Accounting System and Process: Inventory, Xero, and Control

This assignment delves into various aspects of accounting systems and processes. It begins with a memorandum explaining inventory systems, differentiating between perpetual and periodic systems, and discussing methods like FIFO, LIFO, and weighted average. The assignment then includes journal entries illustrating these systems. A report analyzes computerized accounting information systems, specifically focusing on the Xero cloud-based system, detailing its advantages, disadvantages, and adoption considerations. A letter addresses cash mismanagement and the importance of internal controls. Further, a bank reconciliation is provided, along with an analysis of PPE transactions. The assignment covers a wide range of accounting topics, providing a comprehensive understanding of the subject matter.

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:......................................................................................................................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

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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 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.

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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.

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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.

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Sub part (ii): Journal:

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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.

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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

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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