Case Study - Adam & Co: Accounting Information System Analysis
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The business analyst of Adam & Co has prepared the report to analyze the performance of the company. The characteristics and objectives of the system have been highlighted. The system flowchart of purchasing system, cash disbursement system and payroll system has been described.
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Running head: CASE STUDY- ADAM & CO Case Study – Adam & Co Name of the Student: Name of the University: Author Note
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1CASE STUDY – ADAM & CO Executive Summary ThebusinessanalystofAdam&Cohaspreparedthereporttoanalyzethe performance of the company. The characteristics and objectives of the system have been highlighted. The system flowchart of purchasing system, cash disbursement system and payroll system has been described.
2CASE STUDY – ADAM & CO Table of Contents Introduction...................................................................................................................3 System flowchart and description of purchases system..............................................5 System flowchart and description of cash disbursements system...............................6 System flowchart and description of payroll system....................................................7 Internal control and associated risk..............................................................................9 Conclusion....................................................................................................................9 Reference list..............................................................................................................10
3CASE STUDY – ADAM & CO Introduction Accounting Information System is a mechanism of collection, storage and processing of accounting and financial data which are used for the purpose of decision making by the makers of decision. It is a method based on computer for trackingitsaccountingactivitiesinrelationtotheresourcesofinformation technology. The financial reports prepared are used by the internal management as well as by external interested parties like investors, tax authorities and creditors (Ceran, Gungor and Konya 2016). It is designed in a manner that supports all the accounting activities and functions relating to financial reporting and accounting, managerialaccountingandtaxandauditing.Thecommonlyusedmodulesof accounting systems are financial reporting and auditing by most companies. One such company is Adam & Co that follows a centralized accounting system for its networkofterminalsacrossdifferentlocations.Asitsbusinessanalystthe performance of the company has been analysed (Collier 2015). The company has its sourceofinventoriesfromChina,VietnamandThailandmanufacturers.The expenditurecycleprocedureshasbeendescribed.Themanagementofthe purchasessystembythepurchasingsystemhasbeenelaborated.Thecash disbursement system is managed by the clerk and updates are made in the books. The process of pay roll system followed by the company is explained. The evaluation of the process, risk and internal control of its expenditure cycle for the Managing Director has been prepared. The implementation of the system have certain steps that are required to be fulfilled. Several firms have started adopting effective cost accounting information system based on cloud (Galliers and Leidner 2014). Most firms used to hire external consultants from the software consultants or publishers who would have a good understanding of the business. They help in the work by selecting and implementing the desired configuration by incorporating all the parts into its consideration. Synthesis of systems design An analysis is conducted based on which there is creation of new systems. The surrounding systems play an important role in it. The data that needs to be fetched into the system and the process of handling it is described (Gullberg 2016). The information that needs to be fetched out of the system and the way it is to be modified is illustrated. The input and output data should be determined for the processing by the system. The selection of the program has to be appropriately handled to conduct its process. The mechanism is structured with sample master records and control files. It is designed in a manner which facilitates internal control and provides the management with relevant information for decision making. The characteristics of the system are meaningful, useful, relevant, current and reliable (Guragaiet al.2015). For achieving it, the system is built in a manner where the transactions are recorded on their occurrence and immediately made available for the management. Documentation Thedocumentationispreparedwhileitisdesigned.Itisinclusiveof documents by the vendor and detailed instructions for the users that helps them to handleeveryprocesswhichisorganizationspecific.Mostproceduresand documentation are online and they are helpful upon receiving instructions from the
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4CASE STUDY – ADAM & CO vendor of software (Krahel and Vasarhelyi 2014). Procedures and documentation are the afterthought while the insurance tool and policy are used during the process of training and testing before its launch. The testing of the documentation is done during the training phase for the launch of system without any queries by its users. Support The managers and end users have continuous availability of support all the time. The system upgrades adhere to a similar kind of process and all its users are apprised of its changes, upgraded in a manner that is efficient. Certain firms limit the money and time they spend on its design, training, analysis and documentation (Medina-Quintero, Mora and Abrego 2015). They further move directly into the selection of software and implementation. In case of receiving a detailed analysis with the use of sufficient time on its analysis, implementation and support. Tools Accounting information system is assisted with available online resources for its strategic planning. Financial forms and information systems help in concluding the particular needs of every organization along with responsibilities being assigned to the principles that have been involved (Yigitbasioglu 2016). Training The users are trained with the procedures before the launch. A trainer has beenappointedwhoassiststheusersaboutthehandlingofprocedures.The procedures have to be updated during the process of training as the users keep describing their specific circumstances (Nan and Wen 2014). The design is also modified by incorporating the additional information. The procedure is performed with the trainer as well as the documentation. Characteristics- It satisfies the needs of information for both its internal as well as external users of information. The internal users include the managers at different levels for the purpose of control and planning. The standard definitions of accountingtermsarefollowedtoassureconsistencyintheinformation recorded. The external users include vendors, stock exchanges, customers, investors and many more. The mechanism deals with financial transactions that can be shown having monetary value. It is a well-structured and simple system involving procedures and principles for accounting its data. The objective is to protect the interests of vendors, customers, general public and investors. The data for the mechanism is obtained from internal sources. Therefore, the databases are integrated, controlled and well-defined. It makes use of historical data and includes future data as forecasts and budgets. Objectives- Protecting the firm from the potential risks that could arise in future from improper use of accounting data
5CASE STUDY – ADAM & CO Meeting the statutory requirements of the organization Providing reliable information on accounting to its various users System flowchart and description of purchases system Purchases system is a mechanism for the process of purchasing products upon identification of low levels. It involves purchasing upon requisition and through purchase order using product payment and receipt. The key components of these systems are the inventory management in which they review the existing stock and helps the company in determining the further purchases to be done. It also helps to ascertain the quantity and time frame of purchasing it. The blue prints are created by the clerk and forwarded to the respective departments (Nurhayati and Mulyani 2015). The receipt of goods are verified with the digital purchase order along with the packing slip by the receiving clerk. The blue prints are prepared manually on the reports received (Prasad and Green 2015). The goods are shelved and the ledgers are updated using the computer terminal. After receiving the invoice, the receiving report is pulled from its temporary file and the documents are reconciled. The ledgers, accounts are updated digitally by the clerk. The relevant documents are forwarded to the department of cash disbursement.
6CASE STUDY – ADAM & CO Inventory check Placing of order upon detecting low levels of quantity Printing of hard copies and recording in the purchase order file Receiving and inspection of goods by the clerk Reconciliation of documents Receipt of documents by cash disbursement department System flowchart and description of cash disbursements system It is a mechanism of cash outflow for payments done in return for the goods provided. It is also a disbursement of cash on refund made to customers that has been recorded as a decrease in sales. The cash disbursement clerk does the filing of documents after receiving the documents from the department of accounts payable. (Silviu-Virgil 2014). The cheque is prepared by the clerk for the department of accounts payable and forwarded to the treasurer for signing. The cheque is mailed to the vendor (Usenkoet al.2018). The updates in the cheque register, subsidiary ledgers and accounts payable are made by the clerk from the computer terminal. Thefunctionofcashdisbursementiseffectivewhenitincludesproper documentation and is recorded in the financial records of the company (Syaifullah 2014).
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7CASE STUDY – ADAM & CO Documents received from the accounts payable department Signing of the cheque by the treasurer and mailing to the vendor Preparation of cheque by the clerk Filing of relevant documents by the receiving clerk Updation of books of accounts by the clerk Filing of documents by the clerk until the due date of payment System flowchart and description of payroll system Similar to other businesses, Adam & Co has a payroll system installed by which it records the working hours of its employees. It is an automatic process that assists in complying with the tax and legal requirements along with making the payments to its employees in an easier manner. The time cards are reviewed by the supervisors for correctness and submitted to the department of payroll (Trigo, Belfo and Estébanez 2016). It prepares reports that help the management in managing its expenses relating to labour. It generates reports of salaried and hourly employees. It eases the process of reporting by having templates created which the managers to easily and quickly search for its costs relating to the period. The inputs are forwarded to the central system for printing of copies, cheques and posting into the digital records. The system makes calculations of the amount that is owed by the company to its employees on the basis of factors like working hours, hourly salaries or wages and the holidays taken by them in the period of payment. It measures and makes adjustments to arrive at the gross pay amount (Upadhaya, Munir and Blount 2014). The time cards are filed by the clerk and sent to the supervisor for reviewing. It provides the employees with cheques along with a summary of information that has been used for calculating the gross and net wage.
8CASE STUDY – ADAM & CO Recording of work hours on time cards Printing of copies of pay cheques and posting in digital records Input of time card data by the payroll clerk into the system Reviewing of time cards and submission to payroll department Filing of time cards in payroll departments Sending of documents to the accounts payable document Filing of time card in the payroll department and sending the cheque to supervisors
9CASE STUDY – ADAM & CO Internal control and associated risk The cash disbursement system helps the company to reduce its supply cost, administrative cost and increase its efficiency. Therefore, decrease human error as well as minimize the shortages. The purchases system helps to simplify the tracking of orders and make the process of managing the purchase budgets easier by quick preparation of expenditure reports. It helps the company in controlling the cash outflows.It also ensures the necessary purchases that are to be done at affordable prices. The outputs constitute the amount of inputs that are required for the process of production. Disbursement of cash is generally detected in the accounts payable system. However, it has also been found to be disbursed by use of petty cash and payroll systems. A system of disbursement is required by all firms for efficient and secure handling of cash payments. Cash payments are processed through the accounts payable of a company. The internal control plays an important role in this process and helps to ensure legitimate cash payment transactions. The function of accounts payable has the responsibility of approving the payments of vendors and transactions of creditors only if the supporting documents exist. As the transactions are recorded upon having supporting paperwork the chances of invalid transactions get reduced.Generally firms incorporate the system software for the payroll process. It processes information and calculates the amount to be paid. It also helps in checking facts like vacation balances, headcounts and earnings of employees. Conclusion The report helps to conclude the analysis that has been done by the business analyst of Adam & Co. The accounting information system has been described with itsmainfunctionsbeenhighlighted.Thesynthesisofsystemdesign,support, documentation, tools along with training are its main components that help to make the mechanism successful in an organization. The system of purchase system has beendescribedand theprocess by whichithelps todeterminetheinventory management for the firm. The disbursement system of cash also been discussed. The payroll system adopted by the firm has been explained. The reports generated by the payroll system helps the management in taking appropriate decisions.
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10CASE STUDY – ADAM & CO Reference list Ceran, M.B., Gungor, S. and Konya, S., 2016. The role of accounting information systems in preventing the financial crises experienced in businesses.Economics, Management, and Financial Markets,11(1), pp.294-303. Collier, P.M., 2015.Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons. Galliers,R.D.andLeidner,D.E.,2014.Strategicinformationmanagement: challenges and strategies in managing information systems. Routledge. Gullberg,C.,2016.Whatmakesaccountinginformationtimely?.Qualitative Research in Accounting & Management,13(2), pp.189-215. Guragai, B., Hunt, N.C., Neri, M.P. and Taylor, E.Z., 2015. Accounting information systemsandethicsresearch:Review,synthesis,andthefuture.Journalof Information Systems,31(2), pp.65-81. Krahel, J.P. and Vasarhelyi, M.A., 2014. AIS as a facilitator of accounting change: Technology, practice, and education.Journal of Information Systems,28(2), pp.1-15. Medina-Quintero, J.M., Mora, A. and Abrego, D., 2015. Enterprise technology in supportforaccountinginformationsystems.Aninnovationandproductivity approach.JISTEM-JournalofInformationSystemsandTechnology Management,12(1), pp.26-44. Nan, L. and Wen, X., 2014. Financing and investment efficiency, information quality, and accounting biases.Management Science,60(9), pp.2308-2323. Nurhayati, N. and Mulyani, S., 2015. User participation on system development, user competence and top management commitment and their effect on the success of the implementation of accounting information systems.European Journal of Business and Innovation Research,3(2), pp.22-35. Prasad,A.andGreen,P.,2015.Organizationalcompetenciesanddynamic accountinginformationsystemcapability:impactonAISprocessesandfirm performance.Journal of Information Systems,29(3), pp.123-149. Silviu-Virgil,C.,2014.Theimportanceoftheaccountinginformationforthe decisional process.THE ANNALS OF THE UNIVERSITY OF ORADEA, p.591. Syaifullah,M.,2014.InfluenceOrganizationalCommitmentOnTheQualityOf AccountingInformationSystem.InternationalJournalofScientific&Technology Research,3(9), pp.299-305. Trigo, A., Belfo, F. and Estébanez, R.P., 2016. Accounting Information Systems: evolvingtowardsabusinessprocessorientedaccounting.ProcediaComputer Science,100, pp.987-994. Upadhaya, B., Munir, R. and Blount, Y., 2014. Association between performance measurementsystemsandorganisationaleffectiveness.InternationalJournalof Operations & Production Management,34(7), pp.853-875.
11CASE STUDY – ADAM & CO Usenko, L.N., Bogataya, I.N., Bukhov, N.V., Kuvaldina, T.B. and Pavlyuk, A.V., 2018. Formation of an integrated accounting and analytical management system for value analysis purposes.European Research Studies,21, p.63. Yigitbasioglu, O., 2016. Firms’ information system characteristics and management accountingadaptability.InternationalJournalofAccountingandInformation Management,24(1), pp.20-37.