Music Now is a large wholesaler of sheet music, music books, musical instruments, and othe...

Music Now is a large wholesaler of sheet music, music books, musical instruments, and other music-related supplies. The company acquired a midrange computer system last year, and an inventory control system has already been implemented. Now the systems department is developing a new accounts receivable system.

Figure is a diagram of the proposed accounts receivable system as designed by the systems department. The objectives of the new system are to produce current and timely information that can be used to control bad debts, to provide information to the sales department regarding customers whose accounts are delinquent, to produce monthly statements for customers, and to produce notices to customers regarding a change in the status of their charge privileges.

Figure Flowchart for Problem

Input data for the system are taken from four source documents—approved credit applications, sales invoices, cash payment remittances, and credit memoranda. The accounts receivable file is maintained on magnetic disk by customer account number. The record for each customer contains identification information, last month’s balance, current month’s transactions (detailed), and current balance. Some of the output items generated from the system are identified and described briefly below.

1. Accounts receivable register (weekly)—a listing of all customers and account balances included on the accounts receivable file.

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2. Aging schedule (monthly)—a schedule of all customers with outstanding balances, detailing the amount owed by age classifications—0–30 days, 30–60 days, 60–90 days, over 90 days old.

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3. Delinquency and write-off registers (monthly)—(a) a listing of those accounts that are delinquent and (b) a listing of customers’ accounts that have been closed and written off; related notices are prepared and sent to these customers.

Required

The systems department must develop the system controls for the new accounts receivable system. Identify and explain the system controls that should be instituted with the new system. When appropriate, describe the location in the flowchart where the control should be introduced.