Accounting Information System Report 2022

Accounting Information System 1
Accounting Information System
Name of Student
Professor’s Name
Institution
Course
Date

Accounting Information System 1
Executive Summary
This report details the expenditure cycle process used in Adam & Co in terms of the
three component systems as payroll, cash disbursement and purchase system. The system
flowchart diagram and data flow diagram are examined and alongside the evaluation of each
of the three constituent systems’ potential weaknesses and risks.

Accounting Information System 1
Table of Contents
Executive Summary...................................................................................................................2
Purchase System.....................................................................................................................4
Diagram1: DFD Purchase System.....................................................................................4
Cash Disbursement System....................................................................................................7
Diagram 2: DFD Cash Disbursements Systems.................................................................7
Payroll System DFD..............................................................................................................8
Diagram 3: Payroll System DFD.......................................................................................8
Purchases System Flowchart..................................................................................................8
CDS System Flowchart........................................................................................................10
Payroll System: System Flowchart......................................................................................11
Weaknesses and Risks in Internal Control System..................................................................13
CDS......................................................................................................................................13
Payroll Systems....................................................................................................................13
Purchases System.................................................................................................................13
Conclusion................................................................................................................................13
Bibliography.............................................................................................................................14

Accounting Information System 1
Introduction
This report intends to probe the Adam & Co expenditure cycle. This is important
since the Company is using a centralized accounting system that has many networking
terminals in a range of destination. The discussion focuses on three constituents of
expenditure as payroll system (PS), cash disbursement system, and purchase system. Both
flowchart diagram and data flow diagram are used to illustrate the association of the
procedures taken by Adam & Co in completing its expenditure cycle. The weaknesses and
risks of each system are also discussed.

Purchasing
Department
Inventory
Warehous
e
Cash
Disbursement
Department
Monitor inventory
records
Updates inventory
records
Receives Goods
Prepares Digital
Purchase Order
Updates Inventory
Control Access
Updates AP Control
Access
Updates digital AP
subsidiary ledger
Valid Vendor File
AP Pending File
Vendor
Account
Payable
Department
Inventory Subsidiary Ledger
Receiving File
Digital purchase order records
Purchase order copy 1
Purchase order copy 2
Receiving reports copy
Receiving report copy 2
Sends invoice
Sends invoice
Inventory level
Accounting Information System 1
Purchase System
Diagram1: DFD Purchase System
The Adam & Co purchase system has procedures for placing order, inventory
reception, identify inventory needs and revaluating obligations as show in diagram 1 above.
The procedures are used in both manufacturing and retail sector with the former purchasing
raw materials (Jarrah 2018). Control functions and production planning approve purchasing
decisions. Retail sector purchase finished commodities and resale after getting approval from
inventory control function. Inventory record is triggered when stocks drop and materials are
transferred to production phase. Inventories control function records and monitor finished
commodities and level of inventory (Fedaghi 2014). A decrease in inventory leads to
preparation of purchase order to activate purchases procedure in the presence of
Inventory
Subsidiary
Ledger

Accounting Information System 1
predetermined point for reorder which allow purchase requisition to be fundable. PO copy is
designed for vendors as shown in DFD (see diagram 1) (Thite and Sandhu 2014). A copy of
PO is sent to department of purchase for Account Payable (AP) functions set-up for
provisional filing of awaiting files and blind copy is goods reception functions. Adam & Co
has not received stock or suffer financial liabilities and it is needless to facilitate formal
entries in its accounts. However, it might do a memo entry in reference to awaiting inventory-
linked receipts and liabilities (Romney and Steinbart 2015).
Subsequently, the goods arrive and the reception report is made and reconciliation of
goods follow with DPO and packing slip. Documents copies including quantity and prices of
received goods are made to allow reception clerk to count and inspect inventories and draft
reception report. There is pressure to unload delivery vans and sign lading bills and hence
only relevant info is given to reception clerk on quantity of item to accept products delivery.
The next step is update provision about inventories records. An inventory ledger is presented
which triggers the attainment of data on quantity and this activates financial data from
warehouse of inventory (Janvrin and Watson 2017).
AP is set up and AP function receives the setting alongside the reception report
temporary file and PO which are filed. Adam & Co received inventories and realized
obligations to pay (Yuliyanto 2018). The process completed when AP clerk has evaluated
precise liability valuation to when he receives the invoice. In case of material improper
estimates, adjustment is done to entries. Unrecorded liabilities are evaluated at the closure
and when inventories arrive, AP financial data is reconciled with PO and reception report in
pending files through a trio-way matching process to verify quantity and prices. DPO
subsidiary ledger is progressively updated alongside stock controls and AP controls in
general ledger and the reception report and PO are sent (Lopez et al. 2017).

AP Department
Updates
Documents
Document Receipts
Identification
of Liability
Due
Treasurer
Vendor
Preparation of
cheque for invoice
account Signature
Mailing
Receiving
Receiving Report File
Invoice FileCheque Copy
Accounting Information System 1
Cash Disbursement System
Diagram 2: DFD Cash Disbursements Systems
The clerk receives pertinent doc receipts from department of AP and files them
pending due date to pay. During due date for payment, clerk draws a check in reference to
invoiced account which is then sent for signing and mailing by treasure to the vendor. Cheque
register is then updated alongside execution of AP control account and AP subsidiary ledger.
The clerk finally sends records to reception department to file the invoice, alongside copies of
PO, cheque and receiving report (Hall 2015).

Prepares cash
disbursement
vouchers
Payroll DepartmentEmployees Time Cards
Supervisors
Central Payroll SystemTime Card data
Payroll register
Payroll register
Supervisor
AC Department
Write ChequesCheque file
Imprest bank
General ledger
department
Cheque file
Department Employees
Reviews and submits
Hour’s records
Digital Employee Record
Reviews and submits
Deposits
Reviews
Check
Accounting Information System 1
Payroll System DFD
Diagram 3: Payroll System DFD
The payroll system of the Adams and Co company are designed with card system.
The card system allow the employees to keep track of the hours they have worked within the
entire month. After collection, they present the information to their supervisors for review.

Accounting Information System 1
The supervisor incharge of more than one employee, then reviews all the employee work
hour card before forwarding them to the payroll department (Jarrah 2018). The payroll
department then keeps the record and evaluates the cards for any possible error. The
department is also responsible for producing and printing copies of the cards thatv will filed
in employee records file. The clerks at the payroll department files the reviews and send the
employees payment cheques. The supervisor take responsibility once more in the distribution
and review of the payment cheques before handing them to the employees once again.
The clerk sends the copies to the registry department. The registry department keeps
the records in their flies and prepare cash disbursement vouchers. The cash disbursement
vouchers are used to manually produce the general ledgers and the clerks that will then be
deposited in the Bank accounts of the employees (Jarrah 2018).

Accounting Information System 1
Purchases System Flowchart
The system flow charts of the Adams and Co company use the inventory control. The
inventory level control is monitored at the inventory entry level. Initially the clerks are
supposed to develop purchase requisitions and create more copies. Each copy is supposed to
be dropped at the purchase department. The duties of transaction is separated from the
department of inventory and controls and left to the department of purchase. Purchase
requisition is the process that follows. It involves getting copies of the orders and dropping
them to the vendors. The copy is then transferred to the inventory control for further filling
and production.
The payable department is responsible for receiving all the invoices whereby the
information is supposed to be reconciled. A record of transactions is given to the clerk

Accounting Information System 1
responsible for filling. The clerk apart from filling updates the digital team of the
organization thereby storing every data in the department of digital communication. This is
done for future references. Lastly all these information is disseminated to cash disbursement
system.
CDS System Flowchart
Account payable clerks are responsible for all the checks and reviews. The available
vouchers are then filed to the denoted item and transfer of the relevant vouchers is done. The
department is responsible for ever clerical review since the process of disbursement started.
After they review they keep a copy of the file while sending all supportive documents to the

Accounting Information System 1
company’s treasurer for all the approvals (Collier 2015). To secure voucher files the client
has to send the files to the individual owners of the account once more. The clerks only send
the same after they have acquired and prepared all the liabilities ledger documents.
Payroll System: System Flowchart
The flow chart of the payroll system is just a summary of the procedure that the
individuals are paid. The cards that the employee have recorded the working hours are
reviewed by their supervisors. The supervisors send them to the account clerk who produces
a pay cheque for each employee before filling and sending a copy to the department of cash
disbursement. The cash disbursement department then upholds the responsibility of sending
the cheque to the bank for individual employee accounts (Bhoite 2012).

Accounting Information System 1
Weaknesses and Risks in Internal Control System
CDS
The major challenge in this system is that it faces the risks to underperform due to
lack of proper controls. The Company has left it for management to make fundamental
decisions which is another major weakness (Collier 2015).
Payroll Systems
This system is limited by entry of payroll time info as workers enter data about hours
worked. The company lacks individual unique codes which can allow the recognition of
workers and their associated entries of hours worked. This will deter workers from sharing a
code or dishonestly clock in data of colleagues.
Purchases System
This system has not carried out proper research on suppliers and hence faces the risk
of using materials of low quality and quantity as they use contract supplies anyhow (Bhoite
2012).
Conclusion
The report has evaluated the Expenditure Cycle of Adam & Co in terms of purchase,
payroll and cash disbursement system with illustration give in data flow diagram and system
flowcharts of each of the three system. The potential weaknesses and risks in each system
have also been identified and discussed to understand the effectiveness of the Company’s
internal control system.

Accounting Information System 1
Bibliography
Bhoite, D., 2012. e-Cash- Electronic Cash Payment: a System without Use of Paper or
Coins. International Journal of Scientific Research, 2(10), pp.1-3.
Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for
decision making. John Wiley & Sons.
Cook, A., Zoccam Technologies Inc, 2018. Systems and methods for database management
of transaction information and authentication data. U.S. Patent Application 15/933,278.
Fedaghi, S., 2014. Information system requirements: a flow-based diagram versus
supplementation of use case narratives with activity diagrams. International Journal of
Business Information Systems, 17(3), p.306.
Hall, J.A., 2015. Information technology auditing. Cengage Learning.
Janvrin, D.J. and Watson, M.W., 2017. “Big Data”: A new twist to accounting. Journal of
Accounting Education, 38, pp.3-8.
Jarrah, M., 2018. The Use of Social Media as a Marketing Tool for Purchase Adaption and
Purchase Intention to Improve Competitive Advantage. International Journal of Trade,
Economics and Finance, 9(5), pp.203-209.
Lopez, A.G., Butler, M.F., Arslan, B., Welsh, T. and Parento, S., Mastercard International
Inc, 2017. Systems, methods, and devices for implementing a scavenger hunt reward
program. U.S. Patent Application 14/962,026.
Romney, M.B. and Steinbart, P.J., 2015. Accounting information systems. Pearson Education.
Thite, M. and Sandhu, K., 2014. Where is My Pay? Critical Success Factors of a Payroll
System – A System Life Cycle Approach. Australasian Journal of Information Systems,
18(2), pp.1-20.

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Yuliyanto, H., 2018. Cloud Payroll System as the Model of the Fourth Industry Revolution
(Industry 4.0). KnE Social Sciences, 3(11), p.1131.