Weaknesses and Risks involved with Cash disbursement system at Adam & Company 6 The purchases system flowchart 8

ACCOUNTING 15 Accounting Information System Student’s name Course Instructor’s name Institutional affiliation City and state Date Abstract 3 Introduction 4 Cash Disbursement flowchart system 5 Figure 1: Cash Disbursement Flowchart 6 Weaknesses and Risks involved with Cash disbursement system at Adam & Company 6 The flowchart for purchases system 7 Figure 2: The purchases system flowchart 8 Weaknesses and risks that are likely to happen in Adam and Co 9 The payroll system flowchart 10 Figure 3: The payroll flowchart system 10 Risks and

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Accounting Information System
Student’s name
Course
Instructor’s name
Institutional affiliation
City and state
Date

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Table of Contents
Abstract......................................................................................................................................................3
Introduction...............................................................................................................................................4
Cash Disbursement flowchart system......................................................................................................5
Figure 1: Cash Disbursement Flowchart..................................................................................................6
Weaknesses and Risks involved with Cash disbursement system at Adam & Company.....................6
The flowchart for purchases system.........................................................................................................7
Figure 2: The purchases system flowchart...............................................................................................8
Weaknesses and risks that are likely to happen in Adam and Co.........................................................9
The payroll system flowchart.................................................................................................................10
Figure 3: The payroll flowchart system.................................................................................................10
Risks and Weaknesses for Payroll system.............................................................................................11
Conclusion................................................................................................................................................11
References................................................................................................................................................13
Sori, M, Z., 2010.Accounting Information Systems (AIS) and Knowledge Management. Retrieved from:
https://www.researchgate.net/publication/255429534_Accounting_Information_Systems_AIS_and_Know
ledge_Management_A_Case_Study..........................................................................................................13
Ayagre, P., Gyamerah, I, A., & Nartey,J.,2014. The effectiveness of Internal Control Systems of banks.
The case of Ghanaian banks. Retrieved from:
https://www.researchgate.net/publication/280902171_The_effectiveness_of_Internal_Control_Systems_o
f_banks_The_case_of_Ghanaian_banks....................................................................................................13

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Abstract
The paper explores the critical analysis about the information accounting systems more
so the internal control system management. In this paper, Adam and Company limited is the
company under assessment. The company of Adam is evaluated under three systems. These
internal control systems include payroll system, purchases system and cash disbursement system
of the company. In addition, the study investigates the risks and weaknesses faced by each
internal control system of the company with their solutions. It is evident that various companies
are exposed to challenges that emanate from internal control systems because of unplanned
management. With such situation, the companies may result into failure and to quit from the
business since they continuously make losses. Therefore, several procedures are explained in
relation to the way how organizations can solve weaknesses and risks which hinder their set
targets.

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Introduction
Accounting information system refers to the system of achieving, storing and processing
accounting and financial data that are used to aid the role of decision makers. In simple terms, an
accounting information system is basically computer-based methods that track activities in
accounting alongside resources about information technology (Thorps et al, 2019). With this, the
financial reports can be used both by the management internally or external desires from other
parties especially investors, tax authorities and creditors (kaskader .org, 2018). The Accounting
information system (AIS) are followed-up in order to support the roaming accounting functions
and other accounting related activities of reporting, tax and auditing. However, the common
accounting information systems are financial reporting modules and auditing.
Originally, accounting basically rotated on the manual approaches. It was clear that
‘skillfulness’ and experience of the accountants are considered to be very crucial in the process
of accounting. It is evident that, there are more chances for the manual approaches to produce
inefficient and ineffective results. The issues such as inefficient and ineffective results can be
resolved by the accounting information systems. Also, accounting information system aids in
supporting the automation that processes big sums of data and thus producing accurate and
timely information (Crouthamel, 2013).
Accounting Information Systems in early days were formed specifically for the functions
of payroll in 1970s. Originally, accounting information systems were propounded ‘in-house’
since there was no packaged solutions. In actual sense, such solutions were too costly and very
hard to maintain (Decker, 2015). With this, several practitioners in accounting liked manual
approaches than computerized systems. Currently, account ting information systems are sold

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commonly as the pre-designed packages from big vendors especially Sage group, Oracle
Corporation and Microsoft which can be customized to run organization’s processes. However,
several big companies opt to use enterprise resource planning (ERP) systems. Due to the desire
of consolidation a connectivity between other organization systems increased, AIS were
amalgamated with ERP. Previously, several applications in managing various business functions,
organizations had to form different interfaces that are complex for the systems for
communicating with each other. In enterprise resource planning, accounting information system
if formed as the modules to suit the applications of supply chain and human resource activities
(Hailu, 2014). Therefore, such activities are combined together and these are accessible the same
data in executing processes of businesses. In addition, cloud-accounting information systems are
popular in both Small and medium scale enterprises and for big companies at lower costs (Hailu,
2014). In the process of adopting accounting information systems, several organizations removed
operational accounting roles and low skills.
Cash Disbursement flowchart system
It is evident that the system of Cash disbursement in Adam &Co does not portray good
flowchart of cash disbursement. Cash disbursement elaborates the practices of recording,
documenting and to issue payments in purchasing transactions. Also, the accounts cash
disbursement procedures act as the crucial source of finances in the cash cycle (Hla & Teru,
2014). The system of cash disbursement procedures highlights only authorized requests of
purchases that are paid and recorded. Besides, there are three steps to achieve the proper
recording liabilities especially for Adam and Company limited. The first step in cash
disbursement is to record liabilities about the receipts of the company by following purchase
orders as the procedures. The second stage occurs especially the invoices for the vendors are

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acquired. Within this stage, actual reliability is finished with required adjustments to the costs on
the product of the company. Finally, the third step is about preparation and issuing out of
payments for the products received. Figure 2 below shows the cash disbursement flowchart of
the companies more so Adam and Company limited.
Figure 1: Cash Disbursement Flowchart
Source: Kaskader, 2018
Weaknesses and Risks involved with Cash disbursement system at Adam &
Company
In this world that is changing day and night, the companies that keep their cash and
maned by individuals are exposed to the danger of making losses. This therefore calls upon the
attention of the company to put measures or control for recruiting more than two workers to
reduce the losses (Levy, 2017). However, the organization must have strong trust in such
individuals with the company’s money. There is the risk which comes across when a single
individual is responsible about revenues may be budgeted poorly as well as advocating for
fraudulent which cause losses instead of profits to the company (Bowers, 2017). In this situation,

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Adam and Company limited is therefore advised to never trust the single individual to manage
all the finances of the company which puts the company into risks (Levy, 2017). For the case of
Adam and Company limited, clerks of the cash disbursements perform various activities about
the company’s cash especially with making payments, preparing files, settling cheques as well as
updating cheque registers and ledgers. All mentioned activities are supposed to be performed by
many employees to produce effective results in the company (Beasley, 2019). The treasurer of
the company does not perform the attached multiple tasks which satisfy other workers of the
company since the funds are embezzled. The treasurer and the clerk of the company in the
department of cash disbursement have final authorities over the accounts of the company. This
incident makes other people in the company not to feel happy since the acts of embezzlement
and fraud leads to losses of the company. Most significant is that, it is not recommended that
every employee in the organization should lay a hand to the finances of the company, this may
lead to rise of fraud (Indico, 2015). This point therefore hints to the directors and managers to
always be responsible in minimizing the losses instead of leaving full control with the workers
(Clerk and Treasurer). In summary, the system in the organization is not responsible in providing
stipulated time as the different accounts are reconciled (Indico, 2015).
The flowchart for purchases system
At many times, purchasers are meant to check the ‘purchases contract’ immediately after
getting a notice known as a stockout acquired from a warehouse (Sori, 2010). The order sheet is
then issued and later the purchaser if free to get his/her commodities or materials. Before
acquiring the materials, the purchaser has to fill the order sheet and forwards it to the seller who
informs the buyer to collect his/her materials in case they are ready (Ayagre et al, 2014). The
purchasing flowchart is a step by step procedure that is followed by the department of purchases

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in a company that is followed to buy materials required at a moment (Darrough et al, 2012). The
steps in this system are three in number and these include the following;
Firstly, there is material issuance; this is done through steps which are; the person who
requests for the materials develops a document known as a ‘material requisition sheet’, then the
keeper of the warehouse receives and goes through the sheet (Sori, 2010). The store keeper
prepares the materials requested and later the warehouse keeper fills the issue note of materials
which he sends to the requisitioner and then archives the sheet (Akwa-Sekyi, & Gene, 2016).
Secondary, material requisition is done and later there is monthly settlement where the
departmental accountant upgrades the accounting inventory The figure below depicts the
flowchart of a purchases system.

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Figure 2: The purchases system flowchart
Source: Smartdraw, 2019
Weaknesses and risks that are likely to happen in Adam and Co
Adam and Company may have unauthorized and uncalled for materials and other
products. The different untrained people in the purchases department that make their own
choices on what to purchase bring about this risk (Ayagre et al, 2014). The risks that the
company faces are likely to make it difficult for the company to succeed in its performances
(Akwa-Sekyi, & Gene, 2016). Much of the work in the purchases department is carried out by
the purchases clerk who may not be able to know the needs of the company at a moment since he
is always fixed with other activities (Agbenyo, 2018). Also, Adam and Co normally orders

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materials from suppliers who are not eligible or authorized. Vendors who are not authorized
usually supply materials that do not reach the quality of the company’s wish and this will bring
about a reduction in the number of customers (Johari et al, 2015). Unauthorized vendors are not
legally accepted by law to supply commodities and if at all the responsible authority gets to
know about this, companies like Adam and Company that receive their supplies from an
unauthorized supplier may fall into the trap in the process. This risk really is likely to affect the
internal control system of the company (Agbenyo, 2018).
In addition, wrong prices may be given to the purchaser and this means a loss to the
company. Furthermore, the purchased goods may not be meeting the standards of the company.
This arises due to lack of specialization in the company in that the person responsible for
purchasing the materials (procurement officer) is not given a chance to perform his tasks but
instead, the purchases clerk does everything (Johari et al, 2015). This is a sign of weakness in
Adam and Company. Also, the risk of people who make inquiries purchases yet they are not
authorized to do so. These make the work of purchasing department difficult since unwanted
products may be bought and lead to losses in the company.
The payroll system flowchart
The system of payroll is the path through which the payroll is processed. This indicates
that there cannot exist payroll processing minus going through the system of pay roll (Darrough
et al, 2012). The payroll system is composed of three kinds and these are; ‘in-house
computerized’, manual system and the outsourced system (Ferguson, 2017). The manual system
of payroll is where the payroll is manually processed in other words it is made by use of hands
(Beasley, 2019). However, the in-housed computerized system is processed by use of software
well as the outsourced system implies the company employs some other person or organization

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who makes payrolls from outside the company to process for it a payroll (Beasley, 2019). The
flowchart payroll system indicates the stages that are passed through to develop a payroll system
(Ferguson, 2017). It directs companies on how it can create a suitable system of payroll.
Figure 3: The payroll flowchart system
Source: Guilbault, 2019
Risks and Weaknesses for Payroll system
It is evident that methods that are tradition in analyzing and evaluating the total time that
is supposed to be worked for by the employees seem to be influenced negatively by the
inefficiency performances to the organization. It is therefore clear that, traditional methods of
estimating money in order to pat the workers through usage of time cards has led to the lack of
workers’ satisfaction since there are inconsistencies in payments (Agbenyo et al, 2018). For the
case of Adam and Company, proper systems of recording financial data have been seen
producing dissatisfying results since the records are manually kept and processed (International
accounting, auditing and ethics, 2015). Furthermore, the system of payroll at Adam & Company

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has got threats and risks that weakens the internal control system of the company. In addition, it
is observed that traditional ways of determining payments of the employees especially the use of
time cards is said not to be effective and reliable as for the survival of the company (Lai et al,
2017). Therefore, the payroll system at Adam & Company is not suitable enough since the clerk
is responsible in deciding the payments of the workers thus creating risks of the employees to
miss the payments.
Conclusion
In conclusion, it is very vital to attain effective or efficient internal control system in the
company and it is therefore encouraged for each company to note such issue. It is believed that,
the way how the organization utilizes its resources, the level of performance the company attains
accordingly. In the current situation, the performance of organizations nowadays bases on the
technological levels employed in the companies especially through the usage of computers which
store and report reliable results. When the data is maned, monitored and presented well in the
company, it is believed that policy making decisions are easily made thus strengthening the
financial base of the organizations. With this, the accounting information systems are
fundamental towards the performance of the organization when handled in the god manner. In a
nutshell, Adam and Company limited has to review the system of internal control that may yield positive
performances in the company.

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References
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Ayagre, P., Gyamerah, I, A., & Nartey,J.,2014. The effectiveness of Internal Control Systems of
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