Question

The following is a description of the conversion cycle of Central Production Limited: The conversion cycle of the company is triggered by a report from the warehouse. When the quantity of an inventory item falls below a pre-set minimum level, the warehouse manager sends an online inventory status report to production department advising them to schedule a production batch run for the item. Upon receipt of the report, the production clerk assesses the digital bill of materials and the route sheet files for the item to be produced and adds the production details to the online production schedule. The system automatically adds a record to the open work order file and sends an online work order to the work centre supervisor’s computer and to the accounting clerk’s computer. The work centre supervisor receives the work order from his computer and print hard-copy move tickets and materials requisitions for each production process. Production employees take the materials requisitions to store clerk and receives the materials and subassemblies needed to perform the production tasks. If additional materials beyond the standard amount is needed, the work centre supervisor prepares additional materials requisitions. Production employees complete job time tickets after completing a production process to record the time spent on the job. The job time tickets are then sent together with the move tickets to the accounting department. After releasing the materials into production, the store clerk updates the material inventory records and send the materials requisitions to accounting department. The clerk prepares a journal voucher and posts to the general ledger material control account at the end of each day. The accounting clerk assesses the work orders and set up a work-in-process account for a production batch. Throughout the production period, the clerk also receives move tickets, job tickets, and materials requisitions, which he uses to post to the work-in-process account. At the end of each day, the accounting clerk prepares a digital journal voucher and post it to the general ledger work-inprocess and finished goods control accounts. Identify the risks exist in the conversion cycle of Central Production Limited.

Answer 1

Answer: Provided in the explanation section

Explanation:

Consider the instance of El Manufacturing Company in which a worker L E is answerable for setting up the diary vouchers to be utilized for general record sections. Be that as it may, there are sure control shortcomings and issues in this situation.

The assignment of refreshing the general record must be independent from all the bookkeeping and resource guardianship duty inside the association.

In the moment case, L is liable for everything from setting up the Journal Voucher to presenting it on the particular records.

The potential control shortcoming in such situation is as per the following:

• No Segregation of obligation

• Too much dependence on person

• Data uprightness and secrecy if any is flawed

• Chances of blunder is high

In such situation, to make up for the possible hazard, the framework ought to be worked to furnish end clients and GL offices with nitty gritty posting of diary vouchers and record movement report.

Change Cycle is the cycle which track records for the arrangement of crude material to completed products.

Here on the correct perspective overall of the procedure:

1. Triger by stockroom dept ( Raw material Keeper)

2. Produnction supervisor refreshes the request to be finished and include further up and coming requests assuming any.

3.It will create online request slip and legitimately post to bosses tab + bookkeeper tab

4. Chief take material and issue to amassing dept ( overabundance material prerequisite is given by his position moreover)

5. Time + work both finished card sare sent to Accountanct

6. When request finished Accountant update the WIP just as Inventory in books.

Hazard in the Conversion Cycle:

After receipt of material and charging it to FG as Inventory in books

- Risk is hindering of assets in abundance keeping of stock, As material level down after a specific level automatc trigger alternative is set up, which alerts the productin leave. to decide the future necessity according to the productin request in hands ( Good control set up)

Second, Online workorder to Supervisior, All chief gets their no. of creation request ( to be finished on the web) - Good control set up

Third, Supervisor on hand, place the material prerequisite ( and if any abundance necessity - " NO FURTHER APPROVAL" is made to store representative. here hazard is medium over the demand far beyond the Order indicates by the creation dept.

Fourthly, creation representatives itself are planning thier work tickets ( " NO AUTHENTICATION")- As tickets are finished by creation representatives itself control of information info or its endorsement is inadequate.

Fifth, Accountant decides himeslef the WIP , FG of the request over the crude information got as occupation card, time card, material order Risk is bookkeeper simply need to verifiy the information from the information got from the creation L2 official instead of himself keep up the quantities of the activity.

From above it is anything but difficult to catch the degree of hazard at different level in the above procedure of Central creation Limited.