Accounting System and Process

This document provides information about accounting system and process, including inventory systems, perpetual inventory system, periodic inventory system, and cloud-based accounting software Xero.

Running head: ACCOUNTING SYSTEM AND PROCESS
Accounting System and Process
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Answer to question 1:......................................................................................................................2
Sub part (i): Memo:.....................................................................................................................2
Sub part (ii): Journal:...................................................................................................................5
Answer to question 2: Report:.........................................................................................................9
Introduction:................................................................................................................................9
CAIS (Computerized accounting information system):..............................................................9
Xero Cloud based Accounting information system:..................................................................10
Benefits of cloud based accounting software Xero:..................................................................11
Demerits of Xero:......................................................................................................................11
Implementation of Xero accounting information system:.........................................................11
Conclusion:................................................................................................................................12
Answer to question 3: Letter:........................................................................................................13
Answer to question 4: Bank Reconciliation:.................................................................................15
Sub part (i):................................................................................................................................15
Sub part (ii):...............................................................................................................................15
Sub part (iii):..............................................................................................................................17
Answer to question: 5 PPE transactions:.......................................................................................18
References and bibliography:........................................................................................................20

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Answer to question 1:
Sub part (i): Memo:
MEMORANDUM
Date: 14 May 2019
To: Directors, Spottie Ltd
From: [Name, Designation]
Subject: Inventory System
Introduction:
This memo is prepared to explain and describe various inventor control system that can
be used in an organization. Inventory system is the process of record keeping and inventory
control system in which the inventory related transactions are recorded and valuations are done
at the end of certain period of time. In the following paragraphs various inventory systems has
been described briefly.
Perpetual Inventory System:
Perpetual inventory system is defined as the process of recording purchase and sales on
inventory continuously throughout the year. Purchases are recorded as and when a purchase
transaction occurs and sales are also recorded as and when the sales are made. With every sales
transaction an additional entry is made to record the cost of goods sold. The valuation of
inventory is done on the basis of either FIOF, LIFO, or Weighted average method or any other

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valuation method. The FIFO and Weighted average method of perpetual inventory system has
been described briefly in the following paragraph.
First-in-firs-out method:
First-in-first-out (FIFO) method of inventory valuation is a system recording inventory in
the inventory ledger, where, the oldest inventories are issued first and the most recent inventories
are kept in stock. In this method, the cost of goods sold is measured on the basis or oldest unit
price of materials and the cost of ending inventory is measured by the price of recent materials.
This is a traditional method of perpetual inventory system.
Weighted Average method:
This is one more type of method of inventory recording and valuation. In this method
purchases and sales are recorded every day as and when such transactions occurs. The only
difference is in valuation of cost of goods sold and the valuation on ending inventory. Under the
weighted average method of inventory system, the cost of goods sold is determined using the
weighted average method. To ascertain the cost of goods sold, the last remaining total cost of
inventory is divided by the last remaining total quantity of inventory.
Periodic Inventory System:
This is a traditional system of recording inventory and measuring the cost of goods sold
and ending inventory. In this system purchase of materials are recorded in the books as cost of
purchase and the sales are recorded in the books of accounts at usual sales price. No entry is
made at the time of sales to record the cost of goods sold. At the end of the period, a single entry
is made to record the cost of goods sold. In this method, the quantity balance of ending inventory

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is determined by a physical stocktaking. When the physical quantity is determined the value of
ending inventory is calculated considering the recent market price of the materials. The cost of
goods sold is determined for the whole period at the end of the period considering the cost of
beginning inventory, cost of purchase and cost of ending invneotyr.
Conclusion:
From the above discussion and analysis, it can be concluded that, there are various
traditional and modern inventory recording and controlling system. Perpetual systems are more
effective and efficient, but periodic inventory system is less rational and logical. Because of its
usefulness and effectiveness, the perpetual inventory system is more suitable for business having
huge price fluctuation in materials.

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Sub part (ii): Journal:

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From the above working and workbooks, it can be seen that, in perpetual inventory
system, purchase transactions are recorded as and when the purchases are made and sales are
recorded as and when the sales are made. The only difference in this two system are, in the first
one the cost of goods sold is determined separately for every sales and recorded in the books of
accounts, but in the periodic inventory system, the cost of goods sold is determined at the end of
the period and a single entry is made to record that.

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Answer to question 2: Report:
Introduction:
The report is prepared to demonstrate the importance and usefulness of the automated
accounting system to the organizations. Accounting is the process by which the financial records
and the associated transactions is summarized, recorded and classified in a meaningful manner
by the accountants of organization that assist in the process of making decision. In the earlier
days, there was less complexities in the business transactions and the size of business was small
for which the job of the accountants was easy and it was easy for the accountant to carry out the
process of recording all the business and financial transactions. However, with the increase in the
competitive environment and complexities of business, the accountants started facing difficulties
in performing their work in an appropriate and proficient manner. With the advancement of
technology, the work of accountants became easier resulting from the development of accounting
information system.
CAIS (Computerized accounting information system):
The reporting requirement concerning the disclosure of financial and accounting
information has become essential and important due to the evolution and the advancement of
business. There has been the development of several automated accounting system in order to
compete in an increased pressure imposed by the competition prevailing in the industry. The
business organization can implement various accounting software systems as there are varieties
of accounting software packages available in the market. Such software provides great assistance
to the business in recording their financial transactions and daily operations. An organization can
see that in the market, there are availability of desktop accounting software packages which

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provides assistance in recording the day to day operating and accounting activities of the
business. In addition to this, for the purpose of recording the accenting and the financial
transactions of the business, there are accounting packages available in the market based on the
internet system. Another name of the internet based accounting system is the cloud based system
of accounting. Some of the renowned desktop system of accounting is MYOB, SAP and Recon.
Xero is one of the cloud based accounting software with some of the other software named as
Sage cloud based accounting package and Quick books accounting system (Patel, 2015). The
paragraph depicted below demonstrates the application of the software and the merits and
demerits of the cloud based accounting software named Xero.
Xero Cloud based Accounting information system:
Xero is one of the cloud based accounting software package that can run using the
internet and the organization using the system would be able to perform the application online as
well. The software package can be accessed using the password and the user id and the
accountants have ease in recording the accounting transactions using the software. For using the
accounting software, it is required by the organization to subscribe for the software and the
company should be registered to the software by making or paying the subscription fee. The
accounting software Xero can be used by the accountants in different stage. In the first stage, the
activities sand the details of the activities of the companies relating to the transaction are fetched
into the software. The opening balance of the liabilities, assets, expenses and income should be
imported in the software. Since this particular accounting software is completely automated, it is
required by the accountant to fetch the data in the forms of claim of bill expenses, invoices and
the transactions. The subsequent effects to the respective ledger would be given automatically

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and thereby producing the report quickly. This particular accounting software has become
popular because of its efficiency and ease to use.
Benefits of cloud based accounting software Xero:
One of the biggest advantages that contribute to the popularity is the efficiency and the
use of use of the software by the accountant along with its capability of producing the reports
instantly. Another advantage is that the software can be accessed online and therefore,
accountants responsible for handling the software can use it irrespective of anywhere in the
world. The accountants find ease to enter the invoices and bills claiming the expenses directly
into the system for generating the report and subsequent impacts are done automatically
(Susanto, 2016). The information product offered by the software is one of the important features
that make the control system efficient and effective.
Demerits of Xero:
Since Xero is a cloud based accounting software, the data sought for producing the report
are entered and refreshed onto the cloud and accordingly the transactions are entered. Therefore,
it can be inferred that data security is the important detrimental factor in using this particular
software. It is certainly possible in the weak security; the other parties can steal the data from the
cloud. Furthermore, in the event of losing the password and hacking of the account, accountant
can get access to the data without stretching (Mirzaey et al., 2017). This also presents the case of
security issue as the data lost can be easily gained which makes it possible for any other user to
access and might result in occurrence of fraud.

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Implementation of Xero accounting information system:
The software can be adopted by the organization after knowing all the advantages and
disadvantages of the software. Adoption of the software would assist the business in developing
the internal control system and controlling the financial records and transactions (Collier, 2015).
Therefore, based on the usage and then fulfilment of the requirement of the business, the
software can be implemented by the business.
Conclusion:
From the analysis on the software packages availability in the market, it can be inferred
that there are various cloud accounting packages that can be adopted by the organization based
on the ease and usability along with the operations of the business. Xero has been the accounting
software packages that offered the business to develop the efficient internal control in relation to
the recording the accounting and other financial transactions (Mahama et al., 2016). Depending
upon the availability, fulfilling the criteria and requirement of the business, it is recommended by
the business to adopt the software such as Xero and MYOB.

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Answer to question 3: Letter:
To
The Directors, Mr. and Mrs. Spot
Spotty Ltd
Australia
Date: 16 May 2019
Subject: Internal control application and misappropriation of cash
Dear Sir/Madam,
The purpose of writing this letter is to make you acquainted with the internal control
system and how such system have contributed to the occurrence of fraud acts in some of the
business organization of Australia (Guragai et al, 2015). For this, some of the recent cases
regarding the misappropriation of cash have been accounted and the measures taken to prevent
the happening of such acts are presented.
An employee engaged in misrepresenting the financial resources and activity of stealing
the cash of business is referred to be misappropriating the cash. Some of the instances depicting
the acts of cash misappropriation are depicted in the section below:
One of the instances of mismanaging the cash, the company secretary and the financial
controller of a transport company had stolen the cash in significantly lower time period. He was
the person who had the authority of handling the transactions and was the signatory authority in

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dealing with the banks transaction. A total amount of $ 11 million was transferred to his personal
account with time period of twelve months (Sledgianowski et al., 2017).
Another study presented a case where significant amount of cash was stolen by the
employee of bank. The biggest misappropriation of cash was presented by stealing of $ 45
million. In another case, $ 19 million was employed by the employee of one of the companies
operating in Australia.
Some of the internal control system that can help in developing an effective internal
control system includes documentation, reconciliation and accessibility.
In addition to this, there should be appropriate segregation of duties so that the
accounting transactions and recording are handled independently. In light of the issues identified,
I would like to draw attention regarding the implementation of the effective control system.
Yours sincerely
[Name]

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Answer to question 4: Bank Reconciliation:
Sub part (i):
Sub part (ii):

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Sub part (iii):

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Answer to question: 5 PPE transactions:

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References and bibliography:
Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for
decision making. John Wiley & Sons.
Gelinas, U. J., Dull, R. B., Wheeler, P., & Hill, M. C. (2017). Accounting Information Systems.
Cengage Learning.
Guragai, B., Hunt, N. C., Neri, M. P., & Taylor, E. Z. (2015). Accounting information systems
and ethics research: Review, synthesis, and the future. Journal of Information
Systems, 31(2), 65-81.
Mahama, H., Elbashir, M. Z., Sutton, S. G., & Arnold, V. (2016). A further interpretation of the
relational agency of information systems: A research note. International Journal of
Accounting Information Systems, 20, 16-25.
Mirzaey, M., Jamshidi, M. B., & Hojatpour, Y. (2017). Applications of artificial neural networks
in information system of management accounting. International Journal of
Mechatronics, Electrical and Computer Technology, 7, 3523-3530.
Patel, F. (2015). Effects of accounting information system on organizational
profitability. International Journal of Research and Analytical Reviews, 2(1), 168-174.
Sledgianowski, D., Gomaa, M., & Tan, C. (2017). Toward integration of Big Data, technology
and information systems competencies into the accounting curriculum. Journal of
Accounting Education, 38, 81-93.

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Susanto, A. (2016). The effect of internal control on accounting information
system. International Bussiness Management, 10(23), 5523-5529.