Accounting Information Systems Report: Analysis of Adam & Co. Systems

This report presents an analysis of Adam & Co.'s accounting information systems, focusing on the purchase, cash disbursement, and payroll systems. The report utilizes system flowcharts to illustrate the processes within each system, providing a visual representation of the workflow. The purchase system analysis covers inventory checks, purchase requisition, vendor selection, and payment processes. The cash disbursement system analysis examines the accounts payable process, from invoice verification to payment. The payroll system analysis details time card management, personnel actions, and check and control procedures. Furthermore, the report identifies internal control weaknesses within each system, such as lack of authorization controls, improper record-keeping, and inadequate monitoring, along with the associated risks of fraud, errors, and operational inefficiencies. The conclusion summarizes the importance of effective accounting information systems in supporting sound decision-making within organizations.

Accounting Information
Systems

EXECUTIVE SUMMARY
Accounting information system is used to collect, record, process and measure financial
and important accounting information that support to prepare meaningful informational reports
that can be used by manager and other relevant parties to make sound decision. The study
contains evaluation and analysis of Adam & Co’s different internal systems like purchase
system, payroll system and cash disbursement system though flowchart technique.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
System flowchart of purchases system...................................................................................1
System flowchart of cash disbursements system....................................................................3
System flowchart of payroll system.......................................................................................5
Internal control weakness in each system and risks associated with the identified weakness.6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
In accounting term, an effective system that consist detail about the individual, business
dealing and techniques that are used to collect the financial information relevant to business
activities is known as AIS (Accounting information system, 2019). In this report, case study of
Adam & Co’s is discussed which is located in Perth and is a wholesaler company that supplies
industrial supplies. The company uses different accounting system such as purchase system, cash
disbursement system and payroll system which help to maintain proper record of each business
transaction and determine any kind of issues happening within company.
MAIN BODY
System flowchart of purchases system
In business world, a system that is used by the companies in context to buy essential
product or services is known as purchase system. The buying scheme handles the whole
acquisition method, from the request to the invoice, to the delivery of the item, to the deposit for
purchase. It is a main element of efficient inventory management by monitoring current
inventory and helping businesses to ascertain the need of purchase, actual quantity to purchase
and the definite time to purchase. In this context following is evaluation of whole purchase
system of Adam & Co., as follows:
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Checking of inventory specification and budget: As displayed in above above flow
chart of purchase system of Adam and Company, the whole process is begins with checking of
inventory subsidiary ledger which provide help in assessing the availability of inventory within
entity.
Prepare purchase requisition: Further if the level or quantity of any specific item of
inventory is significantly low, then clerk chooses a relevant vendor using valid and detailed
vendor file. Then clerk prepare purchase requisition based on requirement.
Checking and Authorisation of requisition: Here for proper authorisation and check
clerk prints 2 hard copies, where one of the copy is initially sent to vendor, while other copy is
sent to purchase department. Further, digital record of purchase-order is maintained in purchase-
order file.
Obtain quotation: Here this step is followed if more than one vendor is selected to
conform price of items. Then clerk is required to obtain quotation form the selected vendors.
Other wise no requirement of quotations in this process.
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Select vendor and issue purchase order: After selection of vendor through vendor file,
clerk prepares a digital requisition to order of purchase which is also called as purchase
requisition.
Receive goods and check invoice: When the purchased quantity arrives, the recipient
receptionist examines arriving goods from purchase order and packaging slip. Responsible clerk
sends the goods printout to the department of inventory.
Prepare authorise payment voucher: Forward to receiving store permission, the store
clerk updates the stock ledger with the help of computer system. In the inventory department's
with the support of information system, the receptionist starts sending the copy of the letter to the
department of accounts payable (Al-Mawali, Zainuddin and Nasir Kader Ali, 2012.).
Payment of supplier invoice: In this step payment is made to supplier or vendor. The
online account payable joint venture ledgers are updated by the account payable secretary and
these record or other invoice are send to the purchasing department in order to make cash
disbursement.
Enter payment in cash book: At last cash book should also be updated by showing
effect of respective payment against purchase.
System flowchart of cash disbursements system
In present business situation, each and every company need a system that helps that
positively and securely manage cash payments of company that system is called cash
disbursement system (Awosejo and et.al., 2013). The most important part of this system is proper
documentation which help to record entire cash disbursement in the annual record of company.
In the context of Adam & co's, the account payable unit handles the cash disbursement system,
which gives the finance to vendors on the payment date mention in the invoices by getting valid
approval from purchasing department. Following is evaluation of cash disbursement system of
respective company, as follows:
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Accounts payable master data: As displayed in flowchart this is key initial step under
which accounts payable department of company use accounts payable master-data to check the
detail receipt or copies that are provided by the purchase department in order to balance the
purchase order.
Purchasing process: As per the payment date of bill an employee of accounts payables
department make a valid cheque against the billed amount that is further scanned to cashier of
company so that they can sing the cheque accordingly.
Payments: Here in this process payments are managed. In this context job of clerk
working in accounts payable department is to send the bank cheque to subsequent supplier which
help to complete the process of purchase.
General Ledger Process: Throughout the digital book of accounts payable subsidiary
directory, the cash allocation officer updates all the paperwork relevant to specific order which
referred as GL cash disbursement update in flowchart process. This entire systematic process
helps to reduce to chances of error as at each level efficient staff is employed that make a better
use of cash disbursement system (Dowling and Leech, 2014). Due to which the issues of wrong
payment or excess payment or even missed payment can be reduced that might hinder the
proficiency of Adam & co's.
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System flowchart of payroll system.
In companies, there are number of employees those are responsible for different duties
which have a major impact on the business and profitability. Thus manager are required to apply
automatic payroll process which support them them to comply with tax and legal requirement
and ease the process of making payment to valuable company employee. This also proves the
separate number of employee and their wage documents and the job they perform in company. In
Adam & co's case study, the payroll scheme is presented by the department of human resources,
which gives personal information about different staff member to its management (Knežević,
Stanković and Tepavac, 2012). The whole payroll system of company is classified under several
points which are major past of this systems for graphical presentation purpose. Following is
evaluation of these points are, as follows:
Time Card: In Adam & co's payroll office keeps a time card that holds the correct
documents of the worker's operating hours, the job they undertake and other employee-related
information.
Review and Personnel Action: In this step time cards are reviewed and further actions
regarding payroll are taken by personnels based on the review. Office of Payroll utilizes the
scheme of accounting information that is further linked with consolidated payroll scheme.
Payroll department clerk put all employee-related information and data in the data acquisition
and report the same into employee documents which makes easy to determine the actual amount
disburse to each employee. The payroll officer tracks details in the accounting department and
gives checks to their corresponding department that are further allotted to worker after getting
reviewed by supervisors which help in ease allocation of salary.
Check and Control: The payroll officer sends the information to the account payable
unit, there they ensure that salary record are correct and valid by concerning with the accounts
payable officer which support them to issue disbursement voucher for each employee. The
accounts payable officer make a proper checks and issues to relevant cheque in the name of each
employee to the bank for making entire payroll on the desired dates. Eventually, the officer
receives a record of the check in the department of funds payable and records the department
voucher and payroll register (Libby, 2017).
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Internal control weakness in each system and risks associated with the identified weakness.
Purchases system: In this system several internal control weaknesses are related due to which
there are some major risk to company such as:
 Lack of control with authorization of transactions: It is very crucial for business to
make authorization of purchase before the commitment of resources according to the
size, nature of business operation. This is another internal control weaknesses that is
related with missing the discount variable to purchase categorized goods at competitive
prices of poor quality or incorrect amount attempted to enter into the system. This
weakness can lead to risk of fraud and manipulation in records and also tacking of main
cause of any fraud or manipulation in accounts can be difficult due to such weakness in
internal control (Rikhardsson, 2017).
 Improper record of stock: The purchasing system major internal control deficiency, is
relevant if the inventory item are not separately checked against the invoice so that the
risk can result in the manufacturing unit being overstocked. Order patterns are not
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considered throughout the digital information system, like cancelling the command which
may result in the purchase records being misinterpreted.
 Ignorance of task of physical verification of inventories: The purchase inventory is not
physically checked towards the order provided to the supplier, that may lead to risk of
under-valuation of inventory or mismatch in stock record. Due to any kind of differences
in the record of that is order by management and delivery of goods can further lead to cut
down the manufacturing of finished goods.
Cash disbursements system:
 Improper Accountability may result in the abuse and misapplication of the company's
financial resources. The removal of command under specific conditions may contribute to
the problem of uncertainty in the transaction of funds or money disbursement for
ordinary programs and tasks.
 Continuous adaptation problems linked to modifications in the authorization method
owing to the installation of fresh technology information system may arise as a result of
the fund's insecurity problem. Infeasible or unsustainable methods can not provide a
guarantee to sustain the money disbursement scheme, which can result in money loss or
countless financial issues.
 Inappropriate monitoring of internal program can result into time consuming and
unacceptable payment disruptions in business systems. Failure to balance the regular-
time banking transaction may result in money loss owing to the bank's multiple fees.
Payroll system:
 Failure to maintain proper records: The impact of placing improper payroll off time
information due to failure to maintain proper records related to payroll, can reduce the
workers ' work level that might result in less earnings and having a negative effect on
liquidity and increasing tax obligations. This may contribute to indiscipline in IRS laws
resulting in greater staff turnover levels, substantial penalties, legal charges and company
reputation reduction.
 Lack of auto-recheck system: Absence of auto rechecking of on system of payroll can
result in error or omission in salary and wage amount of staff. It could result in the
mistake associated with suspended of staff who are still getting pay controls, excessive
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quantities of hours worked or published vacation hours and other issues related with
manipulating data (Usenko and et.al., 2018).
CONCLUSION
From the above report, it has been concluded that accounting information system helps to
accumulates, process and evaluate the crucial accounting and financial information. This system
helps to formulate reports which are used to make better decision regarding the functioning of
different organisation functions.
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