Account System and Process

This document provides information about account system and process, different methods of inventory management, XERO cloud based accounting system, and more. It includes a memo explaining different types of inventory management systems, journal entries, and the importance of internal control in business. The document also discusses the benefits of using Xero for tracking business and accounting for inventory.

Running head: ACCOUNT SYSTEM AND PROCESS
Account system and process
Name of the student
Name of the university
Student ID
Author note

1ACCOUNT SYSTEM AND PROCESS
Table of Contents
Question 1..................................................................................................................................2
(a) Memo...........................................................................................................................2
(b) Journal entries..............................................................................................................3
Answer 2....................................................................................................................................8
Introduction............................................................................................................................8
XERO cloud based accounting system..................................................................................8
Using Xero for tracking business...........................................................................................9
Using Xero in accounting for inventory...............................................................................10
Other features beneficial to Mr and Mrs Spot......................................................................10
Conclusion............................................................................................................................11
Answer 3..................................................................................................................................11
Question 4................................................................................................................................13
Question 5................................................................................................................................13
Reference and bibliography.....................................................................................................16

2ACCOUNT SYSTEM AND PROCESS
Question 1
(a) Memo
To: Mr and Mrs Spot
From: Accountant
Subject: explaining different methods of inventory
I am writing this report to explain you different types of inventory management systems those
can be used for inventories. These are as follows –
Periodic inventory system – under this, the updates are made only to the closing inventory
while the count for physical inventory is performed. As the physical counts are time taking
this is done more than once in a year.
Perpetual inventory system – perpetual inventory method for accounting records all the sales
and purchases immediately when they take place. It provides detailed view regarding changes
in the inventory with the immediate reporting of inventory amount in the stock.
First in first out method – under this method the goods purchased 1st are sold removed 1st
from the inventory count. Hence, the remaining stock of inventory is priced at most recent
cost incurred for purchasing them.
Weighted average method – under this method total COGS of available goods is divided by
number of units available and it yields weighted average cost per unit.
Hope the above provided solution will help you is understanding difference among different
systems of inventory management.
Sincerely,
Andrew Johnson, Accountant

3ACCOUNT SYSTEM AND PROCESS
(b) Journal entries
Journal entries as per periodic inventory
Date Particulars Debit Credit
01-Jan-18 Cash a/c $ 20,000.00
Share capital $ 20,000.00
01-Jan-18 Bank a/c $ 20,000.00
Cash $ 20,000.00
03-Jan-18 Inventory $ 2,400.00
Accounts payable $ 2,400.00
06-Jan-18 Accounts receivable $ 1,600.00
Raibow prescholl $ 1,600.00
09-Jan-18 Inventory $ 2,100.00
Bank $ 2,100.00

4ACCOUNT SYSTEM AND PROCESS
12-Jan-18 Accounts payable $ 2,400.00
Bank $ 2,400.00
15-Jan-18 Cash $ 1,600.00
Accounts receivable $ 1,600.00
20-Jan-18 Accounts receivable $ 2,000.00
Sydney children
hospital $ 2,000.00
22-Jan-18 Inventory $ 1,050.00
Accounts payable $ 1,050.00
24-Jan-18 Accounts payable $ 1,050.00
Discounts received $ 21.00
Cash $ 1,029.00

5ACCOUNT SYSTEM AND PROCESS
25-Jan-18 Bank $ 2,400.00
Inventory $ 2,400.00
31-Jan-18 Inventory $ 1,893.53
COGS $ 3,656.47
Purchases $ 5,550.00
Journal entries as per perpetual inventory
Date Particulars Debit Credit
01-Jan-18 Cash a/c $ 20,000.00
Share capital $ 20,000.00
01-Jan-18 Bank a/c $ 20,000.00
Cash $ 20,000.00
03-Jan-18 Inventory $ 2,400.00
Accounts payable $ 2,400.00

6ACCOUNT SYSTEM AND PROCESS
06-Jan-18 Accounts receivable $ 1,600.00
Raibow prescholl $ 1,600.00
06-Jan-18 COGS $ 960.00
Inventory $ 960.00
09-Jan-18 Inventory $ 2,100.00
Bank $ 2,100.00
12-Jan-18 Accounts payable $ 2,400.00
Bank $ 2,400.00
15-Jan-18 Cash $ 1,600.00
Accounts receivable $ 1,600.00
20-Jan-18 Accounts receivable $ 2,000.00
Sydney children hospital $ 2,000.00

7ACCOUNT SYSTEM AND PROCESS
20-Jan-18 COGS $ 1,200.00
Inventory $ 1,200.00
22-Jan-18 Inventory $ 1,050.00
Accounts payable $ 1,050.00
24-Jan-18 Accounts payable $ 1,050.00
Discounts received $ 21.00
Cash $ 1,029.00
25-Jan-18 Bank $ 2,400.00
Inventory $ 2,400.00
25-Jan-18 COGS $ 1,360.00
Inventory $ 1,360.00

8ACCOUNT SYSTEM AND PROCESS
31-Jan-18 Inventory $ 2,030.00
COGS $ 3,520.00
Purchases $ 5,550.00
Answer 2
Introduction
Cloud based accounti9ng system is same as the traditional, self-install and on-
premises accounting software with only difference of that the accounting software is hosted
on the remote servers. Under this system the data is sent to the cloud where the data is
processed and the same is returned to user. All the application related software are carried out
off-site and not performed on the desktop of the users. Under the cloud computing, the users
access the software applications remotely through internet or through other network through
the service provider of cloud application. Using the cloud accounting software makes the
business free from installation and maintenance of the software for individual desktops.
Further, it allows the employees from the other departments, branch office or remote area
accessing same data and the same version of software (Xero, 2019).
XERO cloud based accounting system
Xero is the online accounting software that is designed for the small to the medium
sized business. It manages financial health of the business in more transparent, fun and
straightforward way. It runs under the clod and makes the collaboration easy with the
business as the main objective of the business is to review the real time information from the
business. The next generation book keeping system will move to internet base that means

9ACCOUNT SYSTEM AND PROCESS
onsite computer system will not be required anymore (Wyslocka & Jelonek, 2015). Growing
business requires access to the financial data on regular basis. They are required to collect
debts, make payment to suppliers and complete the tax returns on prompt basis. Further, they
are required to deal efficiently with the inquiries from the bank, suppliers and customers and
need to access the accurate as well as up-to-date sales, cost, margin and the information
related to cash flow. For the person who is new to the accounting system can use the most
basics and can present the screens required. The system is sufficiently easy for using yet
enough powerful to grow with the expansion (Hossack, 2015).
Using Xero for tracking business
Tracking summary report of Xero does exactly what is said in the tin. It generates a
list of tracking option that shows activity is the particular accounts group for particular time
period. Simply through input of time frame required, accounts group as well as tracking
category can be added. Tracking category of Xero for location and class categories allows
monitoring various business areas. In this way, the reports assist in making proactive
decisions of business. Purchase and sales data can effectively be tracked with the
departmental names assigned by the users. Furthermore, the data can be tagged by project
name, by region, by salesperson and by department (Xero, 2019). Tracking are carried out
through following steps –
 Setting up the tracking category with the tracking options – this can be done for
whatever and however is required. It is done through going into accounting menu,
selecting advanced and clicking tracking categories. Under the tracking category,
name of tracking category with tracking options is entered. Once the tracking
category is set up, new tracking options can be added while creating the transactions
(Xero, 2019).

10ACCOUNT SYSTEM AND PROCESS
 Assigning tracking options to the transaction – for new transaction the tracking
options shall be assigned to the new tractions like invoices, quotes, bills, purchase
orders, receiving and payment of money. However, for previous transactions the
tracking option is assigned to the transactions entered previously (Xero, 2019).
Using Xero in accounting for inventory
Xero can be used for getting up to date view regarding bestselling product lines.
Further, it shows how much profit is made on which product which in turn helps to take right
decision regarding what needs to be ordered and it shall be priced. Inventory management
tool in Xero helps in keeping track of the stock levels as well as the values on regular basis. It
computes value of goods in hand through average cost method. Simple tracking software is of
great advantage for the independent retailers as well as the wholesalers and the service
providers who deal in retail items (Ma, 2015). Further, inventory can run fast through
importing the large numbers from spreadsheet. It spends less time for the data entry through
setting up things under purchases and sales on regular basis as he untracked items enters price
and description. Further, using inventory items helps in generating quotes, purchase order
invoices and helps is preparing the bills faster that means few numbers of errors. Tracked
inventory further allows seeing stock on hand at a glance while it is quoted or invoiced
(Walther, Sedera, Sarker & Eymann, 2013)
Other features beneficial to Mr and Mrs Spot
 Cash coding – it simply enable to code large numbers of transactions in faster manner.
List of transactions can be sorted for bulk code. It saves hours in the processing time
and this system is specifically useful for the businesses with the cash transactions or
for working on the accounts that has not yet been touched for few months (Dimitriu &
Matei, 2014).

11ACCOUNT SYSTEM AND PROCESS
 Files – Xero files allow the documents to store in the general library or to attach with
the transaction. The documents can either be uploaded or can be emailed. For instance
or may be conditions and terms required to be attached to online quote or invoice
those are being sent.
 Un-coded statement lines – it makes easier in getting feedback from the client or from
the colleagues regarding unreconciled bank items. It can be done through simply
clicking one button for downloading editable PDF that can be shared (Smith, 2019).
Conclusion
From the above it can be concluded that Xero will be of great advantages for Mr and
Mrs Spot is shifting from manual accounting system to computerised accounting system.
Though using Xero they will be able to save lots of time and efforts they are pitting for
manual record maintenance. The tracking summary generates a list of tracking option that
shows activity is the particular accounts group for particular time period that will help them
to track the business. Further, through Xero they can get up to date view regarding bestselling
product lines and can fix the price for those items accordingly. Other benefits like cash
coding, files and un-coded statement lines can help them to run the business smoothly with
less time.
Answer 3
523, Flemingo Road,
Chappel Hill, NSW
May 13, 2019
Spottie Ltd
624, North Road,

12ACCOUNT SYSTEM AND PROCESS
Subject: Importance of internal control in business
Effective internal control decreases the risk associated with loss of assets and assures that the
plan information is accurate and complete; operation plan has been conducted as per the
provision of the applicable regulations and laws and the financial information are reliable.
2 cases of recent fraud by employees are as follows –
 Owner of building supplies entity caught his employee makings refunds for more than
$ 150,000 into personal bank account and covering the same up through forging the
stock records. The owner was 1st alerted by the banking services of the business for te
suspected fraudulent activities and through CCTV footage the employer caught the
employee. Link of the report - https://www.news.com.au/finance/work/at-work/from-
freebies-for-mates-to-150000-fraud-employee-theft-costs-australian-business-
billions/news-story/ac7b41f93ace63b20ff99b5e3d1b712a Biggest amount stolen by any individual in the last 13 years amounting to $ 45
million from by woman who used to work for ING. Fraud took place over the 5 years
period that and the amounts were stolen by her for funding her love for the expensive
pearls, Michael Jackson shows and houses. Link of the report -
https://www.smartcompany.com.au/business-advice/legal/employee-fraud-in-
australia-meet-the-bank-employees-who-stole-217-million-over-13-years/
The above mentioned frauds could have been stopped through implementing proper internal
control system over cash like segregating the duties among the different employees,
reconciling the bank balance with cash balance in regular intervals and implementing proper
authorisation on cash payments.
There internal controls on cash receipts are –

13ACCOUNT SYSTEM AND PROCESS
 Job duties – separating key tasks related to cash receipts will make it difficult for the
dishonest employee to commit fraud. For instance, person responsible for cash receipt
shall not be responsible for deposits and reconciliation
 Access – employee who handle cash shall go through the training course regarding
appropriate procedure before accessing to safe and log
 Reconciliation – the responsible person shall compare the totals of the cash receipts
log on daily basis with the cash in hand and deposits
There internal controls on cash payments are –
 All the checks shall be numbered serially and access shall be limited to the checks for
authorising in writing the checks
 Checks shall be attached with detailed documents
 2 signature requirements hall be there for issuing payments for material amount so
that any one person will not be in a position to withdraw funds from bank account
I will be highly obliged to provide you with any further assistance.
Sincerely,
Jin Richmond
Question 4
Question 5
Original amount of depreciation
Date Particulars Amount
01-Jul-16
cost of
equipment 800000
Residual value 40000
Useful value 760000

14ACCOUNT SYSTEM AND PROCESS
30-Jun-17 Depreciation 152000
Depreciation schedule
Date Depreciation remaining value
01-Jul-16 760000
30-Jun-17 152000 608000
30-Jun-18 152000 456000
Revised depreciation amount
Date Particulars Amount
01-Jul-18 Book value 456000
Residual value 50000
Useful value 406000
30-Jun-19 Depreciation 67667
Revised depreciation schedule
Date Depreciation
Remaining
value
01-Jul-18 406000
30-Jun-19 67667 338333
31-Dec-19 33833 304500
31-Dec-19 selling value 500000
31-Dec-19 Profit on sales 195500
Journal entries in the book for Storm Ltd for the period of 1 July 2016 to 31 December 2019
Journal entries
Date Particulars Debit Credit
01-Jul-16 Equipment $ 8,00,000.00
Cash $ 8,00,000.00
[equipment purchased with cash]
30-Jun-17 Depreciation expenses $ 1,52,000.00
Accumulated depreciation $ 1,52,000.00
[Depreciation expenses charged to
accumulated depreciation
30-Jun-18 Depreciation expenses $ 1,52,000.00
Accumulated depreciation $ 1,52,000.00
[Depreciation expenses charged to
accumulated depreciation
30-Jun-19 Depreciation expenses $ 67,666.67

15ACCOUNT SYSTEM AND PROCESS
Accumulated depreciation $ 67,666.67
[Depreciation expenses charged to
accumulated depreciation
31-Dec-19 Depreciation expenses $ 33,833.33
Accumulated depreciation $ 33,833.33
[Depreciation expenses charged to
accumulated depreciation
31-Dec-19 Cash $ 5,00,000.00
Profit on sales /capital gain $ 1,95,500.00
Sales $ 3,04,500.00
[Profit made on sales]

16ACCOUNT SYSTEM AND PROCESS
Reference and bibliography
Alles, M., Brennan, G., Kogan, A., & Vasarhelyi, M. A. (2018). Continuous monitoring of
business process controls: A pilot implementation of a continuous auditing system at
Siemens. In Continuous Auditing: Theory and Application (pp. 219-246). Emerald
Publishing Limited.
Chang, S. I., Yen, D. C., Chang, I. C., & Jan, D. (2014). Internal control framework for a
compliant ERP system. Information & Management, 51(2), 187-205.
Council, F. R. (2014). Guidance on risk management, internal control and related financial
and business reporting. Financial Reporting Council. Accessed February, 20, 2017.
Dimitriu, O., & Matei, M. (2014). A new paradigm for accounting through cloud
computing. Procedia economics and finance, 15, 840-846.
Hossack, S. (2015). Cloud-based accounting and productivity tools for practitioners and
taxpayers. Taxation in Australia, 50(5), 265.
Leitch, M. (2016). Intelligent internal control and risk management: designing high-
performance risk control systems. Routledge.
Ma, X. (2015). The adoption of cloud computing for small and medium accounting firms.
Muller, M. (2019). Essentials of inventory management. HarperCollins Leadership.
Nisha, N. (2015). Inventory valuation practices: A developing country
perspective. International Journal of Information Research and Review, 2(7), 867-
874.

17ACCOUNT SYSTEM AND PROCESS
Onoja, E. E., & Abdullahi, Y. U. (2015). Inventory valuation practices and reporting:
Nigerian textile industry experience. Mediterranean Journal of Social Sciences, 6(4),
74.
Onyekwelu, U., & Ugwuanyi, U. B. (2014). Effects of IFRS adoption on inventory valuation
and financial reporting in Nigeria. European Journal of Business and
Management, 6(8), 29-34.
Sadgrove, K. (2016). The complete guide to business risk management. Routledge.
Smith, H. (2019). Xero for dummies. For Dummies.
Walther, S., Sedera, D., Sarker, S., & Eymann, T. (2013, June). Evaluating Operational Cloud
Enterprise System Success: An Organizational Perspective. In ECIS (p. 16).
Wyslocka, E., & Jelonek, D. (2015). Accounting in the Cloud Computing. Turkish Online
Journal of Science & Technology, 5(4).
Xero. (2019). Online Accounting Software – Free Trial, Free Support | Xero Accounting
Software. Retrieved 13 May 2019, from https://www.xero.com/us/