STUDY ON THE ACCOUNTING INFORMATION SYSTEM OF MATVEL HOLDINGS, CO.

Group: 24/7 IN LOVE

Members: Aying, Johans Leoj Clavejo, Charmaine Ena Echivarre, Joshua Lao, Muhammad Mendoza, Kimberly Anne Muoz, Jessa Mae Oracoy, Blesilda Sanoria, Mark Christopher Sarcon, Ryza Mae

INTRODUCTION AND BRIEF HISTORY

MATVEL HOLDINGS, Co. is a family-run business established in the year 1992. The primary nature of the business is actually holding other companies outstanding stocks and has a dominant interest in the other company/companies shares thus it can dictate monetary policies. Aside from that, they earn revenues through leasing its properties. Currently, one of the properties of Matvel located at South Central Square, Lawaan III, Talisay City, Cebu is leased to Robinsons Malls. Though the building bears the name of the lessee on the outside (as shown in the picture), Robinsons Malls doesnt actually lease the whole property and it has no right to sub-lease. Thus, whenever other businesses want to rent a commercial space in the building, Matvel Holdings, Co. takes care of the transaction and not Robinsons Malls. **As for our study, we focused on the LEASING nature of the business and not on the holdings function.

MATVEL HOLDINGS, CO. Structural Organization

President

Vice-President

Manager

Leasing Officer

Accountant

Security Guards

Human Resource Manager

Accounting Oficer

Maintenance

HR Assistant

Accounting Staff

Bookkeepers

REVENUE CYCLE (NARRATIVE)

The interested client sends a LETTER OF INTENT to the LEASING DEPARTMENT. The leasing officer from the LEASING DEPARTMENT conducts a background check on the customer. If found credible, the leasing officer will approve the LETTER OF INTENT. A copy is filed in the CABINET that contains all the related leasing files. Once approved by the LEASING OFFICER and the PRESIDENT/VICE-PRESIDENT, the LEASING DEPT. issues a LEASE PROPOSAL stating the terms and conditions of the lease to the CLIENT. An AWARD NOTICE is sent to the CLIENT/LESSEE. A CONTRACT is issued and shall be signed by the President, the Leasing Officer and the client/lessee himself. Once signed, the CONTRACT is filed in the CABINET. The client is now an official lessee to the property. The ACCOUNTING OFFICER produces 2 copies of the STATEMENT OF ACCOUNT for each lessee. The first copy is sent to the lessee and the other is forwarded to the ACCOUNTING FUNCTION. The lessee sends the payment via check or cash to the LEASING DEPARTMENT. The cash is received by the LEASING OFFICER and forwarded to the ACCOUNTING FUNCTION for verification and preparation for deposit. The ACCOUNTING OFFICER issues 3 copies of official receipts. One OFFICIAL RECEIPT is given to the lessee. The second copy is attached to the BOOKLETS for BIR purposes and the last copy is attached to the DEPOSIT SLIP. The ACCOUNTING OFFICER then prepares 2 copies of DEPOSIT SLIPS. The first one is attached to the OFFICIAL RECEIPT to accompany the CHECK to be deposited in the bank. The second copy is filed by the ACCOUNTING OFFICER in the CABINET. After deposit, the BANK issues a VALIDATED DEPOSIT SLIP which the ACCOUNTANT verifies. The ACCOUNTANT then adjusts the balance of the Cash account and the Tenants-Rental account in the GENERAL LEDGER.

Identification and description of major subprocesses and existing control activities

Major Subprocess
A.Sales Order Procedures The sales process begins with the letter of intent from the client indicating the clients desire to lease an area. Upon receiving, the leasing officer conducts a background check on the prospective client. Before issuing the lease proposal, he clients creditworthiness needs to be established. After the approval of the credit standing of the client, the leasing officer issues a lease proposal stating the terms and conditions of the contract. On the agreement of the client, the leasing officer then sends an award notice and a lease contract verified by the companys Vice President and the leasing officer. Subsequently the accounting officer bills the client by issuing a statement of account stating the initial payment (security deposits and 1-month advance payment). The accounting officer then updates the Accounts Receivable ledger with this step, the sales order processing subprocess of the revenue cycle is completed. B. Cash Receipts Procedures Upon signing of the lease contract and the billing of the statement of account, the client goes to the office and pays the initial payments to the accounting officer. The officer then issues an official receipt to the client as an evidence of the transaction. Next, the clerk prepares a bank deposit slip showing the amount of the days cash receipts and forwards this along with the checks or payments to the bank. Upon deposit of the funds, the bank teller validates the deposit slip and returns it to the company for reconciliation. Periodically, the accounting officer reconciles cash receipts by comparing the deposit slips received from the bank and the copies of official receipts issued. This marks the end of the revenue cycle of the Matvel Holdings, Co. Internal Controls and Basic Operating Activities: Daily reconciliation of accounts by the accountant VP/Presidents approval required for major transactions Employs an auditing firm for its annual audit (Luis Caete & Company, Certified Public Accountants) Utilizes Microsoft Excel as its accounting software Combines the use of both manual and electronic devices in its accounting information system Installs security cameras in the vicinity of the building Security guards manually check each persons belongings before entering the building The building is insured under an insurance policy in case of adverse events Disposal of documents every 5 years Supervision of the manager Counter-checking and daily internal audit

Identification of control weaknesses and recommendation of control activities

WEAKNESSES: Due to the fact that Matvel Holdings Co. only has a few employees, the said employees are performing multiple tasks that should have been distributed to different employees in order to avoid fraud and other problems. Collusion between employees is also possible since no one is imposing direct supervision on the employees in the Talisay Branch. They are directly reporting to the VicePresident, which is on the Main Office. Anyone of the employees can access their files, which is placed in a steel cabinet in the office. Aside from soft-copies on their computer, there are no other back-up files for their documents in case an unexpected event like a natural phenomenon will happen.

RECOMMENDATIONS: There should be a segregation of duties in order to avoid manipulation, fraud and other mishaps from happening. The employees should be properly supervised. Though they strongly trust each other, they should still implement preventive controls and should only allow the concerned employee to access the files. They should ask each employee to sign a log every time they get a document from the cabinet since they are still using the traditional process. This is to properly monitor the movement of the confidential documents of the business. They should create a back-up file like a digital copy which is to be placed in a secure area in case an unforeseen event occurs. Lastly, they should periodically audit and recall the company transactions. They should not just rely on an external auditor since we would never know when collusion between the auditor and an employee could occur.