Accounting System and Process

This document provides information about accounting system and process, including different inventory systems such as perpetual inventory system and periodic inventory system. It also discusses Xero cloud based accounting information system and its advantages and disadvantages. The document highlights the importance of internal control in preventing cash mismanagement and employee frauds. Additionally, it explains the bank reconciliation process.

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

1ACCOUNTING SYSTEM AND PROCESS
Table of Contents
Answer to question 1:......................................................................................................................3
Sub part (i): Memo:.....................................................................................................................3
Sub part (ii): Journal:...................................................................................................................6
Answer to question 2: Report:.......................................................................................................10
Introduction:..............................................................................................................................10
Computerized Accounting Information System:.......................................................................10
Xero Cloud based accounting information system:...................................................................11
Advantages of Xero Cloud based accounting information system:...........................................11
Disadvantages of Xero Accounting information system:..........................................................12
Adoption of the Xero Accounting information system:............................................................12
Conclusion:................................................................................................................................13
Answer to question 3: Letter:........................................................................................................14
Answer to question 4: Bank Reconciliation:.................................................................................16
Sub part (i):................................................................................................................................16
Sub part (ii):...............................................................................................................................16
Sub part (iii):..............................................................................................................................18
Answer to question 5 PPE transactions:........................................................................................19
References and bibliography:........................................................................................................21

2ACCOUNTING SYSTEM AND PROCESS

3ACCOUNTING SYSTEM AND PROCESS
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 memorandum is prepared to explain inventory system, its use in business and its
importance. There are various inventory system which can be implemented in business, to
record, and manage the inventory movement of an organization. In the following paragraphs,
some of such inventory systems have been discussed.
Perpetual Inventory System:
Inventory system means the recording and valuation process of inventory. There are
various ways in which such objective can be achieved. Perpetual inventory is one of the most
important concepts in inventory system. In this system all the transactions relating to the
inventory are recorded in the books of accounts as and when it occurs. It recognizes the cost of
goods sold with every sales transaction. In this system, for valuation of closing inventory or to
determine the cost of goods sold, there are various methods, such as FIFO, LIFO, weighted
average.

4ACCOUNTING SYSTEM AND PROCESS
First-in-firs-out method:
First-in-first-out (FIFO) is a system of recording the inventory. The cost of goods sold is
recognized on the basis of first in first out. It means the materials, which are purchased first,
would be issued first and the materials, which have been purchased last, would be issued last. In
this method the oldest materials are issued first then the recent materials are issued. In this
system the oldest cost is considered for the cost of goods sold and recent cost is considered fro
closing inventory.
Weighted Average method:
Weighted average method of inventory system is another important method where the
issue prices are determined on the basis of weighted average price. In this method, the issue
prices are determined on the basis of weighted average price of the last held inventory and its
total price. In this system, the issue price is calculated by dividing the total cost of inventory by
the total quantity of the inventory held before the issue. This is more scientific and rational
system of inventory and is widely used by business organizations.
Periodic Inventory System:
Periodic system of inventory is another method of inventory record keeoing. In this
system purchase transactions of inventory are recorded as and when the transaction takes place,
but no cost of goods sold entry is made at that time of sales. The cost of goods sold is determined
at the end of the period by comparing the opening inventory, cost of purchase and ending
inventory. To compute the COGS, opening inventory and total cost of purchase is added and the
cost of ending inventory is deducted from it.

5ACCOUNTING SYSTEM AND PROCESS
Conclusion:
From the above discussion and analysis it can be concluded that, inventory system helps
in better inventory management and control, there are various effective inventory management
system, of which weighted average method of the perpetual inventory system is efficient and
rational. It can be recommended for the company to adopt the weighted average method of
perpetual inventory system.

6ACCOUNTING SYSTEM AND PROCESS
Sub part (ii): Journal:

7ACCOUNTING SYSTEM AND PROCESS

8ACCOUNTING SYSTEM AND PROCESS

9ACCOUNTING SYSTEM AND PROCESS
From the above journals and working it can be observed that, in perpetual inventory
system, every sales transaction is backed with a cost of goods sold entry taking the cost of goods
sold for the sales units. In the perpetual inventory system the cost of goods sold is determined
based on the FIOO system as shown in workings. In the periodic inventory system only a single
cost of goods sold entry is passed at the end of the period. The value of ending inventory for the
periodic inventory system has been considered on the recent market value.

10ACCOUNTING SYSTEM AND PROCESS
Answer to question 2: Report:
Introduction:
Accounting is defined as the recording, classifying, summarizing and reporting
meaningful information for the stakeholders which will help them in various decision making
process. When the volume of business was small it was manageable for individual accountants to
perform all the accounting jobs in an organization. With the increase in volume of business and
complexities in the business transactions, it becomes quite impossible for an individual
accountant to perform all the accounting jobs accurately and efficiently. To help them out,
various information systems has been developed which can be applied in the field of accounting
and used effectively for day to day accounting and reporting. In this report some of such
automated accounting information system has been described in detail (Belfo & Trigo 2013).
Computerized Accounting Information System:
As the business world developed and revolutions took place, the need for automated and
computerized and advances accounting information system was felt. Various automated
accounting software packages are available in the market which can be used in a business
organization to record their daily business transactions. There are a range of desktop accounting
software packages available in the market, which can be used for the accounting and reporting in
the computers. In addition, some cloud based accounting information system can be used for the
accounting purpose. Those internet based accounting systems are known as the cloud based
accounting systems. Some example of good desktop accounting systems are SAP, Mayob, Recon
and so on and some example of cloud based accounting information system are Xero, cloud
based accounting system, Quick books accounting system, Sage Cloud based accounting system

11ACCOUNTING SYSTEM AND PROCESS
and so on. In the following paragraphs the features, applications, advantages and disadvantage of
Xero cloud based accounting system has been discussed (Belfo & Trigo 2013).
Xero Cloud based accounting information system:
Xero is a cloud based accounting information package, which can be accessed from
anywhere using internet. It requires just a user id and password to get access into the software
and to work on it. To use the Xero cloud based accounting information system, one need to buy
the annual subscription for the Xero, and to get their company registered with the Xero. Various
roles and authorizations can be set and defined for various users in the Xero according to their
authority and scope of work in the organization (Hossack 2015). In the initial stage in Xero
accounting system, the company and its activities needs to be set after entering into it. All the
opening balances of assets and liabilities, expenses and incomes are to be given at the very first
stage. The Xero is automated cloud based software, it only needs the inputs in the form of
invoices, and bills expense claims and transaction entry. All the effect will be automatically
given to the respective ledgers. It can produce all the reports instantly in a single click. It is being
widely used because of its simplicity and performance. In the following paragraphs it usefulness,
significance, advantages and disadvantages have been discussed (Hossack 2015).
Advantages of Xero Cloud based accounting information system:
The Xero cloud based accounting system processes the financial data and produces the
desired and meaningful reports based on the given criteria. The important feature of the system is
its accessibility from the anywhere in the world. The software can be accessed from anywhere
using the internet and can be worked into it sitting anywhere. Its popularity is because of its
simplicity and efficiency. It is very much simple and easy to record transactions in the system;
the rest part of processing the information is done by itself automatically. Its user interface is

12ACCOUNTING SYSTEM AND PROCESS
also very simple and easy. Its unique feature is its production of information. It shows all the
important figures and facts in the dashboard of the system with some graphs. It also shows the
pending invoices for receipt and pending bills to be paid in the dashboard. Another more
important feature of the system is the inventory control system. It records all the inventory
related transactions and tracks the inventory with every inputs and outputs in the inventory.
Therefore, it is very user friendly easy and efficient in performing all the accounting and
reporting financial transactions (Hossack 2015).
Disadvantages of Xero Accounting information system:
The Xero accounting information system is a cloud based accounting system which is
used and accessed through the internet. All the information are stored in the cloud and updated in
the cloud as and when new transactions are entered. Hence, the main disadvantage of the system
is its security of information. Various important information of the business can be stolen by
others parties from the internet. If the system gets hacked or if the user id and password is lost to
anyone else, they can easily enter into the system and get access to it. If the information security
can be assured there would be no problem in using it for the business organization (Brandas,
Megan & Didraga 2015).
Adoption of the Xero Accounting information system:
After knowing all the features, importance and advantages of Xero Cloud based
accounting system it can be recommended that the company should adopt t in their business. It
can help them in controlling their financial transactions and to control their inventory system. It
can also help them to generate various financial reports and information as and when required
and can be used in managerial decision-making process. They need to adopt the system

13ACCOUNTING SYSTEM AND PROCESS
according to their requirement and setup must be done according to their information and
accounting needs (Brandas, Megan & Didraga 2015).
Conclusion:
From the above dissuasion it can be concluded that, there are various automated
accounting information system in the market. Some of them are desktop accounting system and
some of them are fully cloud based accounting system. Xero is a fully cloud based accounting
system and can be accessed through internet. It is effective efficient and easy to use. It can be
recommended for the company to adopt it for their financial accounting purpose.

14ACCOUNTING SYSTEM AND PROCESS
Answer to question 3: Letter:
To
The Directors, Mr. and Mrs. Spot
Spotty Ltd
Australia
14 May 2019
Subject: Cash mismanagement and Importance of internal control
Dear Sir/Madam,
This letter is prepared to make you aware about the cases of employee frauds in some
Australian business organization and various internal control systems to prevent such activities.
Recent cases of cash mismanagement must be taken into consideration and necessary measures
must be taken for prevention.
Cash mismanagement means stealing of cash or financial resources by an employee of an
organization. They can involve in such activities in various ways, some of such recent instances
have been discussed below.
A recent study has shown that almost $217 million has been stolen by the bank
employees in the last 13 years in Australia. A women employee of ING had stolen $45 million,
and it was the biggest cash mismanagement case by employees. In another case a employee of an
Australian company, stole $19 million. She had the cheque signing authority of the company and
the authority to process electronic fund transfer activities. She transferred funds from the
company’s account to an account controlled by her in the name of her own business. The
employee used to make bills drawn on the name of the company using her own business name,
and transferred fund to pay off those bills which was totally fake.

15ACCOUNTING SYSTEM AND PROCESS
In another instance of cash mismanagement, an employee employed as the financial
controller of the company and the company secretary for a transport company had stolen a
significant amount of cash within a period of only five months. He has the authority and role to
act as the authorized signatory on behalf of the organization for all the banking transactions.
Within five months, he transferred a total of $11 million to his personal account and bought
property and a luxury car using that fund.
The risk of employee frauds can be avoided using some internal control mechanism.
Some of them have been described briefly as below.
Access: The authority to prepare, authorize, process and payments must be predefined and
must be given on the basis of various levels.
Documentation: Each transaction must be backed by proper documentation. It assures the
correctness and validity of the transactions.
Reconciliation: All the transactions must be reconciled periodically. Moreover the
reconciliation must be done by some other employee who were not involved in processing such
transactions.
Lastly, it is very important to assign the authority to various persons based on their scope
of work. The employee, preparing, authorizing, processing payments must be different to ensure
a proper control. Therefore, sir and madam, I would like to draw your attention on these things
and to implement an internal control system in the organization.
Sincerely
[Name]

16ACCOUNTING SYSTEM AND PROCESS
Answer to question 4: Bank Reconciliation:
Sub part (i):
Sub part (ii):

17ACCOUNTING SYSTEM AND PROCESS

18ACCOUNTING SYSTEM AND PROCESS
Sub part (iii):

19ACCOUNTING SYSTEM AND PROCESS
Answer to question: 5 PPE transactions:

20ACCOUNTING SYSTEM AND PROCESS

21ACCOUNTING SYSTEM AND PROCESS
References and bibliography:
Al-Hiyari, A., Al-Mashregy, M. H. H., Mat, N. K. N., & Alekam, J. M. (2013). Factors that
affect accounting information system implementation and accounting information
quality: A survey in University Utara Malaysia. American Journal of Economics, 3(1),
27-31.
Belfo, F., & Trigo, A. (2013). Accounting information systems: Tradition and future
directions. Procedia Technology, 9, 536-546.
Bonny, P., Goode, S., & Lacey, D. (2015). Revisiting employee fraud: gender, investigation
outcomes and offender motivation. Journal of Financial Crime, 22(4), 447-467.
Brandas, C., Megan, O., & Didraga, O. (2015). Global perspectives on accounting information
systems: mobile and cloud approach. Procedia Economics and Finance, 20, 88-93.
Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for
decision making. John Wiley & Sons.
Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for
decision making. John Wiley & Sons.
Dimitriu, O., & Matei, M. (2014). A new paradigm for accounting through cloud
computing. Procedia economics and finance, 15, 840-846.
Hilton, R. W., & Platt, D. E. (2013). Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.

22ACCOUNTING SYSTEM AND PROCESS
Hossack, S. (2015). Cloud-based accounting and productivity tools for practitioners and
taxpayers. Taxation in Australia, 50(5), 265.
Iyer, N., & Samociuk, M. (2016). Fraud and corruption: Prevention and detection. Routledge.
Knechel, W. R., & Salterio, S. E. (2016). Auditing: Assurance and risk. Routledge.
Kummer, T. F., Singh, K., & Best, P. (2015). The effectiveness of fraud detection instruments in
not-for-profit organizations. Managerial Auditing Journal, 30(4/5), 435-455.
Maskell, B. H., Baggaley, B., & Grasso, L. (2016). Practical lean accounting: a proven system
for measuring and managing the lean enterprise. Productivity Press.
Mikes, A., & Kaplan, R. S. (2014, October). Towards a contingency theory of enterprise risk
management. AAA.
Nawawi, A., & Salin, A. S. A. P. (2018). Employee fraud and misconduct: empirical evidence
from a telecommunication company. Information & Computer Security, 26(1), 129-144.
Uwonda, G., & Okello, N. (2015). Cash flow management and sustainability of small medium
enterprises (SMEs) in Northern Uganda. International Journal of Social Science and
Economics Invention, 1(03), 153-to.
Worrell, J. L., Di Gangi, P. M., & Bush, A. A. (2013). Exploring the use of the Delphi method in
accounting information systems research. International Journal of Accounting
Information Systems, 14(3), 193-208.