$F$5*E5
15
Building Insurance
Area (sq m) 12,000
=$D$16/$F$5*C5
=$D$16/$F$5*D5 =$D$16/$F$5*E5
16
Canteen Costs
No of Emp
=$D$17/$F$8*C8
=$D$17/$F$8*D8 =$D$17/$F$8*E8
17
Dept Totals
6,000
=SUM(D13:D17) =SUM(E13:E17)
=SUM(F13:F17)
=SUM(G13:G17)
18
19
Overhead
Absorption Rates
20
Overhead
Basis
Total
Hours
Absorption
Rates
21
Moulding
Dir m/c hr
=E18
=C7
=D22/E22
per m/c hr
22
Assembly
Dir l/h
=F18
=D6
=D23/E23
per l/h
23
Packing
Dir l/h
=G18
=E6
=D24/E24
per l/h
Dept
Rate
Applied
Hours
O/Hs
Absorbed
27
Moulding
=F22
2
=D28*E28
28
Assembly
=F23
3
=D29*E29
29
Packing
=F24
1
=D30*E30
30
Total
24
25
JOB NO 2811
26
Overheads
=SUM(F28:F30)
31
32
Direct Materials
33
60
Hours
Rate
4
60
34
Direct Labour
35
Direct Expenses
40
=E35*F35
Total Cost
=SUM(G31:G36)
Profit Margin
=G38*15%
Job Price
=G38+G40
36
37
38
39
40
41
42
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
SOLUTIONS TO TASKS
18.
A
1
B
C
D
E
F
Moulding
Assembly
Packing
Total
S Watson –
Overhead Analysis
2
3
4
Area (sq m)
400
300
100
800
5
Direct Labour Hours
15,000
30,000
1,000
46,000
6
Direct Machine Hours 15,000
25,000
2,000
42,000
7
No of Employees
2
3
8
Basis
Total
Moulding
Assembly
Packing
£
£
£
£
£
3
8
9
Overhead to be
Apportioned
10
Overhead
11
12
Indirect Costs
Allocated
18,455
8,500
5,540
4,415
13
Rent & Rates
Area (sq m)
55,000
27,500
20,625
6,875
14
Heat & Light
Area (sq m)
49,500
24,750
18,563
6,188
15
Building Insurance
Area (sq m)
13,200
6,600
4,950
1,650
16
Canteen Costs
No of Emp
17
Dept Totals
6,600
2,475
1,650
2,475
142,755
69,825
51,328
21,603
18
19
Overhead
Absorption Rates
20
Overhead
Basis
Total
Hours
Absorption Rates
21
Moulding
Dir m/c hr
69,825
15,000
5
per m/c hr
22
Assembly
Dir l/h
51,328
30,000
2
per l/h
23
Packing
Dir l/h
21,603
1,000
22
per l/h
Dept
Rate Applied
Hours
O/Hs
Absorbed
27
Moulding
5
2
9
28
Assembly
2
3
5
29
Packing
22
1
22
30
Total
24
25
JOB NO 2811
26
Overheads
36
31
32
Direct Materials
33
60
Hours
Rate
4
60
34
Direct Labour
240
35
Direct Expenses
40
Total Cost
376
Profit Margin
56
Job Price
432
36
37
38
39
40
41
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
43
SOLUTIONS TO TASKS
13
Rent & Rates
Area (sq m)
=50,000+(50,000*10%)
14
Heat & Light
Area (sq m)
=45,000+(45,000*10%)
15
Building Insurance
Area (sq m)
=12,000+(12,000*10%)
16
Canteen Costs
No of Emp
=6,000+(6,000*10%)
44
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
SOLUTIONS TO TASKS
19.
A
1
B
C
D
E
F
S Watson –
Overhead Analysis
2
3
4
Moulding
Assembly
Packing
Total
Area (sq m)
400
300
100
800
5
Direct Labour Hours
15,000
30,000
1,000
46,000
6
Direct Machine Hours 15,000
25,000
2,000
42,000
7
No of Employees
3
2
3
8
Basis
Total
Moulding
Assembly
Packing
£
£
£
£
£
8
9
Overhead to be
Apportioned
10
Overhead
11
12
Indirect Costs
Allocated
18,455
10,200
6,648
5,298
13
Rent & Rates
Area (sq m)
50,000
25,000
18,750
6,250
14
Heat & Light
Area (sq m)
45,000
22,500
16,875
5,625
15
Building Insurance
Area (sq m)
12,000
6,000
4,500
1,500
16
Canteen Costs
No of Emp
17
Dept Totals
6,000
2,250
1,500
2,250
131,455
65,950
48,273
20,923
18
19
Overhead
Absorption Rates
20
Overhead
Basis
Total
Hours
Absorption Rates
21
Moulding
Dir m/c hr
65,950
15,000
4
per m/c hr
22
Assembly
Dir l/h
48,273
30,000
2
per l/h
23
Packing
Dir l/h
20,923
1,000
21
per l/h
Dept
Rate Applied
Hours
O/Hs
Moulding
4
2
9
24
25
JOB NO 2811
26
Overheads
Absorbed
27
28
Assembly
2
3
5
29
Packing
21
1
21
30
Total
35
31
32
Direct Materials
33
60
Hours
Rate
4
60
34
Direct Labour
240
35
Direct Expenses
40
Total Cost
375
36
37
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
45
SOLUTIONS TO TASKS
38
39
Profit Margin
56
41
Job Price
431
12
=8,500+(8,500*20%) =5,540+(5,540*20%)
40
46
=4,415+(4,415*20%)
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
SOLUTIONS TO TASKS
20.
A
1
B
C
D
E
F
Vagabonds Ltd –
Job No 3112
2
3
Machining
Assembly Finishing
Total
4
Area (sq m)
600
400
300
1,300
5
Direct Labour Hours
30,000
25,000
35,000
90,000
6
Direct Machine Hours 55,000
45,000
25,000
125,000
7
No of Employees
6
6
4
16
Basis
Total
Machining Assembly
Finishing
8
9
Overhead to be
apportioned
10
Overhead
11
£
£
£
£
£
12
Indirect Costs
Allocated
387,000
125,000
152,500
109,500
13
Rent and Rates
Area (sq m)
60,000
27,692
18,462
13,846
Area (sq m)
6,000
2,769
1,846
1,385
4,250
1,870
1,530
850
14
Heat and Light
15
Insurance (Machinery) Direct Machine Hours
16
Insurance (Building)
Area (sq m)
17
Supervision
No of Employees
18
Departmental Totals
6,550
3,023
2,015
1,512
42,000
15,750
15,750
10,500
505,800
176,105
192,103
137,592
Total
Hours
Absorption Rate
19
20
Overhead
absorption rates
21
Overhead
22
Machining
Dir m/c h
176,105
55,000
3
per m/c hr
23
Assembly
Dir l/h
192,103
25,000
8
per l hr
24
Finishing
Dir l/h
137,592
35,000
4
per l hr
Department
Rate
Hours
Overheads
Basis
25
26
JOB NO 3112
27
Overheads
Applied
Absorbed
28
Machining
3
5
16
29
Assembly
8
8
61
30
Finishing
4
3
12
31
Total
89
32
33
Direct Materials
34
35
Direct Labour
36
Direct Expenses
260
Hours
Rate
14
7
91
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
47
SOLUTIONS TO TASKS
37
38
Total Cost
440
Profit margin
110
Job Price
550
39
40
41
42
48
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
SOLUTIONS TO TASKS
Vagabonds Ltd Job No 3112
Machining
Assembly
Finishing
Total
Area (sq m)
600
400
300
=SUM(B4:D4)
Direct Labour Hours
30,000
25,000
35,000
=SUM(B5:D5)
Direct Machine Hours 55,000
45,000
25,000
=SUM(B6:D6)
No of Employees
6
4
=SUM(B7:D7)
6
Overhead to
be apportioned
Overhead
Basis
Total
Machining
Assembly
Finishing
£
£
£
£
£
Allocated
=SUM(D12:F12) 125,000
152,500
109,500
Rent and Rates
=A4
60,000
=$C$13/$E$4*B4 =$C$13/$E$4*C4 =$C$13/$E$4*D4
Heat and Light
=A4
6,000
=$C$14/$E$4*B4 =$C$14/$E$4*C4 =$C$14/$E$4*D4
Indirect Costs
Insurance (Machinery) =A6
4,250
=$C$15/$E$6*B6 =$C$15/$E$6*C6 =$C$15/$E$6*D6
Insurance (Building)
=A4
6,550
=$C$16/$E$4*B4 =$C$16/$E$4*C4 =$C$16/$E$4*D4
Supervision
=A7
42,000
=$C$17/$E$7*B7 =$C$17/$E$7*C7 =$C$17/$E$7*D7
Departmental Totals
=SUM(C12:C17) =SUM(D12:D17) =SUM(E12:E17)
=SUM(F12:F17)
Overhead
absorption rates
Overhead
Basis
Total
Hours
Absorption
Rate
Machining
Dir m/c h
=D18
=B6
=C22/D22
per m/c hr
Assembly
Dir l/h
=E18
=C5
=C23/D23
per l hr
Finishing
Dir l/h
=F18
=D5
=C24/D24
per l hr
Hours
Overheads
Absorbed
JOB NO 3112
Overheads
Department Rate Applied
Machining
=E22
5
=C28*D28
Assembly
=E23
8
=C29*D29
Finishing
=E24
3
=C30*D30
Total
=SUM(E28:E30)
Direct Materials
Direct Labour
260
Hours
Rate
14
6.5
=D35*E35
Direct Expenses
Total Cost
=SUM(F31:F35)
Profit margin
=F38*25%
Job Price
=F38+F40
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
49
SOLUTIONS TO TASKS
21.
A
1
B
C
D
E
F
Vagabonds Ltd Job No 3112
2
3
Machining
Assembly
Finishing
Total
4
Area (sq m)
600
400
300
1300
5
Direct Labour Hours
30,000
25,000
35,000
90,000
6
Direct Machine Hours 55,000
45,000
25,000
125,000
7
No of Employees
6
6
4
16
Basis
Total
Machining
Assembly
Finishing
8
9
Overhead to
be apportioned
10
Overhead
11
£
£
£
£
£
12
Indirect Costs
Allocated
387,000
125,000
152,500
109,500
13
Rent and Rates
Area (sq m)
60,000
27,692
18,462
13,846
14
Heat and Light
Area (sq m)
6,000
2,769
1,846
1,385
15
Insurance (Machinery) Direct Machine
Hours
4,760
2,094
1,714
952
16
Insurance (Building)
Area (sq m)
7,336
3,386
2,257
1,693
17
Supervision
No of Employees
18
Departmental Totals
42,000
15,750
15,750
10,500
507,096
176,692
192,529
137,876
19
20
Overhead
absorption rates
21
Overhead
Basis
Total
Hours
Absorption Rate
22
Machining
Dir m/c h
176,692
55,000
3
per m/c hr
23
Assembly
Dir l/h
192,529
25,000
8
per l hr
24
Finishing
Dir l/h
137,876
35,000
4
per l hr
Department
Rate Applied Hours
25
26
JOB NO 3112
27
Overheads
Overheads
Absorbed
28
Machining
3
5
16
29
Assembly
8
8
62
30
Finishing
4
3
12
31
Total
89
32
33
Direct Materials
34
35
Direct Labour
36
Direct Expenses
260
Hours
Rate
14
7
91
37
38
50
Total Cost
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
440
SOLUTIONS TO TASKS
39
40
Profit margin
110
Job Price
551
41
42
Insurance (Machinery) =A6 =4,250+(4,250*12%) =$C$15/$E$6*B6 =$C$15/$E$6*C6 =$C$15/$E$6*D6
Insurance (Building)
=A4 =6,550+(6,550*12%) =$C$16/$E$4*B4 =$C$16/$E$4*C4 =$C$16/$E$4*D4
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
51
SOLUTIONS TO TASKS
22.
A
1
B
C
D
E
F
Vagabonds Ltd Job No 3112
2
3
Machining
Assembly
Finishing
Total
4
Area (sq m)
600
400
300
1300
5
Direct Labour Hours
30,000
25,000
35,000
90,000
6
Direct Machine Hours 55,000
45,000
25,000
125,000
7
No of Employees
6
6
4
16
Overhead
Basis
Total
Machining Assembly
Finishing
£
£
£
£
£
12
Indirect Costs
Allocated
387,000
125,000
152,500
109,500
13
Rent and Rates
Area (sq m)
57,000
26,308
17,538
13,154
14
Heat and Light
Area (sq m)
6,000
2,769
1,846
1,385
15
Insurance (Machinery) Direct Machine
Hours
4,250
1,870
1,530
850
16
Insurance (Building)
Area (sq m)
6,550
3,023
2,015
1,512
17
Supervision
No of Employees
42,000
15,750
15,750
10,500
18
Departmental Totals
502,800
174,720
191,180
136,900
8
9
Overhead to be
apportioned
10
11
19
20
Overhead
absorption rates
21
Overhead
Basis
Total
Hours
Absorption Rate
22
Machining
Dir m/c h
174,720
55000
3
per m/c hr
23
Assembly
Dir l/h
191,180
25000
8
per l hr
24
Finishing
Dir l/h
136,900
35000
4
per l hr
Department
Rate Applied Hours
28
Machining
3
5
16
29
Assembly
8
8
61
30
Finishing
4
3
12
31
Total
25
26
JOB NO 3112
27
Overheads
Overheads
Absorbed
89
32
33
Direct Materials
34
35
Direct Labour
36
Direct Expenses
260
Hours
Rate
14
7
91
37
38
52
Total Cost
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
440
SOLUTIONS TO TASKS
39
40
Profit margin
110
42
Job Price
550
13
Rent and Rates
41
=B5 =60,000-(60,000*5%) =$D$14/$F$5*C5 =$D$14/$F$5*D5 =$D$14/$F$5*E5
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
53
SOLUTIONS TO TASKS
23.
MEMORANDUM
To: Senior Management
From: Your name
Subject: Yearly Sales Figures
Date: Today’s Date
Following our recent meeting please find detailed below the
information you requested with regard to last year’s sales figures.
I have produced the information in graph form for your
convenience.
Please let me know if I can be of any further assistance.
54
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
SOLUTIONS TO TASKS
24.
MEMORANDUM
To: Managing Director
From: Your name
Subject: Shareholding Position
Date: Today’s Date
Please find detailed below our shareholding position as at the end
of December 2003. This is illustrated in graph form with data
shown as percentage of overall holding.
I hope this meets with your requirements.
34%
12%
26%
10%
Cadbury Schweppes Ltd
Virgin Enterprises
Coca Cola Ltd
The Burton Group
Axa Insurance Group Ltd
18%
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)
55
SOLUTIONS TO TASKS
25.
MEMORANDUM
To: Finance Director
From: Your name
Subject: Budgeted Figures
Date: Today’s Date
The budgeted figures for the six months from 1/3/2004 to
31/8/2004 are detailed below in graph form.
I hope this meets with your requirements.
56
USING INFORMATION TECHNOLOGY IN ACCOUNTING (H)