GE20 0320 1_System_3_Guide_to_Order_Writing_Billing_Inventory_Accounts_Receivable_and_Sales_Analysis_Jun70 1 System 3 Guide To Order Writing Billing Inventory Accounts Receivable And Sales Analysis Jun70

GE20-0320-1_System_3_Guide_to_Order_Writing_Billing_Inventory_Accounts_Receivable_and_Sales_Analysis_Jun70 GE20-0320-1_System_3_Guide_to_Order_Writing_Billing_Inventory_Accounts_Receivable_and_Sales_Analysis_Jun70

User Manual: GE20-0320-1_System_3_Guide_to_Order_Writing_Billing_Inventory_Accounts_Receivable_and_Sales_Analysis_Jun70

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Guide to Order Writing, Billing,
Inventory, Accounts Receivable,
and Sales Analysis

The purpose of this manual is to describe the basic approaches for handling
order writing and billing, inventory accounting, accounts receivable, and
sales analysis on the IBM System/3. Coding methods, pricing, documents,
reports, record types, controls, and processing procedures are discussed
in detail. Records, files, report forms, and flowcharts illustrate the text.

Second Edition (Reprinted June 1970)
Copies of this and other IBM publications can be obtained through IBM branch
offices. Address comments concerning the contents of this publication to IBM
Technical Publications Department, 112 East Post Road, White Plains, N. Y. 10601

Contents
Introduction. . . . . . .
Coding . . . . . . . . .
Customer Numbers .
Item Numbers . . .
Order Writing and Billing
The Invoice. . . . . .
Invoice Control Totals.
The Invoice Register . . .
The Order Acknowledgment
Customer Order Control List .
Customer Charges . .
Price of I tern Sold .
Price Conversion.
Special Charges .. .
Taxes . . . . . . . .
Other Invoice Calculations.
Card Records . . . . . .
Customer Master File . .
Ship-to Master File . . .
Item Transaction Record
I tern Master Record . . .
Invoice Summary Record
Methods . . . . . . . . . .
Order Entry . . . . . . .
Customer Order File Assembly
Card Punch Approach
Tub File Approach
Postbilling . . . . . . . .
Back Orders . . . . .
Miscellaneous Transactions .
Pre billing . . . . . . . . . . . .
Back Orders . . . . . . . .
Miscellaneous Transactions. .
Inventory Accounting .. .
Inventory Reports . . . . . .
Stock Status Report. . . .
Stock Transaction Register
Inventory Costing
Average Cost
Last Cost . . .
Standard Cost .
Costing the Invoice
Card Records. . . . .
I tern Master File. . .
I tern Transactions . .
Stock Transactions
Methods . . . . .
Physical Inventory . . .

1
3
4
4

5
S
6

7
7
7
9
9
9
9
10
10
10

12
12
12
13
14
16
18

22
22
24

28
28
30
32
32

3S
35
35
36
37
37
37
38
38
38
39
39

40
40
43

Accounts Receivable . . . . . . ..
Required Records .. . . .
Customer Master Records
Invoice Summaries ..
Journal Entries . . . . . . .
Cash Receipts Records . .
Customer Balance-due Records
Aged Period Date Record . . .
Required Reports . . . . . . . .
Accounts Receivable Transaction Register.
Cash Receipts Register.
Customer Statements
Aged Trial Balance .
Delinquency Notices
Accounting Control
Sales Analysis . . . . . .
Report Options. . . .
Current Analysis.
Comparative Analysis .
Percent Change in Sales
Percent Change in Quantity Sold
Determination of Gross Profit .
Gross Profit Percentage .
Records Used . . . . . . .
Customer N arne Record .
Salesman Name Record.
I tern Transaction Record
Sales Summary Record
Typical Procedures . . . . . .
Sort I tern Transactions . .
Match-Merge Sales Summaries.
Report Preparation . . . . . . .

46
46
46
47
47
47
47
47
48
48
50
50
53
54
55
59
59
59
59
61
61

62
62
62
62
62
62
63

64
64
64
64

INTRODUCTION
In the design and implementation of any application for a data processing system, we find that
information from one application can be used in another area, and vice versa. And, while applications
like billing and accounts receivable can stand alone, it is more efficient and profitable to combine them
wherever possible. In sales and distribution accounting, the four basic, interrelated applications are:
•
•
•
•

Order writing and billing
Inventory accounting
Accounts receivable
Sales analysis

Figure 1 shows these basic applications and their interrelationship. Information on stock shipments
can be used to maintain inventory records in inventory accounting; charges billed to customers can be
posted directly to accounts receivable; detailed records of all sales made are essential to sales analysis;
. use of an order writing and billing application sharply reduces the clerical functions otherwise required
for processing in each of the other three areas.
Because of this interrelationship these applications are combined in this publication. Basic
approaches for the IBM System/3 to each application are described that can be adapted to an
individual company's need.

Inventory Accounting

Order Writing
and Billing

Stock receipts
transfers

Customer
orders

~.
Stock
transactions

Customer
orders

~------~----~~

Invoice
register

Invoices

.......

...

System/3

Item
transactions

System/3

Stock status
register

Customer
payments

'-\~

Invoice
summaries

........

Cash

Item
transactions

~____r_ec_e_iP_t_s____~. ~
System/3

Analysis by
salesman
____
S_y_st_e_m_/_3__

Aged trial
balance

~~~~~~~~~~~~
I

Statements

Accounts Receivable

Figure 1. Sales and distribution accounting applications

Sales Analysis

.......

Item sales
analysis

Customer
sales
analysis

CODING*
In order to achieve success in any of these application areas, codes must be established not only as a
means of identification (warehouse location, packaging, etc.) but also as an aid in computer operations
that precede and include the preparation of desired reports. In sales and distribution accounting, codes
are assigned to customers and customer classifications, products and product classifications, salesmen,
sales territories, etc. After codes have been assigned they are applied throughout the system.
Code construction should be preceded by a complete appraisal of the job to be done and the required
results and by a consideration of all possible methods for its accomplishment.

Customer Numbers
When a data processing application is installed, it is advisable to examine current numbering systems
and to make changes where appropriate. The customer master me is kept in sequence by customer
number, not by customer name. To make looking up a customer's record easier, customer numbers
should be assigned in customer-name sequence. This becomes particularly important in accounts
receivable processing, since customers often make payments without supplying their customer number.
Since new customer accounts are regularly opened in the course of business, customer numbers should
be assigned by tens, as shown in Figure 2. This makes it possible to preserve reasonable alphabetic.
sequence by assigning subsequent numbers between existing ones.

Customer Number:

Customer Name:

10010

Affiliated Supply Corp.

10020

J. C. Allen Associates

10030

Allied Brass, Inc.

10040

American and Northern Co.

Figure 2. Method of assigning customer number

*Refer to Coding Methods (F2Q-8093) for specific methods of coding and for the way in which various codes may be
prepared and applied.

When a unit price determination system is used as described under "Price of Item Sold", an item's unit
price code is indicated by the last digit of the customer number. In such a case, the plice-class digit is
appended to each customer's number once the system has been set up. See Figure 3.

Customer Number:

Customer Name:

100103

Affiliated Supply Corp.

100201

J. C. Allen Associates

100302

Allied Brass, Inc.

100403

American and Northern Co.

Figure 3. Customer number with price-class appended

Item Numbers
The system of item numbers in use should be critically reviewed. Many companies use an itemnumbering scheme that combines product codes, descriptive abbreviations, and similar data with a
base item number. The method requires lengthy item numbers, often with a varying number of
characters, and its necessity is questionable where a data processing system is used. Descriptive data,
item class code, warehouse location, item size and weight, and vendor number are normally provided
for separately in the item master records and need not be reflected in the item number itself.
An item-numbering system that usually proves most workable is one using all-numeric item numbers,
with all item numbers having the same number of digits. If items are to be renumbered, they may be
grouped in some meaningful way. Many companies use a product-type grouping. If a grouping system
is employed, item numbers should be assigned by fives or tens, leaving unused numbers for products
that may be stocked in the future.

ORDER WRITING AND BILLING
The mechanization of order writing and billing procedures provides an efficient method of handling
customer orders from the time of receipt through the preparation of the invoices. In addition to
providing invoices that are neat, legible, and accurate, the application provides control reports and
registers as well as accurate records for the accounts receivable, inventory accounting, and sales
analysis applications.
The first part of this section describes the applications in general, followed by recommended
procedures for the three common approaches to order writing and billing.
The Invoice

An invoice has a specific purpose: it is a report to the customer of the merchandise shipped and
the prices charged. To serve its function it must be complete, legible, and accurate. Each company's
invoice is distinctive. In many industries the invoice is the only document customers see, and part of
the customer's impression of the firm's efficiency and business methods stems from the appearance
of its invoices. The approach in this publication to order writing and billing permits this
distinctiveness to be retained.
An invoice has three sections: (1) the upper section is the heading and contains customer's name and
address and other miscellaneous data; (2) in the invoice body are listed, in detail, the item
transactions and the amounts charged; (3) below the body lines are the invoice totals and possibly
some miscellaneous data such as a statement of the cash discount terms offered. A typical basic
invoice is shown in Figure 4; variations are described on following page.

LAURENTIAN INDUSTRIES, INC.
SOLD TO

SHIP TO

S. W. STAPLES
498 RIVERVIEW STREET
SAN JOSE, CALIF.
94061

RODRIGUEZ DESIGN HOMES
DIVISION OF S. W. STAPLES
8363 OLIVE STREET
SUNNYVALE. CALIF.
95111

DATE

09/15/6

QUANTITY
ORDERED
40
350
200
115
60
115

INV. NO.
138265

QUANTITY
SHIPPED
40
100
150
115

ORDER NO.
111690

SHIPPING INSTRUCTIONS
VI A SMITH TRANSPORT

2% 15 DAYS NET 30

250
50
60
10

105

DESCRIPTION

UNIT PRICE

B500 TWINLITE SOCKET B
B506 SOCKET ADAPTER BRN
C151C SILENT SWITCH IVORY
A210 PULL CORD GOLD
1436 LAMP ENTRANCE
A200 FIXTURE 5 LIGHT

.60
.32
1.20
.42
.50
20.13

EXTENDED
AMOUNT

244.50

TAX
12.23

FREIGHT
18.95

MISC. SPECIAL CHARGE
45.00

Figure 4. Sample invoice

!
SALESMAN
G. PEREZ

DISCOUNT
AMOUNT

NET AMOUNT

TAXABLE

INV. NO.

430915

138265

S. W. STAPLES

I COST IUNIT

I
I
*
* I

1.20
3.20
9.00

22.80
28.80
111.00
13.50

2113.65

211.31

1,902.28

18.95
45.00

CUST NO.

I
I
I

24.00
32.00
180.00
13.50

FRE I GHT CHARGE
PACKING CHARGE

TAXABLE

430815

STATED TERMS

QUANTITY

BIO

CUSTOMER NO.

EXTENDED COST

SALES AMOUNT

.35
.19
.19
.25

14.00
19.00
118.50
43.15

22.80
28.80
111.00
13.50

10.50

1,102.50

1,902.28

1,291.15

2,198.38

I
I
I

INVOICE AMOUNT
2,214.56

I
I

Apart from date and invoice number, computer-printed data in the invoice heading frequently includes:
•
•
•
•
•
•

Customer number
Customer "sold to" name and address
Customer "ship to" name and address
Customer purchase order number
Sales information such as salesman's name, number, territory, district, etc.
Shipping information such as shipping instructions, carrier, delivery dates, etc.

The body of the invoice may include:
•
•
•
•
•
•
•
•
•
•

I tern number
Description of item
Quantity ordered and quantity shipped
Item unit price and list price, if different
Discount amount allowed
Special charges
Item net sales amount
Taxes charged on item
I tern extended cost
Indication, if appropriate, of out-of-stock or back-ordered items

The totals section may include:
•
•
•
•

Total net sales amount
Total special charges
Total net sales subject to cash discount
Total taxes

Other descriptive miscellaneous data, such as a statement of cash discount terms offered, may be
included in the totals section. The dollar amount of cash discount is not usually standard in invoice
calculation nor is cash discount usually reflected in the printed total amount due. The amount subject
to cash discount, however, can be determined.
In addition to the variations described above, many companies use invoice forms with detachable
tear slips. Side tear slips customarily include the date, invoice number, and customer number, and
frequently show customer name, salesman name or number, item net sales amounts and the total,
item extended costs and the total, and the total invoice amount. Inasmuch as the side tear slip usually
contains cost figures, it is removed before mailing to the customer. A detachable lower section may
include customer name and·number, and the total amount invoiced. When the customer receives the
invoice, he detaches and returns the lower section with his payment. The function of invoices
designed in this manner is to ensure that customer payments are properly identified.
INVOICE CONTROL TOTALS

A number of invoices, representing a number of customer orders, are ordinarily run together as a batch.
The form following the last invoice is usually used to print four control totals for the batch of invoices
printed. These are:
•
•
•
•

Total quantity of all items ordered
Total quantity of all items shipped
Total of all special charges made
Total amount invoiced on all invoices

Quantity and special-charge totals may be checked against comparable figures originally made up for
incoming customer orders and printed as part of the customer order control listing. The total amount
invoiced should match the corresponding figure shown in the subsequently printed invoice register.
6

The I nvoice Register
The invoice register is a summary listing of all invoices that have been printed. The invoice register
usually shows all invoices printed together in a single batch, but in some cases the invoice register may
be printed only once a day and may show more than one batch. It is recommended that the invoice
register be produced at least daily.
The invoice register can list whatever invoice totals have been taken, as well as identifying data such
as invoice number and customer number. The document provides a concise sales summary to
management and' enables a check to be made of the total amount invoiced. Figure 5 illustrates
a typical invoice register.

INVOICE REGISTER
DATE 09/15/-CUSTOMER NAt-IE
CUST.
NO. SPECIAL CHARGE DESCRI PT ION

INVOICE INVOICE
NO.
DATE

138265 09/15/-- 430975 S.W. STAPLES
FREIGHT CHARGE
PACKING CHARGE
138266 09/15/-- 431030 SINCLAIR ELECTRIC
FREIGHT CHARGE
138287 09/15/-- 432450 WINSTON APPLIANCE CO
CREDIT IrWOICE
138288 09/15/--- 434960 YARNELL ELECTRICAL CO:"JTR

PAGE 03

EXTENDED

DISC.
MIOUNT

M~nUNT

$2.423.15

224.77

TAX
AMOU~JT

SPECIAL CHARGES
TYPE
M-InUNT

12.23
1
2

238.96

4.78

57.7()CR

2.03CR
64.17

18.95
45.00

2274.56

10.24
1

208.62

INVOICE
AMOUNT

16.38

5.50

249.92
59.73CR
160.83

Figure 5. Invoice register

The Order Acknowledgment
The order acknowledgment form is optional in an order writing and billing procedure. It is most often
used when a formal customer order must be printed for use by the shipping department. In some
manufacturing industries, customer orders are for products that must be assembled prior to shipment,
and the order acknowledgment serves as a confirmation to the customer that the order has been
received and is being filled.
The order acknowledgment is essentially identical to the invoice except that it includes no sales
amount, discounts, taxes, or totals. Usually carbon copies of the invoice are printed and used as the
order acknowledgment, as a picking slip subsequently returned to the data processing department
marked to indicate which items were in stock and have been shipped, and as a packing slip. I terns may
be listed in warehouse location sequence in order to simplify picking of the order. Figure 6 shows a
typical order acknowledgment.

Customer Order Control List
The customer order control list (Figure 7) is printed during order entry and serves a clerical auditing
function to ensure that all customer order data has been correctly transcribed on punched cards.

LAURENTIAN INDUSTRIES, INC.
111 W. ST. JOHN ST.
SAN JOSE, CALIF. 95113

TELEPHONE
408-286-9100

CUST. NO.
'~30975

S. W. STAPLES
498 RIVERVIEW STREET
SAN JOSE, CALIF. 94067

SOLD TO

SHIP TO

RODRIGUEZ DESIGN HOMES
DIVISION OF S. W. STAPLES
8363 OLIVE STREET
SUNNYVALE, CALIF. 95117

SHIPPING
INSTRUCTIONS

DELIVER BEFORE 3PM
SHIP VIA SMITH TRANSPORT

CUSTOMER
ORDER DATE
7/10/6

CUSTn~ER

ORDER
ACKNOWLEDGMENT

SALEsr1AN

ORDER NO.
S51320

NUMBER
103

ORDER DATE
7/10/6

NAME
G. PEREZ

OUR
SHIP DATE
7/18/6

LOCATION

ITEM
NUMBER

DESCRI PTI ON

UNIT
PRICE

OUANTITY
ORDERED

2A
2A
2A
2E
2C
2F
2F

391468
411116
411121
411173
411280
411390
411520

OCTAGON BOX 4 INCH
TI500 THINLITE SOCKET B
B506 SnCKET ADAPTER BRN
C151C SILENT SWITCH IVORY
A210 PULL CORD GOLD
1436 LAMP ENTRA~CE
A200 FIXTURE 5 LIGHT

.23
.60
.32
1.20
.42
.50
20.13

96
40
350
200
175
60
175

154
156
302
101
120
160
180

ORDER NO.
717690

BACK
ORDER

Figure 6. Order acknowledgment

All, or most, customer data is shown. Quantities and special-charge amounts, for all orders, are
totaled so that these figures can be tallied against the invoice control totals that will subsequently
be taken. Use of the customer order control list is important to accuracy during order entry;
the procedures are discussed in more detail under "Methods".

DA TE

CUSTOMER ORDER CONTROL LISTING

CUSTOMER
NUMBER
430975

430975
430975
430975
430975
430975
430975
430975
430975
430975
430975

ORDER INFORMATION

ZIP

RODRIGUEZ DESIGN HOMES
DIVISION OF S. W. STAPLES
8363 OLIVE STREET
SUNNYVALE, CALIF.
95117
DELIVER 3EFORE 3PM
VIA SMITH TRANSPORT
TI500 TWINLITE SOCKET B
B506 SOCKET ADAPTER BRN
C1Sle SILENT SWITCH IVORY
A210 PULL CORD GOLD
1436 LAMP ENTRANCE
A200 FIXTURE 5 LIGHT
FREIGHT CHARGE
PACKINr CHARGE
TOTALS

Figure 7. Customer order control list

ORDER NO.

ITEM ft.JO.

SPEC.
PRICE

QTY.

.32

40
350

09/14/--

SPECIAL CHARGE
OR CRED IT

717690
717690
717690
717690
717690
717690
717690
717690
717690
717690
717690
717690

411116
411121
411173
411280
411390
411520

200

175
60
175
18.95
45.00
1000

63.95

Customer Charges
Amounts charged to customers appearing on the invoice fall into three general categories: (1) prices of
items sold, (2) special charges for freight, handling, and other special services rendered, and (3) taxes.
Pricing may be simple or somewhat involved, depending on whether each item has a set price that
is always charged or whether item prices vary by customer. Special charges normally involve a flat
amount and are straightforward. Taxes are ordinarily determined as a percentage of the price, although
for certain excise taxes the sales amount may have no bearing on the amount of tax charged.
PR ICE OF ITEM SOLD

Each item transaction may involve three prices: (1) unit price,. (2) extended price, and (3) net sales
amount. In the simplest case, each item has a single-unit price charged to all customers, and there is no
discounting by customer or by item. The price is carried in the item record, and extended price (and
net sales amount) is determined by a simple multiplication of price times quantity. The occasional
price change is handled by changing the item record to reflect the new price.
Competitive conditions, however, ordinarily demand a pricing method more flexible than this.
F or example, an item either may have several unit price$ or it may have one unit price with several
different discount percentages to be applied; then, too, either the extended amount of each iine item
or the total billing amount can be discounted by a specific percentage. The class of customer determines
the price or discount percentage to be applied. The last digit of the customer number can be used to
indicate the class of customer.
Two principles must be observed in any method of pricing or price discounting. First, the method
should be uniform; where prices are based on customer (or item), then customers (or items) should be
classified so that all customers in a particular class get a certain price or discount, all customers in a
different class get a different price or discount, and so forth. Second, once the method is set up,
changes should be held to a minimum.
PRICE CONVERSION

The unit price for an inventory item is recorded in the item record. This price is usually based on the
customary ordering unit. In some cases, however, the unit price may be based on an inventory unit
larger than the customary ordering unit. For example, typewriter ribbons might be listed as $100 per
gross, although orders are taken only by the dozen.
If this type of pricing is in use, a conversion factor should be included in the item record. This
conversion factor will direct the computer to convert the unit price recorded to the actual price per
ordering quantity before extending the line item amount. In the example above, the conversion factor
would be 12. If conversion is required for one inventory item, it should be used for all items. For those
that require no conversion, a factor of 1 is used.
SPECIAL CHARGES

An invoice frequently includes other charges beyond those for merchandise sold. Such charges may be
for freight or shipping, special packaging or handling, and miscellaneous.
These charges are not included in the line item records but require a special record for each type of
charge for each invoice. All special charges can be totaled separately and included in the invoice total.

TAXES

Provision should also be made to calculate and include applicable taxes in the invoice total. The most
commonly used tax categories are excise, state sales, and local sales taxes.
Customers, items, and special charges may be classified as taxable or nontaxable with respect to each
tax. Where tax applies, the amount subject to tax should be totaled for each tax category and the
tax calculated on the appropriate total. Taxes should also be determined on an item-by-item basis so
that they may be shown on the invoice. To avoid rounding errors, however, line item tax figures
should not be used for the tax totals.
Each tax calculated by the computer should be determined as a simple percentage of the net sales
amount total for the items subject to tax. Certain commodities, however, may be subject to excise tax
based on some factor other than price. When this is the case, the unit tax amount in dollars and cents
should be precalculated and carried in the item record for each item. The precalculated amounts can
then be extended and totaled by the computer during invoice printing.
OTHER INVOICE CALCULATIONS

Two other calculations may be made when the invoice is printed. If cash discount is offered, the
amount subject to cash discount can be totaled and printed as part of the statement of terms. Only
item net sales amounts are included in the amount subject to cash discount; taxes and special charges
should be omitted. If cash-discounting policy varies by item, a code in the item record will indicate
whether the item is or is not subject to the discount.
Cost of goods sold may also be determined, and this amount is usually printed on a side tear slip that
is detached from the invoice before mailing. When cost is calculated, each item record must carry the
cost per unit.

Card Records
Order writing and billing procedures use various punched card records containing information that falls
into six categories:
• Customer mailing addresses and other unvarying customer data
• Customer shipping addresses (usually more than one per customer)
• Miscellaneous data, such as shipping instructions, to appear on the order acknowledgment and
the invoice
• Item transaction information, including the name, number, and price of each item ordered
• Special charges to be included in an invoice
• Summary information on each invoice printed
Data from the frrst five categories is used to print the invoice. This data is in several records that are
assembled into a customer order me to be processed by the computer. A single invoice summary
record is punched by the computer for each invoice printed, and the information in this record is
subsequently listed in the invoice register. Invoice summary records are also used to update customer
account balances, a function that is discussed under "Accounts Receivable". Physical handling of the
records for order writing and billing is covered under the heading "Methods".

CUSTOMER MASTER FILE

A customer master record (Figure 8) contains data that is generally not subject to change, such as:
• Customer number, name, mailing address, zip code, and phone number
• Codes indicating (where policy varies) whether the customer is liable for sales taxes, whether he
receives discounts, and whether items may be back-ordered for him
• Information of a miscellaneous nature, such as the name and number of the salesman serving him,
his location, his line of business, and credit limits
The customer number and mailing address information must be included in the master records for
every customer, as must the codes required for processing. Miscellaneous information should be
included if it is to be printed in the order acknowledgment or invoice or if it must otherwise be
conveniently available to clerical personnel. When the customer master me is established, care must
be taken to include only data that is expected to change infrequently or not at all.

iI!§I C: ~"E\R I
~

1 2 3 4

5 6 1

OUST'' ' ' '

91011 121314151611 1819202122232425262128293031 32

CUSTOMER ADDRESS LINE I

C~6E:

~ 11~llill~I''"~:;~'I;;I;;I~I~lil~lililll~lil'" ·". """ "I;
656661686910111213741516711819808182838485868188 8990919293949596

8
4

8 9 1011 121314151611 18192021222324252621 28293031 32

3334353631383940414243444546474849505152 5354 555657585960616263 64

8
4
2
~

1 2

3 4

5 6

8
4
2
~

2
1

65666768697071 12737475167118798081828384858681888990919293949596

Figure 8. Customer master record

SHIP-TO MASTER FILE

The ship-to master file (Figure 9) is essentially a second master customer file containing shipping
addresses. Since some customers have more than one receiving address and since the customer master
me has functions to which shipping addresses are not relevant, the ship-to master ftle is kept separate
from the customer master fil.e. When a customer order is assembled, the appropriate ship-to records
are taken from the master file for use in printing the order acknowledgment and invoice. Details and
variations are discussed under "Order Entry" .

SHIP- TO KAME
SHIP- TO LINE I

~iLI 2

34567

SHIP- TO LIKE I
(SHIP-TO LIKE 3)

1910111213141516171819 2021222324252627 2829303132

1
1
333435363738394041 42434445464748495051525354555657515960616263 64

II J~ I

65666768697011 72 73 74 757677 71 7910811283848586 8788 19 90 9192 9394 95 96

Figure 9. Ship-to master record

ITEM TRANSACTION RECORD

The billing file contains an item transaction record (Figure 10) for each item in the customer order.
The transaction record normally contains:
•
•
•
•

Item number and a description
Quantity ordered and shipped
Unit selling price, unit list price, and unit weight
Codes indicating discounts, back-order policy, sales tax, etc.

All item data printed on the order acknowledgment and invoice or needed for item computation must
be included in the item transaction record. If the item transaction records are also used for inventory
accounting and sales analysis, requirements for those applications should be considered.
ITEM MASTER RECORD

The item master record contains the data required for the item transaction records. For example, if an
item is a price-determination item, all pricesl percentages are included in the record; if tax class varies,
tax codes are included; quantity conversion codes, size, commission codes (for sales analysis), etc.,
may also be necessary parts of the item master record. It is also necessary to include additional data
on quantities, receipts, issues, vendor, minimum I maximum balances, etc., when the m.e is used in the
inventory control application. The item master fIle, therefore, may include several item master records
for each item.

ORDER NO.

RI C CUST. NUMBER

CLASS

ITEM NUMBER

TR S'MAN

SELLING PRICE

LIST PRICE

ITEM DESCRIPTION

ITEM DESC.

W. H. LOC.

QTY. SHIP

WEIGHT

~BI
~A

i ~ ""

C~~10B~~R

~1
~ B

s
~

2 3 4

5 6 1

ITEM COST

IIi

N°~~i:R
I

QTY. ORDER

N~1EB~R

~--

2
1
B
A

LIST
SELLING
PRICE
PRICE
: :

ITEM DESCRIPTION

e
4

333435363731 3i 4041424344 45 46 41 414950515253541516'115159606162'63 64

2 f-

~~~~.

91011 121314151611 11192021222324252621 21 29 30 31 32

:tuRlE
LOCATION

ITEM

WEIGHT

QUANTITY
SHIPPED

QUANTITY
ORDERED

COST

65666161691011121314117611181910118213141586811119 90 9192 9394 9196

Figure 10. Item transaction record

INVOICE SUMMARY RECORD

As each invoice is printed, the system punches an invoice summary record (Figure 11). These invoice
summary records are used to prepare the invoice register and as input to the accounts receivable
applications.

RIC

CUST. NO.

AIR

INVOICE NO.

INVOICE DATE

SPEC, CHG.

NET AMT.

CUSTOMER NAME

CUST. NAME

~ ~ ~§

C~~~OB~~R

1 2 34

~ A

TAX
AMT.

2 __

INVOICE

~NUV~m

;::2""

-I

§ A

:!!

TAX AMT.

DISC. AMT

INVOICE AMT.

5 6 1

DISCOUNT
AMOUNT
1

INDvm

AJt~NT:

AMOUNT
I

91011 1213141516111119202122232425262121293031 32

SPECIAL
NET
CHARGES
AMOUNT
: :

: :

cus,.. " .."

~~~u~ronngn~nl1n~"~U~M~~~"~"~U~"~H

Figure 11. Invoice summary record

~
A
B

CUSTOMER NAME

333435363131394041424344 45 46 41 4849505152 53 54511651515960616263 64

2
~

Methods
There are three basic customer order-handling methods, as illustrated in Figure 12. In the method
labeled A, the order is first routed to the data processing department where an order acknowledgment
is printed by the computer. The customer's copy of the order acknowledgment may be mailed or
included with the shipment, and the picking slip copy is sent to the warehouse. The warehouse
packs and ships the order and returns a shipping notice (usually the picking slip marked to indicate
which items were shipped) to the data processing department. An invoice is then printed on the
computer and mailed to the customer. This method has proved highly successful for a large number
of companies.

In method B the customer order is routed directly to the shipping department, and the ordered items
are packed and shipped. The customer's order, marked to indicate that shipment has been made, is
then sent to the data processing department, where an invoice is printed on the computer and mailed
to the customer. While this method eliminates some of the clerical handling of method A, it presents
at least two possible problems. The first is that no formal document is available to accompany the
shipment, and the second is that customer orders may lack uniformity and completeness (such as
customer- and item-identifying data). The control procedures necessary to ensure ordering uniformity
may offset the advantages of direct order handling.
In method C, the customer order is routed to the data processing department and an invoice is printed
on the computer before shipment is made. A copy of the invoice serves as the picking slip for the
warehouse. The customer's copy of the invoice is usually included with the shipment and there is no
need for the warehouse to return formal confirmation of shipment. In order to print the invoice
before the order is picked, the computer must be able to determine stock availability. This
automatic determination is performed through the use of item master record cards (one or more
cards for each item stocked) that contain accurate inventory balances. The degree of warehouse
inventory control required in this method is often not practical. Such practices as undershipping
and overshipping will obviously invalidate computer-maintained inventory balances.
While method C generally involves a greater time lag between receipt of the customer order and
shipment, it offers the advantages of uninterrupted processing of the order by the data processing
department and a definite notice to the warehouse of stock availability.

In methods A and B the invoice is printed after the shipment has been made, and these two methods
are called postbilling. They differ in that method A requires printing of an order acknowledgment and
method B does not. In method C, the invoice is printed before goods have been picked and shipped.
This is a pre billing system. Details of the work flow in the data processing department for both postand prebilling are discussed later in this section.

Customer's
order

Order
Acknowledgment

Data
processing
department

Goods Shipped
Warehouse

Shipping
notice

Picking
slip

Invoice

Goods Shipped
Warehouse

Shipping
notice

Invoice

Data
processing
department

Customer's
order

Invoice

Data
processing
department

Picking
slip

Goods Shipped
Warehouse

Figure 12. Basic order-handling methods

ORDER ENTRY

The establishment of the general order-handling method is one of the two key decisions in setting
up an order writing and billing system. The second decision involves order entry procedures within
the data processing department.
The customer order enters the data processing cycle in written form, on what is called a source
document. How this source document is written and who writes it vary, of course, from company
to company. In many cases, an order form, such as the one in Figure 13, is fuled out by the salesman
and delivered directly. In other businesses, salesmen or customers may telephone orders, which are
written down by an order clerk as they come in. Many distributors supply customers with preprinted
order forms as shown in Figure 14, and these forms are then mailed or delivered by customers
themselves. In addition to the obvious advantage that preprinted order forms permit the customer to
review the entire product line when he places the order, they also ensure that all item numbers are
transmitted accurately.
A company usually has control over the source document that is used, and the source document should
be designed so that it is convenient to handle and includes all necessary data. A well-designed source
document will simplify the entire order-entry procedure.

NATIONAL PRODUCTS
GREENVILLE, MASS.

ORDER

SOLD

INC.

OFFICE USE
ONLY

CREDIT DEPT. OK

TO~1 ·1=~'r!::7- e.

4;i~t;:~;I·

SHIP TO

DATE TO
BE SHIPPED
VIA

DATE

J-I-

CUST. ORDER NO.
oJ II
SALESMAN;:
PLEASE SHOW COMMODITY NUMBER
COMMODITY
DESCRIPTION
NUMBER

QUANTITY

j~. ~~..:;-~
,~. ~~.:r-v

IZ.~

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"'loll

1.4.

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CUSTOMER'S
AUTHORIZATION

ALL PRICES SUBJECT TO CHANGE WITHOUT NOTICE
DELIVERIES WILL BE MADE FROM NEAREST BRANCH

FigUre

13.

Order form

DZ -

DOZEN

GR -

GROSS

-HUNDHD

THOUSAND

CS -

CAS!

CT -

CARTON

SALES OFFICES ARE
LOCATED IN ALL
PRINCIPAL CITIES

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ICOST-CASE
0

PACK

DESCRIPTION AND SIZE

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ITEM
CODE

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STORE RECORD

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2

SUGGESTED RETAIL ORDER RIlCORDIlvOLUME POLIO

it G P A

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CODE NO.

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REG

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.s
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REG

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Figure 14. Preprinted order fonn

There are five basic steps in order entry, as illustrated in Figure 15:
1. Customer orders are received by a clerk who edits them for completeness, making sure that each
order includes the customer's number, item numbers, item quantities, and any other information
considered necessary. Where a customer has not supplied a purchase order number, an internal control
number is assigned. The clerk assigns transaction-type codes such as the ones listed below, so that
individual transactions can be handled appropriately during later computer processing.
Code

N
C
D
R

Transaction Type
Normal order
Cash sale
Drop shipment
Returned merchandise

Depending o.n the order-handling method used, the coding clerk mayor may not assign a common
batch number to all orders. In methods B and C, in which processing continues until the invoice has
been printed, a batch number is assigned. In method A, customer orders usually do not remain
together in the shipping department. Instead, the shipping notices are batched when they are
returned from the warehouse, and a batch number is assigned at that time.

2. All item quantities in the batch are totaled on an adding machine, and the adding machine tape is
clipped to the batch of customer orders. This total is later used (in step 5) as a check that all item
transactions shown on the orders have been correctly entered into the data processing system.
3. The customer order f:t1.e is assembled (as described below).
4. After the customer order f:t1.e is assembled in punched card form, it is processed on the System/3 to
print a control listing.
5. Item quantities are totaled during the control-listing run, and this total is checked against the adding
machine tape prepared in step 1. If the figures match, processing continues normally. If the figures do
not match, the error is found and corrected and the control listing reprinted if necessary. It is
important that there be a definite checkpoint for all orders entering the data processing system. It is
much easier to identify errors at the point of entry than to correct records later in the processing cycle.
CUSTOMER ORDER FILE ASSEMBLY

During step 3 in Figure 15, the customer order f:t1.e is assembled. Records for ship-to addresses are
optional for any customer and may be omitted when the ship-to address is the same as the sold-to
address. When they are omitted, the word SAME is printed in the ship-to area of the order
acknowledgment and/or invoice.
The customer ship-to records are ordinarily filed in sequence by customer number, with one pair of
records for each different shipping address. The records are pulled from the file and duplicated. The
customer's purchase order number is also punched into the duplicated records. The original ship-to
master records are then refiled and used again when that customer reorders. The newly created
ship-to records are used for only one customer order and are destroyed afterwards.
Customer master records are not assembled at this point in the procedures as there may be several
orders from the same customer.
The miscellaneous data record is normally completed for each order. Where miscellaneous data is
always the same for a customer (cash discount terms, for example), the miscellaneous data record may
be prepared in advance and f:t1.ed with the ship-to records.

If special charges apply to the customer order, one special-charge record is needed for each charge.
In most businesses the same special charges occur repeatedly; it is often feasible to establish a
prepunched special-charge f:t1.e, organized alphabetically by special-charge description. The appropriate
charge record is pulled for each order, and customer number and order number are recorded into it.
This method ensures accuracy in special-charge amounts and maintains uniformity in the wording of
special-charge descriptions.
Figure 16 illustrates the handling of the ship-to, miscellaneous data, and special-charge records.
Most of the records in a customer order f:t1.e are item transaction records, one for each item on the
order. Item transaction records are created through one of two basic approaches as illustrated in
Figure 17.

o
Figure 15. Order-entry data flow

Ship-to
master
records

Blanks

Duplicate
and punch
order number

Ship-to
master records
(original)

Ship-to
master records
(new)

Blanks

Special
charge
records

Punch
miscellaneous
data

Punch
customer no.,
order no.

MisceHaneous
data records

Skeleton
customer
order file

Figure 16 •. Ship-to, miscellaneous data, and special-charge record preparation

Specialcharge
records

Card
punch
approach

Tub file
approach
Customer

Customer

Blanks

Item
transaction
records

Punch

Item
transaction
records

To customer order
file for the order
Figure 17. Order assembly (item transactions only)

To customer order
file for the order

Card Punch Approach

I tem transaction records contain:
•
•
•
•
•

Customer number
Order number
Item number
Quantity
Transaction-type code

This provides basic item transaction records for inclusion in the skeleton customer order fue.
Additional data, such as item description and price, are reproduced into the item transaction
records from item master records later in the order processing cycle.
Tub File Approach

The tub file approach involves mes of prepunched item transaction records. A reservoir of records is
maintained for each item stocked. The records, containing item number, item description, price, and
appropriate codes, are pulled manually from the fue-one for each item on the customer order. Item
transaction records in the tub me are usually separated by divider cards to facilitate order pulling.
Figure 18 illustrates the organization of transaction and divider cards in a tub file.
Once item transaction records have been pulled from the tub file, they are completed by recording
customer number, order number, quantity, and transaction-type code. This additional data can be
included in the record that was pulled, or the pulled record can be used as a master. When the pulled
record is used as a master, its data is dupli~ated into a blank item transaction record, the variable data
is added, and the original record is returned to the tub me. The former method is usually preferable,
if for no other reason than that several orders in a batch may include the same item.
If item unit-price determination by the computer is not required, the use of tub files eliminates the
need for a later computer run to reproduce the appropriate price from the item master records into
the item transaction records.
A variation of the tub file method is called the warehouse bin plan, and is often used successfully in
situations where the customer order goes directly to the warehouse (method B, discussed earlier).
In the warehouse bin plan, there are no tub files as such. Instead, prepunched item transaction records
are kept in the warehouse, physically located with the items they represent. Shipping clerks pull item
transaction records as they pick the items on the order. The transaction records then accompany the
shipping notice when it is sent to the data processing department.
If the tub file approach is used, groups of item transaction records can have various item quantities
prepunched along with the other item data. Such a tub file is called a denominated tub file. The
quantity denominations may be arbitrary or conform to customer ordering habits.
The decision on the use of tub files versus prepunching is influenced by a number of factors: the
number of different items kept in stock, the inventory activity that an average order batch represents,
the number of order batches to be processed during the day or week, the allowable time lag between
receipt of the customer order and shipment of goods, and the number of clerks available to pull records
from the tub fue. Of these, inventory activity is probably the most important factor. The inventory
activity of a batch is:
the number of items in all customer orders in the batch
the total number of items carried in stock

Divider

----.-.t~~1

110523

( 110523
( 110523
( 110523
( 110523
( 110523

( 110523

Divider

----.-.t~~l
{
(

110522

( 110522
( 110522

----.....j.....1

110521

"'I

110522

( 110522
( 110522

Divider

110522

( 110521
( 110521

( 110521
( 110521
, 110521

Figure 18. Tub file organization

After an order has been assembled in punched card form, no matter which method is used, it is placed
in a batch fIle until all orders in the batch are ready for computer processing. How frequently batches
are processed depends on the requirements of the business, the number of customers, the number of
items kept in stock, and the processing methods used. A company carrying a relatively small number
of items and using a postbilling system might process several batches a day. Another company,
carrying a large, diversified inventory, but with a less urgent requirement for rapid handling of
customer orders, might process only three batches a week.
The following two sections discuss batch processing for the two basic order-handling methods
(postbilliilg and prebilling) mentioned earlier. The steps are described in sequence as they occur.

POSTBILLING

Figure 19 shows the first five steps of the procedure for a postbilling system (method A):
1. Customer orders are assembled in punched card form in a batch fIle.
2. The control list of orders is printed. During the printing of the control list, the computer separates
the item transaction cards from the other order cards. The ship-to address, miscellaneous data, and
special-charge cards are held aside for step 4.
3. This step is required if tub fIles are not used, or if item unit price is determined by the computer.
During this step, all item transaction records are sorted into item-number sequence. They are then
processed against the item master fIle, and the computer punches data from appropriate item master
records into each item transaction record. All item data that will be needed for invoicing and later
for sales analysis and inventory control is punched at this time. This data includes verbal description
of the item, words or abbreviations for its quantity or weight units (box, crate, dozen, oz, lbs, for
example), codes for warehouse location, product classification, taxability, applicability of discounts,
unit price, cost, and weight. Item unit prices may be computer-determined during this step as
described earlier.
4. The item transaction records are first sorted by warehouse location sequence, and then, together
with the order data records are sorted into order number and customer number sequence. The sorted
order records and the customer master records are processed to print order acknowledgments.
Customer master records may be either pulled by hand or selected by computer during this step.
In general, for small batches, pulling cards by hand is usually faster. Where a batch represents orders
from a large percentage of customers, computer selection may be faster.
A copy of the order acknowledgment (with item transactions listed in warehouse-location sequence)
is used as a picking slip. The customer copy of the order acknowledgment and the picking slip are
usually sent to the warehouse, where the goods are packed and the order acknowledgment included
with the shipment.
S. The customer order records themselves are placed in a holding fIle, and no further processing is
done until shipment confirmation is received.
Order-handling methods A and B differ only slightly in their processing workflow. In method B
(in which customer orders are fITst handled by the shipping department and goods have been shipped
by the time the orders enter the data processing cycle), no order acknowledgment is printed in step 4,
and customer orders continue directly to invoicing instead of being placed in a holding fIle.

OW
fIle

(
~

Item
transaction
records

{
Item
master
records

System/3
print customer
order control
list

0)
.....

(
Order
data
records

"
Customer
order
records

W
file

Figure 19. Flowchart for order entry and order acknowledgment printing

Customer
master
records

System/3
1) sort by whse. loc.
2) sort by cust. ord.
no. and cust. no.
3) print ord. ack.

(

Control
list

(

"
Item
transaction
records

....

(

...

System/3
1) sort by item
number
2) reproduce
item data

-... .....
~

Customer
order
records

.....

Order
acknowledgments

........-

Figure 20 shows the processing sequence after orders have been shipped.
6. The picking slips are returned from the warehouse marked with quantities shipped. The appropriate
customer order records are taken from the holding fue, and quantity shipped is punched for each item
transaction. Miscellaneous data, such as total shipment weight and additional special charges, may be
added. Invoices to be processed together are assigned a common batch number at this point.
Order-handling method B omits this step since the original punching of the order includes quantities
shipped.
7. The customer order records are then used to print the invoices. During this processing the invoice
summary records, one for each invoice, are punched by the computer. During invoice printing, the net
sales amount (extended price less any extended-price discount) is calculated for each item transaction
and punched into each item transaction record. Item transaction records are again separated by the
computer from the customer order me for later use as input to inventory accounting and then sales
analysis. The customer data records may be filed or destroyed.
8. The invoice summary records are used to print the invoice register. Once the invoice register is
printed, the invoice summary records are used for accounts receivable processing. All invoice summary
data shown in the invoice register, and all customer charge data needed for accounts receivable, must be
included in the invoice summary record when it is produced during billing.

Shipping
confirmations

Customer
order
records

o~
Blanks

Item
transaction
records

System/3
print
invoices

Customer
data
records

Invoices

Invoice
summary
records

System/3
print invoice
register

Invoice
summary
records

To inventory
accounting and
sales analysis

File or
destroy

Figure 20. Flowchart for invoice writing after shipment

To accounts
receivable

Invoice
register

Back Orders
When insufficient stock is available to fill an order, the item may be placed on back order for the
customer. If back-order processing is done, the computer punches a back-order record during invoice
preparation for any item whose quantity shipped is less than the quantity ordered. Back-order records
are then manually fued, and held until stock has been received. This procedure is shown in Figure 21.
The back-order me should be in item-number sequence. When the item is received in stock, all backorder records for the item are pulled manually from the fue. Customer number, purchase order
number, etc., are determined from the back-order record itself, and a customer order fue for the
customer back order is reassembled for entry to the data processing cycle in essentially the same
manner as has been previously described.
Preventing back-ordering is sometimes desirable. For example, a discontinued item should not be
placed on back order. Back-ordering of an item may be prevented by an appropriate code in the item
transaction record. Likewise, back-ordering may be prevented for any customer by a similar code in
the customer master record.

Miscellaneous Transactions
Miscellaneous transactions that affect order writing and billing include cash sales, first orders for new
customers, merchandise returned, and credit given where merchandise is not returned.
Cash Sales

Since sales made for cash are usually handled by counter clerks, they do not follow the normal orderhandling procedures. A cash-sale summary card (an invoice summary with a customer number of
all 9's) is punched for the day's total cash transactions. The cash-sale summary record is inserted
manually with the invoice summary cards produced during invoicing and then listed as part of the
invoice register.

If the computer performs inventory accounting or sales analysis that includes cash sales, individual
item transaction records are required. The item transaction records are assembled in the same manner
as for noncash customers; but the customer order me for a cash sale does not include shipping addresses,
miscellaneous data, or special charges. Actual selling price (unit price) is punched for each cash-sale
transaction. Cash-sale item transaction cards are included in the first three steps of the procedure for
a postbilling system shown in Figure 19 and are then used as input to inventory accounting and sales
analysis.
New Customers

When an account is opened for a new customer, customer master records must be punched. The master
recordsare included with the customer's frrst order in the batch file and are listed on the customer
order control listing so that all punched data can be verified during the batch audit. After the control
listing has been printed, the new customer master records become part of the customer master file.

If the mailing address and shipping address differ, two pairs of ship-to records must be punched for the
frrst order for the new customer. One pair is manually filed in the ship-to master fue. The other pair,
containing the purchase order number, is processed as part of the billing rue.
Miscellaneous data, item transactions, and special-charge records for the frrst order are assembled in the
same way as for other orders.

Notice of
stock
received

Back-order item
transaction
records

Customer
order
records

Figure 21. Back-order processing

Returned Items
When merchandise has been returned for credit, a skeleton customer order file containing one
miscellaneous data record and item transaction records for the returned items is assembled. The item
transaction records are punched with negative amounts for quantity ordered and quantity shipped.
If the actual unit selling price is known, this is also punched as a negative amount. The records are
processed in the same way normal customer orders are, and an invoice ( credit memo) is printed showing
credit for the returned items, less any discount originally given, plus credit for taxes originally charged.
Credits
Many companies give credits for merchandise damaged in shipment or for other situations that arise in
the course of doing business. Credits are treated as negative special charges and are processed in the
same way as normal customer orders. The printed invoice shows a credit amount.
In some instances, particularly where a shipment has been partially damaged and replacement merchandise is to be sent, the exact credit amount cannot be conveniently determined. In such a case, the
replacement merchandise is treated as if it had been ordered normally. The customer's number is noted
at order entry, and his invoice is removed from the batch of invoices printed. At this point, the exact
credit amount is known, and a journal entry record is punched as an adjustment to accounts receivable.

PREBILUNG
In a prebilling system the customer's invoice is printed before goods are picked and shipped. The
method is workable only in a tightly controlled inventory environment, since the computer must maintain stock balances that reflect the actual warehouse inventory.
Figure 22 illustrates the fIrst five steps in order handling for a prebilling system.
1. Customer orders are assembled in punched card form in a batch fIle.
2. The control list of orders is printed. As this list is printed, item transaction records are separated
from the other records in the customer order fIle. The ship-to address, miscellaneous data, and specialcharge records are held aside for step 5. Item transactions go through steps 3 and 4, the sort/reproduce
step and the inventory accounting step. Step 3 is required if tub files are not used or if item unit price
is determined by the computer.
3. All item transaction records are sorted into item-number sequence. They are processed with the
item master record fIle, and the computer punches data from appropriate item master records into
each item transaction record. All item data that will be needed for invoicing, and for later sales
analysis, is punched at this time. This data includes a verbal description of the item, words or
abbreviations for its quantity or weight units (box, crate, dozen, oz, lbs, for example), codes for
warehouse location, product classification, taxability, applicability of discounts,unit price, cost,
and weight. Item unit price may be computer-determined during this step, as described earlier.
4. The computer determines, for each item transaction, whether enough stock is on hand and punches
the quantity that will be shipped into the item transaction record. The item master rue's stock balances
are updated at this time, and a stock status report may be printed, listing the inventory activity for the
batch. (This procedure is described in greater detail under "Inventory Accou~ting" in this manual.)
5. The item transaction records are first sorted by warehouse location and then, along with the
customer order data records, are sorted by order number and customer number in preparation for
invoicing.

oy
1

file

(
/

Customer
order
records

,....

System/3
print customer
order control list

Control
list

......
.........

(
/

Item
master
records

.....

8 -.

I-

Item
transaction
records

•

Customer
order data
records

,....

System/3
1) sort by item no.
2) reproduce
item data

Inventory
accounting
u

(
/

( Other transactions
/

Item
master
records

Item
transaction
records

•

8.
...

....

System/3
update inventory
and print stock
status report

...

.
...

(
/

Item
transaction
records

Stock
status
report

System/3
sort by customer
order no. and
customer no.

-.....

(
/

Figure 22. Preparation for invoicing before shipment

+
Customer
order
records

Figure 23 shows the completion of the data processing cycle for billing.
6. This step is the order-acknowledgment option. An order acknowledgment can be printed, if
required, from the customer order m.e. For most companies, carbon copies of the invoice serve as
the picking slip, office copy, and salesman's copy.
7. Invoices are printed from the customer order fue, one for each invoice, are punched by the
computer. A copy of the invoice, with item transactions listed in warehouse-location sequence, is the
picking slip. The invoice customer's copy and picking slip are usually sent together to the warehouse,
where goods are packed and the invoice included with the shipment. During invoice printing the net
sales amount (extended price less any extended-price discount) is calculated for each item transaction
and punched into each item transaction card. Item transaction records are automatically separated
from the me for later input to sales analysis.
8. In this step the invoice register is printed. This is a listing of all invoice summary cards for the batch.
Once the invoice register is printed, invoice summary cards are used for accounts receivable processing.
All invoice summary data shown in the invoice register and all customer charge data needed for accounts
receivable must be included in the invoice summary record when it is produced during invoicing.
9. During the printing of the invoice the system separates item transaction records and customer data
cards. Item transaction records are used as input to sales analysis. The customer data records may be
fued or destroyed.

Back Orders
When insufficient stock is available to fill an order, the item may be placed on back order for the
customer. If back-order processing is done, the computer punches a back-order card, during the
inventory accounting run, for any item whose quantity shipped is less than the quantity ordered.
The billing file for the order, containing the shipping address, miscellaneous data, and unshipped item
transaction records is then reassembled and placed in a back-order fue (Figure 24).
The back-order fue is periodically reprocessed as part of a daily batch of new orders, usually after a
shipment has been received for an item that has been out of stock. Where back orders still cannot be
filled, the items remain on back order for processing at a later date.
Preventing back-ordering is sometimes desirable. For example, a discontinued item should not be
placed on back order. Back-ordering of any item can be prevented by an appropriate code in the
item record. Likewise, back-ordering can be prevented for any customer by a similar code in the
customer master record.

Miscellaneous Transactions
Miscellaneous transactions that affect order writing and billing include cash sales, frrst orders for new
customers, merchandise returned, and credit given where merchandise is not returned.
Cash Sales

An item transaction record that includes unit selling price is punched for each item sold over the counter.
Cash-sale transactions are handled in essentially the same way as other customer orders, but the
customer order fue for a cash sale does not include shipping addresses, miscellaneous data, or special
charges. Cash sales are removed from processing at step 5 in Figure 22 and held for later input to sales
analysis.
Once each day, a cash-sale summary record (an invoice summary with a customer number of all 9's) is
punched for the day's total cash transactions. The cash-sale summary record is inserted manually with
the invoice summary records produced during invoicing and then listed as part of the invoice register.
32

Customer
order
records
~

Optional Step

------------4-----------------_
"

1-----...:-

Customer
master
records

System/3
print order
acknowledgments

•

1-----1.......

Order
acknowledgments

~--------~~

Customer
order
records

L
L

Customer
master
records

System/3
print
invoices

...

Invoices

Invoice
summary
records

\
Invoice
register

System/3
print invoice
register

Item
transaction
records

To Sales Analysis

Customer
data
records

File or Destroy

Figure 23. Flowchart for invoicing before shipment

........

Invoice
summary
records

To Accounts Receivable

Notice of
stock
received
Back-order
item records

Figure 24. Back-order processing

New Customers

When an account is opened for a new customer, customer master records must be punched. The master
records are included with the customer's first order in the batch file and are listed on the customer
order control listing so that all punched data can be checked during the batch audit. After the control
listing has been printed, the new customer master records become part of the customer master m.e.
If the mailing address and shipping address differ, two pairs of ship-to records must be punched for the
fIrst order for the new customer. One pair is manually filed in the ship-to master fIle. The other pair,
containing the purchase order number, is processed as part of the billing flle.

Miscellan(!ous data, item transactions, and special-charge records for the fIrst order are assembled in the
same way as for other orders.
Returned Items

When merchandise has been returned for credit, a skeleton customer order flle containing one
miscellaneous data record and item transaction records for the returned items is assembled. The item
transaction records are punched with negative amounts for quantity ordered and quantity shipped.
If the actual unit selling price is known, this is also punched as a negative amount. The records are
processed in the same way normal customer orders are, and an invoice (credit memo) is printed showing
credit for the returned items, less any discount originally given, plus credit for taxes originally charged.
Credits

Many companies give credit for merchandise damaged in shipment or for other situations that arise in
the course of doing business. Credits are treated as negative special charges and are processed in the
same way as normal customer orders. The printed invoice shows a credit amount.
In some instances, particularly where a shipment has been partially damaged and replacement
merchandise is to be sent, the exact credit amount cannot be conveniently determined. In such a case,
the replacement merchandise is treated as if it had been ordered normally. The customer's number is
noted at order entry, and his invoice is removed from the batch of invoices printed. At this point, the
exact credit amount is known, and a journal entry card is punched as an adjustment to accounts
receivable.

INVENTORY ACCOUNTING
Many businesses have a substantial portion of their assets represented in inventory, and accurate
inventory accounting plays an important part in profitable operation. The most common inventory
accounting application involves a computer-maintained item master fue that is updated to reflect all
inventory activity. In addition to the item identification and quantity on hand, inventory records may
also include such information as quantity currently on order, value of on-hand inventory, unit cost,
dates of the most recent issue and receipt, total quantity issued to date, and minimum and maximum
balances. This method is called balance-forward inventory accounting-one of the cards comprising
the master record for each item is essentially a balance-forward record. Inventory accounting ties in
closely with billing (it is an integral part of a pre billing system, in fact), and in most cases the
applications are used together.
I nventory Reports

Two main reports are produced during inventory accounting: the stock status report and the stock
transaction register. The stock status report provides management with information on all inventory
activity and notes those items whose balances have fallen below the minimum acceptable level so that
immediate action can be taken. When required, all items can be listed on the stock status report to
give a complete statement of all merchandise the company handles. The stock transaction register is
primarily a control listing of inventory transactions that do not involve sales to customers. It enables
a check to be made that all receipts, purchase orders, adjustments, and transfers have been entered
correctly so that they will be properly recorded.
STOCK STATUS REPORT

A stock status report, like the one shown in Figure 25, is printed whenever inventory is updated and
gives detailed information on all active merchandise. Ordinarily, the fITst line for each item in the
listing shows standard descriptive data on the item, including its number and an identifying description.
The on-hand and on-order balances are also shown. Subsequent lines give the detail on current
transactions involving the item: purchase orders sent to suppliers, receipts from suppliers, sales to
customers, etc. The quantities remaining on hand and on order are shown on the line below the last
transaction listed. Whenever shipments reduce stock below the item's predetermined minimum balance
or receipts push the current balances above the predetermined maximum, the exception condition is
noted on the report.
Maximum and minimum balances can be carried in the item master fue for all items so that these
checks can be made by computer whenever the inventory balance changes. Minimum levels can be set
either for the item's normal reorder point or for the danger level-the point at which outstanding
purchase orders must be expedited. The meaning of "minimum level" should be the same, however,
for all items. Maximum balance points are usually reached less frequently. Companies can set a
maximum balance figure to indicate that outstanding purchase orders should be canceled.
The stock status report also has value as an aid to management review of inventory at the end of an
accountjng period or when physical inventory is taken. At this time, it is printed to show the current
status of all items (with no transactions). If date oflast issue or sale is maintained by computer, it is
good practice to include this date as part of the item's descriptive information. The date is not so
important during regular inventory accounting runs since only active items are shown, but when the
complete inventory is listed the information tags slow-moving items so that appropriate action can be
taken. Inventory value can also be printed and totaled on the stock status report.

STOCK TRANSACTION REGISTER

The stock transaction register (Figure 26) is a control listing of all stock transactions (transactions other
than issues and returns). Each transaction is listed, and totals are normally taken on quantities and cost
amounts. These figures are checked against totals taken from the original stock-transaction documents
to ensure that all transactions have been correctly punched. Details on the clerical handling of stock
transactions are given under the heading "Methods".

DATE 2114/--

STOCK STATUS REPORT

ITEM NO.

DESCRIPTION

411116

B500 TlHNLITE SOCKET BLUE
ADJUSTMENT
RECEIPT
ISSUE

QUANTI TY
ON HAND

QUANTITY
ON ORDER

458

500

TRANSACTION
QUANTITY

950*
411122

B506 SOCKET ADAPTER BROWN
ISSUE
ISSUE
ISSUE
C151C SILENT SWITCH IVORY
RECEIPT

A210 PULL CORD GOLD
ISSUE
ISSUE

.35
.35
.37
.36
.36

160.30
14.70
185.00
18.00342.00

203810-

.19
.19
.19
.19
.19

61.75
3.807.221.9048.83

150

1.16
1.20
1.19

58.00
180.00
238.00

16
30

2.25
2.25
2.25
2.25

139.50
36.00
67.50
36.00

BEG. INV.
CHANGE
NEW VALUE

EXTENDED
COST

42
500
50-

16"
FINAL TOTALS

AVERAGE
UNIT COST

150

200*
411254

QUANTITY
B/O

325

257*
411173

PAGE

LAST
RECEIPT

2/11/--

12119/--

2/10/--

111171--

LAST
ISSUE

MIN.
BAL.

MAX.
BAL.

800

1600

300

800

2/14/--

2/11/--

UNDER
100

200

165

2/03/--

2/09/--

48295.26
700.08
48995.34

Figure 25. Stock status report

STOCK TRANSACTIO!'! REGISTER
PAGE

()7125/-TRANSACTION
DATE

TRAN
CODE

I TEr~
NO

COST
DESCRIPTIrN

QUANTI TV

AI~OUNT

VENDOR
NC

P.O.
NO

RECE I VINr,
NO
103764

07/23/--

413010

CH001'PR BOX 100A FLUSH

07/23/--

412146

CH148 BREAKER 15A

100

')7/23/--

411116

1500 TWINLITE SOCKET B

500

175.00

103767

07/24/--

503029

MOTOR L/2 HP 60 CVC

18.50

103762

07/24/--

317802

TERM INAL CLI P

100CR

50.00CR

$ 720.00

10927

115902

07/24/--

326917

TERr·, H!AL BAR

100

75.25

103766

07/24/--

411121

1506 SOCKET ADAPTER BRmlN

400

76.00

103765

07/24/--

412997

CH173 BREAKER 30A

07/24/--

413088

C1l176 BREAKEr. 60A

07/24/--

411174

C151 SILENT SWITCH BRmlN

07/24/--

413090

CHOOS BR BOX 150A

07/24/--

718326

FC803 FUSE 15A

Figure 26. Stock transaction register

60CR

159.00CR

40
200
10
200

27618

A5903

27618

15903

103763

158.00

103768

Inventory Costi ng

Inventory cost figures are often maintained by computer to cost issues and to report the value of
inventory on hand. The most frequently used inventory costing procedures are the average-cost
method and the last-cost method. A third method-standard cost-proves workable for many
companies, and although standard cost is not computer-maintained, it can be used without difficulty
within the framework of the balance-forward inventory application. First in first out (FIFO) and last
in first out (LIFO) methods are not usually incorporated within this method of inventory accounting
and are not discussed in this publication. For reference to FIFO and LIFO procedures see IBM
System/3 Guide to Inventory and Material Accounting (E20-0321).
AVERAG E COST

The average-cost method is normally used by distributors whose merchandise cost fluctuates, where
temporary cost changes are not relevant to the company's long-range planning, and where a relatively
high or low current item cost does not truly reflect the item's normal cost or the inventory value.
The method is commonly used by companies dealing with raw materials or similar commodities.
Manufacturers, produce distributors, and lumber dealers are typical users of the average-cost method.
In addition to quantity on hand, item records must contain the average unit cost and the cost amount.
The average unit cost is the cost amount divided by the on-hand quantity and is recalculated whenever
a stock receipt is entered. Cost amount is the total value of the inventory on hand (cost of beginning
inventory + cost of receipts - cost of issues). This is adjusted whenever the inventory balance changes.
For example, 250 units on hand of an item with a current cost price of 70¢ would represent an item
cost amount of $175. When an additional 1000 units are received at a total cost of $750 (75¢ each)
the total cost amount becomes $925. The item's unit cost price is then carried at 74¢ -the average
unit cost of 1250 units with a cost amount of $925.
The average-cost method is best suited to situations where cost differs with each receipt of an item
and where cost fluctuates both up and down. Over a period of time, the average-cost method
ordinarily gives cost figures that in most cases approximate the FIFO method of costing-and with
considerably less clerical effort.
LAST COST

Use of the last-cost method of inventory costing usually gives good results for inventories whose costs
are relatively static, where there is no regular up-and-down fluctuation in supplier's prices. The cost
carried for an item reflects current market conditions, and in this sense accurately represents the
current replacement value of the merchandise on hand.
For the last-cost method, the item master record contains the quantity on hand and the item unit cost
price. When stock is received, the computer simply replaces the previous unit cost price in the item
record with the new unit cost. The item's cost amount (quantity x cost price) may also be carried to
show the item's current inventory value, but this is not a necessity for the unit cost to be maintained.
If cost amount is included, it must be kept in mind that this figure may not represent the actual cash
outlay for the inventory on hand; it represents the replacement value of goods at the current market
price.

STANDARD COST

Standard cost is used primarily by manufacturers whose inventory of fmished goods includes a valueadded cost in addition to the cost of raw materials. Each item's standard cost is determined by the
company's accounting department, and ordinarily reflects wage rates, equipment usage, and other
direct or indirect costs, as well as the cost of materials. An item's standard unit cost is punched when
the item's master record is punched. When a cost is reevaluated and changed, the item record is
repunched.
Standard cost is often used in situations where neither average cost nor last cost reflects the inventory's
true value. Costs should be subject to regular review, of course, but it should be kept in mind that
cost changes will require the punching of new records, and so standard cost should be used only where
management expects item costs to remain constant for substantial time periods.
COSTING THE INVOICE

If the card punch method is used for customer order entry during order writing and billing, the cost of
goods sold can be shown on the invoice (usually on a tear slip detached before mailing). The figure
used for an item's cost is the unit cost carried in the item's master record.
If the tub fue method is used, the item cost per unit must be punched in each item transaction record
in the tUb ft1.e in order for cost to be shown on the invoice. With the balance-forward inventory
methods, tub fues, computer-maintained costs, and costing of the invoice are not compatible, and it
is recommended that these three options not be used in combination.
Cost of goods sold and other invoice calculations are discussed in the preceding section.

Card Records
Inventory accounting uses card records having three distinct functions:
• Item master records contain descriptive information and balances for every item the company
handles
• Item transaction records represent sales of individual items (and merchandise returned)
• Stock transaction records carry data on inventory changes not involving specific customers-receipts
from suppliers, orders placed, and adjustments
All of these records are used when inventory is updated and the stock status report is produced. The
item master fue is also used in the order writing and billing procedure with the punch order entry
method, or with the tub fue method when price determination is performed by the ~omputer. The
same item transaction records needed for inventory accounting are used for billing and for sales
analysis, and their functions in those areas are described elsewhere in this manual.

ITEM MASTER FILE

The item master records contain descriptive data that is generally not subject to change and balance
information that is revised regularly by the computer. The constant information usually includes:
• The item's number, an identifying name or description, a code or abbreviation indicating its
location i~ the warehouse, its product-line classification, its unit weight, and predetermined
figures indicating maximum and minimum inventory levels
• Unit price data-either a single unit price, a set of unit prices applicable to different customer
classifications, or a list price with discounts applicable to different customer classifications
• Codes indicating (where policy varies) whether the item is taxable, whether it is discounted when
sold, whether it is subject to cash discount, and whether it may be back-ordered
• Information of a miscellaneous nature, such as the number of the vendor supplying the item or
the number of the department producing it, and a code indicating the sales commission associated
with the item
Much of the item master data-the price information and codes-is used for billing procedures. If the
item master fue is not used for billing, the fue needs only the descriptive information that is to be
printed in the stock status report, and any other data used in inventory accounting.
The master fue also includes item balance data, such as:
• The quantities on hand and on order and the total quantity issued to date
• Unit cost and current inventory cost amount
• The dates of the last issue a~d the last receipt of the item
Quantity on hand is revised by the computer whenever a transaction changes the inventory balances.
If quantity on order is to be maintained, purchase orders for merchandise are punched as stock
transactions and the computer records them. When a shipment arrives, quantity on order is reduced
and quantity on hand increased by the receipt quantity.

If the number of issues to date is included in the item master records, this figure is kept up to date by
computer for all items.
ITEM TRANSACTIONS

Item transaction records are used to record item sales to customers. For inventory accounting purposes,
the record should carry an item number, the item quantity shipped, and a code indicating the type of
transaction and whether on-hand inventory is increased, decreased, or unchanged. Suggested
transaction-type codes are listed below.
Code

0
0
0

Description

Action

Normal Order

- Decrease Inventory

Cash Sale

- Decrease Inventory

Filled Back Order

- Decrease Inventory

Drop Shipment

- No Change

Returned Merchandise - Increase Inventory

Where billing is done, the item transaction recordomust also include whatever item information is to
be shown on the invoice. Sales analysis may also require certain additional information such as
product class.
STOCK TRANSACTIONS

Stock transaction records are used to record receipts of stock from suppliers, purchase orders for
stock, and inventory adjustments. The record carries the item number, the quantity involved, and a
code indicating the type of transaction. The suggested stock-transaction codes are:
Code

0
0
0

Description

Action

Stock Received

- Increase Inventory

Adjustment

- Decrease or Increase Inventory

Purchase Order

-No Change

r lethods
Clerical procedures for inventory accounting are straightforward, as shown in Figure 27. Stock
transactions enter the data processing cycle in written form: a bill of lading, a notice from the
warehouse that a shipment has been received, or a copy of a purchase order sent to a vendor. Item
transactions enter in punched card form from the billing procedure, either before the invoice is
printed (pre billing) or after the invoice is printed and goods are shipped (postbilling).
The frequency of posting stock transactions ordinarily depends on the company's methods of
customer order handling. Where a postbilling system is in use, inventory transactions-both customer
sales and stock receipts-are normally recorded only once a day and sometimes as infrequently as once
or twice a week. Infrequent inventory processing is workable, as long as it is not necessary for
inventory balances to be constantly up to date. For companies taking telephone orders (where it is
often necessary to check the item m.e to see whether an order can be filled) or for companies
depending on the regular minimum-balance checking that inventory accounting provides, daily inventory processing is recommended.
In a prebilling situation, inventory accounting takes place and a stock status report is printed with
every customer-order batch processed. For pre billing, absolutely current stock balances are a
necessity, and stock transactions are held only briefly before they are recorded. Figure 27 is a
flowchart of the inventory accounting procedure.
In step one, the stock-transaction source documents are edited by a coding clerk who makes-sure that
item numbers and quantities are correct and that any other necessary data has been included. The
coding clerk dates each transaction and adds the appropriate transaction-type code.
In step two, control totals are taken on all incoming transactions: the item quantities and the total
cost of items received (ifrecorded for costing). The figures.taken at this point will be checked against
the totals subsequently taken by computer as a safeguard that all transactions have been correctly
recorded.

Purchase
orders
Stock
receipts

Stock
transaction
records

Input from Billing

Stock
transaction
register

Print stock
transaction
register

Item
transaction
records

Stock
transaction
records

Stock
status
report

Update
inventory;
print stock
status report

Item
master
file

Item
transaction
records

Input to Billing
or Sales Analysis

Stock
transaction
records

Input to Accounts Payable
or General Ledger

Figure 27. Flowchart for inventory processing

Stock transactions are recorded in step three, one card for each item received or ordered. Each
card includes, at the minimum, the item number, the quantity received (ordered), and the
transaction-type code.
For receipts, the transaction date and the total cost are also recorded for each item if this data is
needed for inventory accounting. Other informative data-such as vendor number and the number
of the company's purchase order-may be included if it is to be shown in the stock transaction register
or the stock status report.

In step four, all stock transactions are sorted and listed by computer. Totals are ordinarily taken on
item quantities and costs, and these totals are compared ( step five) with the adding machine totals
taken previously, as illustrated in Figure 28. If the totals match, processing continues normally.
If they do not match, the error is found and corrected and the stock transaction register is reprinted
if necessary. The control-total audit at this early point in processing provides an opportunity for
errors to be caught before they can be recorded in the master file.
After the stock transaction register is printed, stock transactions are combined with the item
transactions from the billing procedure and the complete set of transactions is processed against the
item master file (step six) to update item balances, costs, and dates last active, and to print the stock
status report. Processing in this step includes:
1.
2.
3.
4.

Sorting item transactions into item number sequence
Merging the item transactions and stock transactions
Match-merging the combined transactions with the item master file
Updating the active item master records by punching the new balance-forward information into
blank cards as the transactions and master records are processed and the stock status report is
printed
5. Merging the updated item master records back into the item master file

After the inventory has been updated, stock transaction records may be separated by type. The orders
may be filed for reference in the stockroom and the receipts may be held for use in accounts payable
or general ledger applications. The item transaction records may be involved in further processing in
the billing and sales analysis applications.

Nur~BER

ITEr1

VENDOR
NUMBER

TRANS.
TYPE

40390
12520
28615
51375
36465
48360
42875
10850

19005
37410
37410
28600
28600
13625
13625
13625

P
R

TOTALS

Figure 28. Balancing control totals

P
P

R
R
R

QUANTITY
500
7(10
2500
100
2000
550
1500
2000

COST
EX TH~S I ON
910.00
925.00

Physical Inventory
A regular physical count of the merchandise on hand is a necessity in any inventory accounting
system. How often physical inventory is taken depends on company policy, the number of different
items the company stocks, and the data processing methods it follows. Where pre billing is used for
customer orders, the balances carried in the item master me must reflect the actual balance on hand in
the warehouse, and a monthly physical inventory is recommended.
By reproducing information from the item master me, the system can provide physical inventory
records, showing the item number and quantity on hand, to be used by the employees who take
inventory. Figure 29 shows the first part of the procedure. The entire item master file is processed by
the stock status program, which prints a stock status report showing all items, and produces item
balance records (Figure 30) to be handed out to the inventory staff.

Blanks

Item
master
file

List all
inventory
items

Item
balance
records

Figure 29. Flowchart for producing cards for physical inventory

Stock

I
'=

231201351
CL~ssl STOCK NUMBER

1,2-326

II
U/H

SCREWDR IVER, PHILLI PS,
DESCRIPTION

LOCATION

IN,MEDIUM
SIZE

A
STOCK
NUMBER

1 134561

LOC~TION

QU~NTlrt

8910 11111314151611 181910111113141516111819303131

ITEM COUNT

COUNTER

4
2
1

CHECKER

Figure 30. Physical inventory record

During physical inventory, the item balance records are used as inventory tickets. As each item is
counted, its actual balance is written down on the balance card. The cards are then returned to the
data processing department for the recording of any adjustments necessary.
Figure 31 shows the recording of adjustments-essentially the same steps shown earlier (Figure 27)
for entry of normal stock transactions.
The coding clerk examines the balance cards, discarding those that show warehouse inventory to be
the same as the current balance in the item master file. Where there is a difference, the coding
clerk notes the amount of the difference on the balance card so that an adjustment can be made.
When all cards are in, the adjustment quantities are totaled, and stock transaction records are
punched for each item to be adjusted. The transaction register is then printed, the totals are
checked, and inventory processing continues as it normally would for regular recording of stock
transactions. The stock status report that is printed gives management an opportunity to review
all inventory adjustments.
The procedure described above can be followed to put the inventory accounting application in
initial operation. When the item master me is converted, the item quantity on hand is left blank
in all records. Item balance records are then punched by computer, physical inventory is taken,
and the quantities are recorded. Where costing is done, the stock transactions are recorded as
receipts (not as adjustments) so that the current inventory value may be included as part of the
stock transaction.

Item
balance

Stock
transaction
records

Print
list of
adjustments

Transaction
register

Stock
transaction
records

Stock
Item
master
file

Adjust
inventory

Figure 31. Flowchart for adjustments to inventory

ACCOUNTS RECEIVABLE
Accounts receivable is the amount of money owed to a company by its customers for merchandise
sold or services rendered on a credit basis. The purpose of this section of the manual is to show how
the IBM System/3 can be used to record, handle, and manage the data arising from accounts receivable
operations. The importance of this function is underlined when one considers that almost 90% of the
nation's business is done on credit and that to many companies the estimated income from accounts
receivable is a prime budgetary consideration when planning their own expenditures. In general, the
purpose of accounts receivable procedures, in addition to accounting for all receivable transactions,
is to facilitate the collection of money owed, to minimize any losses from bad debts, and to maintain
customer good will through prompt and accurate recordkeeping.
All transactions, including charges for merchandise sold or services rendered, cash receipts, and journal
entries are recorded in chronological sequence and then charged or credited to the proper customer
accounts. There are two basic approaches to this function: open-item and balance-forward. The
fundamental difference between the two is the way in which cash receipts are applied. Cash receipts,
under the open-item method, are credited against specific invoices, while cash receipts under the
balance-forward method are applied to the total outstanding balance of the account. The detailed
discussion that follows will show examples of each approach.
The choice of a particular method depends upon the requirements of individual companies. In either
approach, howev~r, five basic reports are required for a comprehensive accounts receivable system.
The five reports are:
1.
2.
3.
4.
5.

Accounts receivable transaction register
Cash receipts register
Customer statements
Aged trial balance
Delinquency notices

Six types of input records are required to produce the five basic reports. The six are listed below:
1.
2.
3.
4.
5.
6.

Customer master records
Invoice summaries
Journal entries
Cash receipts records
Customer balance-due records
Aged period date record.

Required Records
CUSTOMER MASTER RECORDS

Prior to application implementation, the customer master records are punched from the user's original
customer name and address fIle. As new accounts are added to the system, customer master records
must be punched for these accounts and manually inserted into the file.
The customer master records contain such information as customer number, name and address, interest
and late charge code (if applicable), statement code and credit limit amount (see Figure 8, under
"Order Writing and Billing"). In the example to be used here, the customer master record will be
mandatory input for three of the five basic reports: customer statements, the aged trial balance, and
delinquency notices.

INVOICE SUMMARIES

Invoice summaries are created in one of two ways. They are either a by-product of the billing
application or they are punched from copies of the invoices.
These records contain, among other fields of information, customer number, invoice number and date,
invoice amount, terms, and account debit or credit information from credit memoranda (see Figure 11,
under "Order Writing and Billing"). The invoice summaries will be used as input to two of the basic
reports: the accounts receivable transaction register and the customer statements.
JOURNAL ENTRIES

Journal vouchers are prepared by the accounting department to adjust small differences, write off bad
debts, and provide for other miscellaneous entries. Since the volume of these items is low, they are
usually written up at the end of the month in the accounting department and forwarded to the data
processing department, where one journal entry record is punched for each journal voucher entry.
These records become input for two of the five reports: the accounts receivable transaction register
and the customer statements.
CASH RECEIPTS RECORDS

After the mail is opened and separated, the customer remittances are sorted into the sequence
maintained in the accounts receivable file, which, in this example, is by customer number. The amount
received is marked either on the tear slip that was originally part of the invoice, on the customer's
remittance statement, or on the envelope if no stub or statement was included with the payment.
In the latter case, it may be necessary to make use of a cross-reference file of customer names, or to
perform other research in order to identify the payment by customer number.
The cash receipts records will be used as input for the accounts receivable transaction register, the cash
receipts register, and the customer statements. Among other fields of information, they contain
customer number, amount of payment, amount of credit received, invoice number (open-item method
only), and date of payment.
CUSTOMER BALANCE-DUE RECORDS

These records are prepared by the computer during the statement printing operation. They are the
updated records of accounts. They contain such information as customer number, statement date,
total amount due, current amount due, and interest and late-charge amounts where applicable,and
they may contain up to seven fields of aging.
Using either the balance-forward or the open-item approach to accounts receivable, these records will
be used as input to the aged trial balance report and to the delinquency notices. They will not be used
as input to the open-item customer statement preparation because, by definition, an open-item statement is one that lists all open items regardless of date, thereby developing the customer balance due at
statement time. However, since the balance-forward statement shows only current-month transactions,
it must depend upon a previous balance-due record to develop the current customer balance due.
Therefore, in the open-item method, the customer balance-due records are mandatory input to two
reports, the aged trial balance and delinquency notices, whereas the balance-forward method requires
these records for preparation of customer statements in addition to the other two reports.
AGED PERIOD DATE RECORD

This record is punched to be used as input to customer statement preparation. It contains the current
period date and up to seven aged period dates. The dates are used by the computer to compare with
invoice or balance dates for aging purposes.

Requ ired Reports
ACCOUNTS RECEIVABLE TRANSACTION REGISTER

This is a control listing of all entries to accounts receivable. These entries include invoice summaries,
journal entries, and cash receipts. The register may be printed as often or as seldom as necessity
dictates during the monthly accounting period. However, we shall assume, for the purposes of this
example, that it will be run on a daily basis.
This report is essentially a balance run although it also serves as an audit trail. In preparation for the
running of the accounts receivable transaction register, a control clerk runs an adding machine tape,
by type of all the daily receivable entries. The documents are then recorded and verified. The
System/3 prepares the register, the totals of which are compared to the original adding machine tape.
Any differences that exist must be resolved at this point and the register rerun until it is free of errors.
Figure 32 is one example of an accounts receivable transaction register. Figure 33 is a flowchart
illustrating the steps necessary to produce this register.

ACCOUNTS RECEIVABLE

T~A~SACTInN

07/1116

DATE

CUST
NO

CUSTOMER
NMIE

JOURNAL
NO

INVOICE
NO

CASH
AMOUNT

HJV(lICE
MIOUNT

07/11/--

759820

SOUND OF THE SEVENTIE

063 l t20

$ 46.23

07/11/--

633870

OLDE VILLAGE SHOPPE

063421

89.70

07/11/--

642990

PARACm! TV SALES

063422

20.30

063422

129.76

07/11/--

122620

CANN I ZON I STUDIOS

07/11/--

682030

RAY~10ND

07/11/--

742950

SARATOGA VARIETY

29.72

07/11/--

014280

BAKER BRADLEY & CO

43.50

07/11/--

872060

UNIVERSITY ELECTRIC

07/11/--

883290

VILLAGE

07/11/--

006280

ALLSTONS

r. TV

TOTALS

Figure 32. Accounts receivable transaction register

JOURNAL
MIOUNT

$ 63.80

S RAPID REPAIR

~IUSIC

97.75
n7-(;36

$18.23CR

07-037

10.70CR
$234.77*

$285.99*

$28.93CR*

Cash receipts

Control
totals

-Control
totals

Journal
vouchers

Journal entries

Invoice
summaries

Cash receipts

Accounts
receivable
System/3

Journal~J1tries
----.,"~~~,1

In"oice
summaries

Casllreceipts

To cash receipts
reg. run

'\1
Figure 33. Accounts receivable transaction register preparation

CASH RECEIPTS REGISTER

Once it has been established that the accounts receivable transaction register is in balance with the
established control totals, the cash receipts register can be prepared. This register not only serves as a
permanent record of accounts receivable cash entries, but it also provides a ready means of reference
and it becomes the basis for auditing cash entries to the accounts receivable f:tle.
The cash receipts records, all of which were selected by the computer during the accounts receivable
transaction register run, are sorted by customer number and the cash receipts register is listed. Figure
34 is one example of a cash receipts register. The total cash received must agree with the total cash
amount from that day's accounts receivable transaction register.

CASH RECEIPTS REGISTEP.
PAGE

11/30/--

CUST
NO

CUSTor~ER

NAME

IrJVOICE
NO

DATE
PAID

CHECK
N()

141220

11/29/--

2310

CASH
RECEIVED

DISCOUNT
TAKEN

90-5401

$1,213.24

$12.26

$1,225.50

BANK
NO

AIR
CREDIT

104430

ANDREI,} A ANDERSON

105864

ANNADALE & MC COY

143780

11/29/--

3228

90-3280

357.28

3.61

360.89

106900

BAKER HOME I'ECORATING CO

149261

11/29/--

4267

90-4360

96.10

1.92

98.02

108005

CANADIAN AMERICAN IMPORTS

144231

11/28/--

3650

90-8135

4,213.34

42.56

4,255.90

232561

FARRAGUT FINE FURNISHINGS

146524

11/30/--

1218

90-3209

79.79

1.60

81.39

635860

PLANTATION HOME PRODUCTS

148296

11/28/--

216

90-1261

5.80

827093

SILVERTHORNE &. STONE

143876

11/28/--

403

90-3221

380.75

7.62

388.37

926300

HH.ORTON MILL &. GEAR

143280

11/30/--

1616

90-1380

429.98

8.60

438.58

TOTALS

5.80

$6,776.28* $78.17*

$6,854.45*

Figure 34. Cash receipts register

CUSTOMER STATEMENTS

At the end of the month, statements can be written for all customers with open balances. Showing the
customer the status of his account serves to speed collections by reminding him of amounts due, gives
the customer proof of what he has paid, and provides a means of graphically pointing out overdue items.
This is so whether the statement is open-item or balance-forward. The difference is in format only.
Using the open-item approach, the accounts receivable me contains all the detail required to prepare
statements accurately and promptly. The procedure is as follows:
At statement time, the customer master record file is match-merged with the accounts receivable f:tle.
That is, the customer master record for each account is collated in front of the previously unpaid
invoice summaries, any cash receipts for the month, and all journal entries for the month. Customer
master records for inactive accounts are selected and set aside. The cards are then processed on the
System/3 computer to prepare customer statements (Figure 35). In addition, the computer punches
customer balance-due recqrds, which will be used for the preparation of the trial balance report and
for delinquency notices.

LAURENTIAN INDUSTRIES, INC.
250 HACIENDA AVE.
SAN JOSE, CALIF.

STATEMENT

STATEMENT
CUSTor~ER

H. J. El,.LIOTT
ELLIOTT TRANSFORMER CO
1418 E. FIRST AVE.
CLINTON, CALIF.
95588

NO.
H. J. ELLIOTT
ELLIOTT TRANSFORMER CO
1418 E. FIRST AVE.
CLINTON, CALIF.
95588

25368(1
]'lATE

9/30/--

CUSTOMER NO.
253680
DATE
9/30/--

RETURN WITH REMITTANCE
MO
8

9
9
9

DATE
DY
31
09
12
23
25

----

INVOICE
NUMBER
663108
663214
663821
854217
663108

DES CRIP T I Of'~
INVOICE
INVOICE
INVOICE
INVOICE
FREIGHT ADJUST.

AMOU~,T

$285.96
86.54
185.23
326.55
24.83CR

$859.45
TOTAL DUE

t40

8
9
9
9
9

DATE
DY
31
39
12
23
25

----

---

INVOICE
NUMBER
663108
663214
663821
854217
663108

DESCRIPTION
INVOICE
INVOICE
INVOICE
INVOICE
FREIGHT ADJUST.

AMOUNT
$285.96
86.54
185.23
326.55
24.83CR

$859.45
TOTAL DUE

Figure 35. Open-item customer statement

The total accounts receivable amount (accumulated by the system as statements are being prepared) is
balanced to the control totals, and the original copies of the statements are mailed to the customers.
The second copies are forwarded to the credit department for their use, and the third (if three copies
are prepared) are bound in customer number sequence and held in the data processing department for
reference purposes.
After printing of the statements, the accounts receivable me, which has been separated from the
customer master records and the customer balance-due records, is purged of closed items. That is,
all open items for which full payment has been received are removed from the ftle, along with their
respective cash receipts cards and journal entries. The removed records are held for reference and the
remaining records become next month's accounts receivable ftle, to which will be added any
transactions affecting accounts receivable as the cycle begins again. The customer master records and
the customer balance-due records are ready for preparation of the aged trial balance report. Figure 36
is a flowchart of the procedure just described.

Journal entries
Customer
master
records

Cash receipts

Invoice summaries

System/3

Journal entries
Cash receipts

Customer
master
records

Blanks

System/3

Journal entries
Cash receipts

Invoice summaries I

New balance due
Cl,Jstomer
master
records

Figure 36. Open-item customer statement preparation

Customer

Balance-forward statements (Figure 37) are prepared in a similar manner but with the following
differences:
1. The customer balance-due records from the previous month are required as additional input to the
statement run.
2. No purge of the me is required.
I

LAt!G cor·1I' AtIY

I
I
I
I
I
I

STATE:·1Er:T

C)STOMER
554386

MO
09
09
09
09

~lO

11ITTON CORPORATIN:
138 MARSHALL DR.
PO BOX 851
CALI F
LONG POP.T

DATE
YR
DY

an
10
15
3Cl

DATE
9/30/--

•

---

HIVOICE
R

f\jut~llE

REFEPEt.JCE
t:UMFF.R

091531

CURREt:T Ar10UIJT
'i>l.693.91

30 DAYS
$[96. L,6

DESCRIPTION
PRIOR BALANCE
H;VOICE
PAYt-H,t;T
LC ADJUSTMENT
LATE C:1ARGE S

185163
075126

94134

I 60

DAYS f. OVER

AW")UtlT

LANG

09
09
09

"'ALAr!C E DUE

DATE
YR
DY
08
10
15
30

----

HITTON CORPORATION
138 r1ARSHALL DR
PO BOX 851
LONr; PORT
CALIF

ItlVOICE
NUMBER

NU~1BER

94134

DE scn I PT I Otl

AMrurn
~2

PRIOR BALM-ICE
INVOICE

.565.46
1.685.91
1.856.0'lCR
1.3."OCR
O.QO

PAYr~ENT

091531

$1.693.91

9/30/--

REFEREt;CE

185163
075126

CURREtn AMOUt;T

$2,39').37

ArJY

nATE

CUSTGrlER NO.
554386

r~o

$;>,565.46
1,685.91
1.856.00CR
13.00CR
8.00

cor~P

S T A TEr~ENT

30 DAYS

$696.46

LC ADJUSTt1ENT
LATE CHARGES

60 DAYS

f. OVFR

:gl',LANCE DUE

$2.390.37

RETAItJ THIS PORTIDr-l FOR YOUR R[CORDS

Figure 37. Balance-forward statement

AGED TRIAL BALANCE

To list the aged trial balance, two input records are required: customer master me and customer
balance-due records. The balance-due records are created from blank cards during the statement
preparation run.
The aged trial balance is printed showing cross-foot totals for each account, and totals for each aged
column. These totals can be used to establish controls for accounts receivable. For example, they can
be balanced against the control sheet or against other reports such as the delinquency notices.
In this last instance, assume that a user desires all accounts with balances greater than 90 days to be
dunned. The aged columns on the trial balance for amounts due over 90 days should balance with the
delinquency-notice amounts.
Figure 38 is a sample of an aged trial balance report.

LAURENTIAN INDUSTRIES INC

PAGE 1

AGED TRIAL BALANCE
CUST.
NO.

CUSTOMER
NAME

TELEPHONE
NUMBER

108
165
178
189
247
252

ALLEN C. CO.
ANDERSON AUTO SUPPLY
ANDREWS AND SONS INC
ARGONAUT ENGINEERING
BERKLEY PAPER CO
BEST DISTRIBUTION CO

415-378-1089
408-286-6741
408-262-2074
415-867-2506
408-251-4189
408-296-1667

- -

DATE

LAST PAY
MO DA YR

CREDIT
LIMIT

TOTAL
OUTSTANDING

CURRENT
AMOUNT

16
28
05
27
21
06

$15,000
2,500
750
2,000
6,300
1,000

$ 7,296.35
1,665.49
146.64
3,125.41
5,289.00
765.44

$ 6,919.77
1,665.49

$35241.33*

$21,085.31*

2
1
2
12
2
10

FINAL TOTALS

30 DAYS
$

7117/--

OVERDUE ACCOUNTS
60 DAYS
90 C. OVER

376.58
$

2,111.30
1,185.50
3.25

611.54
2,652.45

146.64
312.13
1,400.05

-$5,601.57* $3,831.82*

$ 90.44
51.00
762.19

$998.63*

Figure 38. Aged trial balance

DELINQUENCY NOTICES

It is necessary to analyze accounts receivable records periodically in order to identify delinquent
accounts and to provide for a follow-up procedure. This function is extremely important because
experience has shown that the older an outstanding balance becomes, the more difficult it is to collect.
In addition, a heavy load of past-due receivables ties up working capital, exercising a restricting effect
on other functions of a business operation.

The System/3 user, when he defines his aged periods in an age period date card, may defme any of
his periods as overdue. Customers who have had unpaid balances for a period equal to or greater than
the overdue period can then be dunned using the following procedure:
The customer master record followed by the customer balance-due record for each account is entered
into the computer and the aging fields of the balance-due record are analyzed. If the account, by
definition from the age period date card, is overdue, a delinquency notice is printed. If not, the cards
are simply passed through the system and the next account is analyzed.
The delinquency notices, as does the aged trial balance, require the balance-due records as input.
Therefore, they too must be printed after aging has occurred during the statement run. However,
either the aged trial balance or the delinquency notices can be printed first, depending upon
individual requirements.
This, then, is a description of a basic accounts receivable application with the choice of open-item or
balance-forward left to the individual user. There follows a brief discussion of procedural details.

Accounting Control
Accounting controls are an important part of data processing, as they are of all good accounting
procedures. In accounts receivable, these controls check the functioning of both the procedure and
the personnel, and in many cases also provide the entries to be made to the general ledger. Essentially,
a typical control procedure is as follows:
As a group of accounts receivable records is created for each group of invoices, credit memos, or cash
receipts, they are listed on the system to prepare control registers. These registers show the details of
each transaction and the total of each group of transactions. The totals are checked with predetermined
totals from the originating source for each type of transaction and are then recorded on the control
sheet. The cards representing the transactions are filed in the accounts receivable me.
At the end of the month, the items recorded on the control sheet are totaled and combined with the
previous month's balance to obtain the current month's balance. The cards in the accounts receivable
me are then listed on the system to prepare the trial balance. Since all entries were proved back to the
preestablished controls, and since the trial balance total is obtained by reading and accumulating the
information previously punched in the accounts receivable cards, the trial balance usually balances.
However, if any discrepancies do occur, they can be located relatively easily, because the accounts
receivable file can be automatically sorted into date sequence and the control totals reestablished to
locate any discrepancies, and because sufficient data has been provided on the registers so that any
transaction can be reconstructed. Figure 39 shows this concept in outline form and the following
paragraphs describe it in more detail.
The Control Sheet

At the start of each accounting period, the accounts receivable balance from the previous accounting
period is entered on the control sheet. Then each day, as debits and credits affect the accounts
receivable balance, they are posted to the control sheet in summary form. The control sheet then
represents the latest status of the accounts receivable. Let us consider the source of the entries to the
illustrative control sheet shown in Figure 40.
Invoices, Credit Memorandums and Journal Entries

Each day, the accounts receivable debit records representing the day's billing are listed on the accounts
receivable register. This register, then, is a completely detailed list of all invoice entries to the accounts
receivable. The total billing figure (arrived at during the billing procedure) is balanced with the total
receivables amount (from the accounts receivable register) and is posted to the accounts receivable
control sheet. Thus, for example, on December 31 the total of the invoices billed, $7,764.44, is
posted to the control sheet.
In a similar manner summary figures are balanced and posted to the control sheet for credit
memorandums and journal entries.

Sales, credit
memorandum

L
Accounts
receivable
register

.......

.....
Journal entries,

Trial
balance

.........

misc. erries

Accounts
receivable

.....

,~er

Accounts
receivable
file

-------I;W

Cash receipts
register

ACCOUNT RECEIVABLE
CONTROL SHEET

"
INVOICES
DATE

INVOICES
PAID

BILLED

DEBIT AIR CREDIT AIR

CASH
RECEIVED

DISCOUNT
ALLOWED

DEBIT

BALANCE

v
,~----------~~----------~/
...

T
Figure 39. Control procedure

RETURNS ALLOWANCES
DEBIT

DEBIT

MISCELLANEOUS
EXP DR AIR

CR AIR

Cash Receipts

Cash receipts can be entered into cards by anyone of several methods, to suit the needs of the business
and to comply with either the open-item method or the balance-forward method. In either case, as soon
as the cards have been prepared, they are detail-printed on the system, producing the cash receipts
register.
This register serves several purposes. Its immediate function is to prove that the accounts receivable
records are in balance with actual cash receipts. It is also a permanent record of accounts
receivable cash entries, and provides a means of ready reference. Furthermore, it is the basis for
auditing credit entries to the accounts receivable ledger flle.
ACCOUNTS RECEIVABLE
CONTROL SHEET

DATE

INVOICES

CASH

DISCOUNT

BIL.LED

PAID

RECEIVED

ALL.OWED

,;, I'
DEBIT A/R

BALANCE
LAST MO.

1.2.

2.
3

6
7

8
9
10
1.3

III
IS
16

17
.20
:21
:22.

9 091 14
S'I3i 3'1
, 6'1S .23

S 927

721'1 61

" 908 ~3

L I'S- I'
76¥.2. II
7 11'1 82

.9 ,o8 77

:J.f

7 9;.S :2.~

.30
.31

Z I/o~

,,27

811K7 .27
9296 20
, #135 33
5 0" 140

.21

:1.1/

DEBIT

RETURNS

DEBIT

AL.L.OWANCE.

DEBIT

,I)~

MISCELLANEOUS

EXP

DR A/R

CR A/R

5'5

10 LIllI 06

" 9So '6
8 :1.11
.1 {'7.!. SlL
9 301 8'1
J S74 57

.1.3

CREDIT A/R

MONTH OF

IS
7 76'1 lJl/

11 S.2.1 60
, iIi 93

I 993

3 '5# l:l
:l. '113 '17
751 .If

71~

, 877 39
// 89.1. 'III
282:1. 97
8 '80 8'

'I11f'7.3 19
61771/- Oi'
I 'IiI 50

5S 1//

71 l33

3/'- ('S
"-hI 17

"t5 .2S
15.2S 7S
131,50
1(.3 '17

(,81/$
308:1.8

/loll}

5'1M
//1 /3
179 I('s

.21371
7016

V
.... \-ANCE

Figure 41. Posting cash receipts

RETURN.

rJE

J95 42

D ••COUNT

ALLOWED
DIr.IT

492'17
36 1,6 5
490100
9 3 1,9 5
407,02
38 1,6 6

71 38
10 100
1 9,02
8,31

~ : ~Ij i

2 1110

1 0 0 0 10 0
10 3319 3
14616 1
6 50140
..§.9 0

5 105

I
I
70'86

SALES ANALYSIS
Comprehensive sales analysis reports are of major importance to a distribution organization. Through
accurate and up-to-date knowledge of sales activities, management can control present conditions and
plan future policies. With this timely information management can direct the efforts of salesmen,
check the effectiveness of advertising, regulate purchases, meet competition, and provide sales facilities
and policies that promote the profitable conduct of the business.
Sales analysis factors usually include what items are sold, who sold them, and to whom they were sold.
The user of an IBM System/3 has a wide latitude in designing the types of sales analysis reports best
suited to his own operation. This section of the manual discusses the requirements for producing five
of the more commonly used types of reports:
•
•
•
•
•

Item sales analysis
Item class sales analysis
Item-within-customer sales analysis
Item-class-within-customer sales analysis
Customer-within-salesman sales analysis

Figure 42 shows an example of each type of report.
Report Options

In the design of a sales analysis sytem, careful consideration should be given to the many options that
can be incorporated into each type of report. Examples of these options, which can greatly increase a
report's meaning and profitable use, are:
•
•
•
•
•
•

Current year-to-date analysis
Comparative year-to-date analysis
Percent change in sales
Percent change in quantity sold
Determination of gross profit dollars
Determination of gross profit percentage

CURRENT ANALYSIS

Sales analysis reports may be designed to reflect sales activity on a current year-to-date basis. A report
of this type includes sales for the current month and sales year-to-date for the current year.
One of the many uses for current analysis can be seen in a report in which customer sales are listed for
each salesman. Management can evaluate the performance of the sales force and compare salesmen's
results. If the report reflects item sales, fast-and slow-moving items are highlighted.
COMPARATIVE ANALYSIS

Sales analysis reports may also be designed to include comparative figures showing current month and
current year-to-date compared with the same month and year-to-date of the preceding year.
This kind of report highlights cyclic or seasonal trends in sales and sales performance.

A D C COMPANY

CDr1PARATIVE ANALYSIS OF SALES "v ITEM
PERIOD EnDING 10/31/6

ITEtl
NO.

CURRo PERIOD QUAN.
nliS YR
LAST YR

DESCRIPTlI'N

624634
624832
624901

PAGE

D20068 OVERHAUL GASKET
17DOOll tELT DYNAMIC FAN
DMK6448 HUB ASSEM!lLY J2

11}
190
1-

14
150
5

PCT
C!tG

PCT
CHr-

YTD QUM1TITY
TItIS YP
LAST YR

2927
120-

9('1
1,820
18

840

98
1,905
18

A Il C COMPANY

SALES !lY ITEtI CLASS
MONTH

ITEH
CLASS

E~;DINr-

('13/31/6

SOLD TH IS
MONTH

r-ROS S
PROFIT

ABRAS IVES

2,720.19

271.36

ACIDS AND CHEtllCALS

1,216.27

170.27

BRASS

6,221}.63

435.45

CLASS DESCRIPTION

PRC'f IT SOLD Till S
PERCEr:T
YEAR

GRnss

PRflFIT

PR"~

PERCH~T

907.60

3,139.68

408.07

16,341.47

1,143.87

A !l C CflI'PANY

_SALES

ANALYSI~

BY ITEt! FOR EACH CUSTOMER

PERlnD FNDIt;(; 03/31/6

CUST
NO.
10

ITEM

CUSTOMER/ I TEt-I
flAME

411116
411122
411173

CONTItlENTAL ELECTRIC cn
11500 Tl-IINLITE SOCKET 1\
8506 SOCKET ADAPTER llROHN
C151 S IUNT ~\o!JTCIl IVORY

0667

'---

SOLD Till S oEo IOD
nUANTITY AMOUNT

rlD.

320
1.000
25

CUSTmiER TOTALS
0955

PAGE

PROFIT
PRCNT

192 .45
320.05
30.'lO

1',

542.50

SOLD Ptl S YEAR
ITY
Al10UNT

OUAI~T

1.2ro
5.240
865

pnOFI T
PRCtiT

720.03
1.677.34
10"'38.23

14
9
12

3.435.60

C C"'MPANY

'-COMPARA TlVE SALES fI:1AL YS I S
BY ITEM CLASS FOP. :AC!I CUSTr)t.1rR
MONTH ErilllNG 05/31/6

CUST
NO

ITEM
CLASS

CUST0I1Fr.1I TEtl CLASS
r:AME
TARDELL IIARDI"ARE
!)UI LDER HARDt·fARE
ELECTRICAL SUPPLIES
GIFTS AND SUNDRIES
HOUSEl-JARES
METAL ANil PIPE
NAILS ArlD SCREWS
PAINT AND SUPPLIES
POI!ER AND HAND TOOLS
SPORT H:r. GOODS
YARD AllD GARDEN EOUI PMENT

3310

11
12
13
14
15
16
17
18
19
20

PAf.E

PRCNT
MONTHLY SALES
TillS YEAR
LAST vEAR CHG

YEAR TO DATE SALES
THIS vEAR
LAST YFAR

103.19
87.58
63.01
198.05
201.52
75.04
316.51
425.58
227.91
146.54
1.844.93

515.92
435.57
315.09
990.32
1.005.48
373.46
1.588.46
1.704.29
1.331.50
73Z.f.1
8.992.72

361<)

91.31
85.02
.00
150.23
25.40
40.89
250.62
385.12
209.2<)
55.65
1.293.53

13
2
32
704
88
26
10
')

165
43

PRCt~T

CHr-

2916
351220
41

729.43
375.29
490.36
1.123.19
840.66
264.91
1.248.72
1.392.32
850.45
61f, .18
7.<)31.71

27
22
57
19
13

ABC COMPANY
COMPARATIVE

~ALES

CUq(,~ER

ANALYSI S IlY

3824
fflR EACH

'---

SALE~~'AN

PEP.IOD ENDING 07/31/6

SU.1N
NO.

CUST.
NO.

SALEsr1AN/CUSTOMER
NAME

1426
2632
3217

A R HESTON
HYDRO CYCLES INC
RUPP AOUA CYCLES
SEA PORT HEST CO

0301
1941
2601

H T llRAVEtiAN
BOLLINGER ASSOCIATES
MACK IfARDHARE CO
RECREATIotlAL UNLIMITED

SALES'1AN TOTALS
12

""-

SALE SMAJ.: TOTALS

FIlIAL TOTALS

Figure 42. Typical sales analysis reports

THIS PERIOD
THIS Y!'AR

THI~

PERIOD
LAST YFAR

PAGE
YEAR-TO-DATE
THI S YEAR

YEAR-Tr.-DATE
LAST YEAR

4.312.06
2.3(11.<)8
421.06

10.010.28
20.922.60
900.00

<). ('00.92
11.020.16
593.10

10.920.28

7.035.10

31.732 .88

20.614.18

100.96
4.201.85
180.60

O.'lO
860.82
420.96

100.'l6
13.97.2.68
8.C29.22

0.00
1.866.22
1.200.00

4,483.41

1.281.78

22.052.86

3.('66.22

98.473.26

')1.905.82

656.002.17

5<)8.771.49

3.210.26
7.800.02
90.00CR

PERCENT CHANGE IN SALES

This information can be reported in two ways: (1) percent of change for the current month versus the
same month for the previous year, or (2) percent of change year-to-date this year versus year-to-date
last year.
The results are a reflection of the percentage of increase or decrease in the dollar amounts of gross
sales. For example, if last year in July a firm had sales of $10,000.00 for item number 646223, and
sales of $12,000.00 for the same item in July of the current year, the report would show the percent
of increase in gross sales for that item:
Item Number

Sales This Period

646223

$12,000.00

Same Period Last Year

$10,000.00

Percent Change

If, on the other hand, the figures in the example above were reversed, showing a decrease in gross sales,
the percent change would show a negative number reflecting that decrease.
Item Number

Sales This Period

646223

$10,000.00

Same Period Last Year

$12,000.00

Percent Change

16.7-

The percent change tells at a glance whether sales for a particular item, item class, etc., have increased,
decreased, or remained constant.
PERCENT CHANGE IN QUANTITY SOLD

Percent change in quantity sold can also be reported on a current month versus same month prior year
basis, or on a current year-to-date versus prior year-to-date basis. The change, either increase or
decrease, is expressed in percent of units sold.

Item Number

This Year
Quantity Sold

Sales
Amount

Last Year
Quantity Sold

646223

18.75

Sales
Amount

9.38

Percent
Change

100

The percent of change in quantity sold is computed on the basis of the difference between the number
sold this year and the number sold last year. Again~ if the above figures were reversed, the percent
change figure would be a negative number.

DETERMINATION OF GROSS PROFIT

The gross profit, in dollar amounts, is usually reported either for the current month only or for the
current month and current year-to-date.
This figure, expressed in dollar amounts, is computed on the basis of unit cost times quantity sold subtracted from sales amount. For example, a report for customer sales within salesman might look like this:
Salesman
Number

Salesman
Name

Customer
Number

Customer
Name

Sales
Amount

Gross Profit

Jones
Thomas
Uvas
Zeers

100.00
208.00

16.00
33.28

404.00

63.64

Adams

100
110
120
130
GROSS PROFIT PERCENTAGE

Given the cost per unit and the selling price per unit, the system can compute the percent of gross
profit. This option may also be reported either on a current month only basis or on a current month
and current year-to-date basis.

Records Used
F our types of punched card records are required to produce the five typical sales analysis reports
previously mentioned. The four records are:
•
•
•
•

Customer name record
Salesman name record
Item transaction record
Sales summary record

CUSTOMER NAME RECORD

The customer name record permits customer name to be printed on the item sales within customer and
item class sales within customer reports. It contains (as a minimum) record identification code,
customer number, and customer name.
If the system is being used to perform order writing and billing, the customer master records from that
application may be used to reproduce customer name records automatically. When master records are
not available, the name records must be punched from present customer fIles.
SALESMAN NAME RECORD

The salesman name record permits salesman's name to be printed on the customer-within-salesman
report. It contains (as a minimum) record identification code, salesman number, and salesman name.
These records must be punched from current information.
ITEM TRANSACTION RECORD

Item transaction records that represent the current period's sales are required for each of the five sales
analysis reports. The record contains (as a minimum) record identification code, customer number,
item number, item class code, item description, unit cost if gross profit determination is required,
quantity sold, and sales amount.

If the order writing and billing is performed on the system, item transaction records are available as an
automatic by-product of that application (see Figure 43). Otherwise, they must be punched from
sales invoices.
RIC

ORDER NO.

CUST. NUMBER

TR S'MAN

ITEM NUMBER
LIST PRICE

ITEM DESCRIPTION
W. H.LOC.

WEICHT

CLASS

OTY. SHIP· OTY. ORDER

ITEM DESC.
SELLINC PRICE

ITEM COST

~BI

§ A
:: 8
~ 4 ~8
~

CUSTOMER
NUMBER

eo~ B1

I 2 l

5 6 7

=8A

9 10 "

~ ~~

ORDER
NUMBER

g ~z
v>

::l",

12 13 14 15 16 "

3114 35 3i 31 3139 4041424344454647484950 51

WARE HOUSE
LOCATION

8
~

OUANTITY
SHIPPED

WEICHT

4
___

LIST
SELLINC
PRICE
PRICE
: :

ITEM DESCRIPTION

2 __

ITEM
DESC.

II 19 2021 22 23 24 151617 11293031 32

:a:~

ITEM
NUMBER

A
8
4

5354 5556'5751 59606162'63 64

~~~

OUANTITY
OROEREO

2
1
B

65666761697071 727374757677 7879808182 8384851687!.189 90 9191939495 96

Figure 43. Item transaction record

SALES SUMMARY RECORD

A different sales summary record is required for each of the five sales analysis reports. The sales
summary record contains year-to-date sales data that is summarized according to the requirements
of a specific report (such as by item, by item class, etc.).
Initially, sales summary records for both the current year and the prior year (if comparative reporting
is desired) must be punched from existing sales records. Once the sales analysis application has been
implemented on the system, new sales summary records are automatically generated during each
period's reporting. The new updated records, which contain current year-to-date sales data, become
input for the next period's reports. The current year-to-date sales summary records for each period
can be retained and used the following year to provide prior year-to-date data for comparative
reporting. Figure 44 shows a sales summary by item record.

DATE

RICI

ITEM DESCRIPTION
AMT. THIS PERIOD CR.PR. THIS PERIOD

~i I~ I

i ~

I 2

DATE
I
I

3 4

5 67

OTY. Y. T. D.

ITEM NUMBER

AMT. Y.T.O.

OTY. THIS PERIOD

CR. PRo Y.T.O.

I .:\E'~R I Ii

8 910" 121314 IS 16" 18191021122324252627 28 29 30 31 32

fEA
~8

SALES OTY.
THIS PERIOD

ITEM DESCRIPTION

2
I

B
A
8
4

Ul4~W17~~w~ue«a%O~~M~~U""~D~~~~~~«

CROSS PROFIT
THIS PERIOD

SALES OTY.
YEAR-TO-DATE

SALES AMT.
YEAR-TO-DATE

CROSS PROFIT
YEAR-TO- DATE

2
1
B
8
4

65666168697071 727374757677 78 7980 81 82 83848586 87 !.I 89 90 919293949596

Figure 44. Sales summary by item record

8
4

A
SALES AMOUNT
THIS PERIOD

2
I

Typical Procedures
Although the specific input records required vary with the five types of sales analysis reports, the
general procedures for producing each report are essentially the same (see Figure 45).
SORT ITEM TRANSACTIONS

Regardless of the type of report to be produced, the first step is to sort the item transaction records.
This sorting establishes a sequence based on the control fields required by an individual report.
Specifically, the item transaction records are sorted by item number for item sales analysis, by item
class code for item class analysis, etc.
MATCH-MERGE SALES SUMMARIES

If comparative year-to-date reporting is used, the current year's sales summary records must be matchmerged with the prior year's summary records. Control fields for the match-merge are the same as for
the item transaction sort; the specific fields depend on the type of sales analysis report to be printed.
This match-merge step is of course omitted when comparative sales summary figures are not required.
The merged current and prior year summaries or current year only summaries are match-merged
with the sorted item transaction records. Again, the control fields for the match-merge are determined
by the type of report to be printed.
REPORT PREPARATION

Sales analysis reports that do not require the printing of customer's or salesman's names are prepared
by processing the merged item transaction and sales summary records on the system. Prior to
preparing item-within-customer, item-class-within-customer, or customer-within-salesman reports,
the appropriate name records (customer or salesman) must frrst be match-merged with the item
transaction and sales summary records. Any unmatched name records should be checked for
appropriate action and then the merged sales records can be processed on the system.
As each type of sales analysis report is being prepared from appropriate input records, blank cards are
entered into the system. New current year sales summary data is automatically punched into the
blank cards, thus creating updated sales summary records for use during the next reporting period.
When all the required sales analysis reports have been completed, the new sales summary records are
flIed and held for use in preparing the next period's reports; the old (previous period) sales summary
records are filed for use the following year to provide comparative figures; the item transaction and
prior year summary records may be history filed; and the name records are returned to their
respective files.

"I I

Item
transaction
records

System/3
sort item
transactions

--=;l
Sales
summary
records

transaction
records

--~
Customer
name
records

When
required

System/3
match and
merge records

System/3
print reports,
punch new
summary records

When
required

~-~
Salesman
name
records

Sales
analysis
reports

Customer and
salesman name

New sales

Figure 45. Flowchart of general procedures

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GE20-0320-1_System_3_Guide_to_Order_Writing_Billing_Inventory_Accounts_Receivable_and_Sales_Analysis_Jun70 GE20-0320-1_System_3_Guide_to_Order_Writing_Billing_Inventory_Accounts_Receivable_and_Sales_Analysis_Jun70

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