Accounting Information System Case Study: Adam & Co Analysis

This case study report provides a comprehensive analysis of Accounting Information Systems (AIS). It begins with an executive summary and introduction to AIS, emphasizing its role in organizational financial management and performance evaluation. The report outlines the core principles governing AIS, including source documents, useful output, data collection, and processing devices. It then details the six key components of AIS: people, data, controls, IT infrastructure, and internal controls. The study further classifies and analyzes three main types of AIS: purchasing systems, cash disbursement systems, and payroll systems, including their processes, advantages, and disadvantages. Flowcharts are used to illustrate these systems. The report concludes by summarizing the AIS, emphasizing its ability to streamline accounting processes, improve efficiency, and aid in cost optimization, while also discussing methodologies for evaluating different AIS types.

Running head: ACCOUNTING INFORMATION SYSTEM
Accounting information system
Name of the student:
Name of the university:
Author notes:

1ACCOUNTING INFORMATION SYSTEM
Executive summary:
This report is particularly explaining about the accounting information system (AIS) and also
the various components of AIS. Along with such this report is also providing the principles
and operations in an organizational. After that it provides a discussion about the various types
of accounting information system (AIS) through analyzing and comparing them. At the
ending it discussed the various methodologies in case to evaluate different types of
accounting information system.

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Table of Contents
Executive summary:...................................................................................................................1
Introduction:...............................................................................................................................3
Principles:...................................................................................................................................3
Components:..............................................................................................................................4
Types:.........................................................................................................................................6
Conclusion:..............................................................................................................................11
References:...............................................................................................................................12

3ACCOUNTING INFORMATION SYSTEM
Introduction:
The financial statement of an organization plays an important role in case of
evaluating the overall organizational performance. In case of maintaining the financial
statement properly, every organization is required an effective accounting information system
(AIS), which is enable to keep record all the financial transactions properly. Such recording
procedure is commonly known as bookkeeping procedure. The accounting information
system is involved storing and managing the financial data is useful for the users in reporting
the financial information to the shareholders or owners and other stakeholders. Through an
effective accounting information system (AIS), some modern companies are maintained their
current, high quality and rapid information about the internal conditions for the purpose of
making the strategic decisions. This system is considered as an intelligent system of
accounting, which can be customized and capable of displaying the required information for a
business. In this system, generally three primary functions are available that plays an
important functions in case of performing the accounting information system (AIS). The
accounting information system generally used to collect and stored all the organizational and
financial data of an organization in a one place through proper bookkeeping system.
Generally an effective accounting information system (AIS) is keeping record of individual
transactions data including the effective financial data from the source as this accounting
information system should be able to provide the accurate information for decision making
purpose. This AIS is provide the framework on which a company or organization can depend
relating to its various accounting information. Without a proper Accounting information
system function, it will be broader warnings for organizations in case of maintain accounting
information and completion of overall organizational goals (Belfo and Trigo 2013).

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Principles:
Accounting information system (AIS) refers to the commercial statements, which is
generated to process the book keeping function of an organization. The use of such
accounting information system helps the users in case of achieving the right decision for them
as per their individual interest. Accounting information system is used to maintain the profit
or loss of an organization through the income statement for a particular time period. It is also
used to consider in presenting the related to financial position that is preparing by the balance
sheet and information about the cash flow. Accounting information system is generally
consisting of four basic principles which are operates on the flexibility, cost benefits and
compatibility. The following accounting information system principles are as follows:
1. Source of accounting documents: using proper accounting Information system in
performing operation an organizations can be able record all the individual accounting
transactions in chronologically ordered. There are important documents which
comprises of sales order, invoice etc. it also includes papers required for business
plans.(Brandas ,Megan and Didraga 2015).
2. Provide useful Output: Generally an organization is using accounting information
system in case to derive necessary results, which is relevant, understandable, reliable,
timely and also accurate. There are a data which are provided by the output in entity
and includes the computers, printer and projector as well as other various types of
technologies.
3. To collect input data: Using the effective accounting information system an
organization is normally collect input data. In such system an organization can able to
store various data in large scale. In case of Adam & Co., the company is using of
proper accounting information system to store its individual accounting data and also
to make effective managerial decisions (Worrell, Wasko and Johnston 2013).

5ACCOUNTING INFORMATION SYSTEM
4. Processing device: Processing device is also connected to the AIS input device which
receives the input data from the collecting device and then process them to store it in a
customized digital format. Its main important objective is to transform the accounting
information into a decision making report. It has the capability of processing huge
information in few seconds (Belfo and Trigo 2013).
Components:
An Accounting information system (AIS) is generally consisting of six various
components, which are the following:
People: For accounting information system, generally peoples are the user. AIS system is
works with various departments in the organization. With the using of effective and well-
designed information system every intended users can access the relevant financial
information properly, because such system is generally simplifies the procedures of getting
information relating to an organization. This system is designed to meet the user’s needs,
improve efficiency without any obstruction (Simkin, Norman and Rose 2014).
Data: Data is the essential components of the Accounting information system. It includes all
the valid information that is processed by the accounting information system by storing the
information into its database structure. . To perform such programmer properly system need
various input screens for different system users and also different outputs formats in case to
meet the demands of individual users .as well as data is numbers, the salary of employees,
alphabets, name and symbol. Data helps create accounting information statements and reports
which facilitates auditing and decision making (Daoud and Triki 2013).

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Controls: In Accounting information system controls are the security measures that protect
sensitive data. Accounting information system must have an internal controls to protect the
data against unauthorized computer access and to limit access to authorized user.
Internal control: In case to protect the financial information the internal structure the system
is need to be secured properly. The information are need to protect from the hackers, viruses
and the unwanted guests who may take advantages of organizations sensitive data. (Galliers
and Leidner 2014).
IT infrastructure: An Information technology is generally consisting the updated electronic
and technological devices, such as computers, laptops, routers and also the networks, which
is relevant to perform the functions of an organizations properly and smoothly.It helps the
organization to run efficiently and smoothly by using all these equipment. All the required
software and tools are also come in the IT infrastructure.
Types:
Generally the Accounting information system simplifies the financial reporting process
which helps in the decisions making of the components of accounting processes. AIS are
basically using in software based device. There are 3 types (AIS), which are as followings:
(Sačer and Oluić 2013).
1. Purchasing system
2. Cash disbursement system
3. Payroll system
Purchasing system: It is one type of system or processes, which is used to purchase goods
and services for an entity in a particular time period. For Adam & Co. such system is
generally consist the purchase requisition, evaluating different suppliers, negotiating with

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suppliers for price, purchasing orders and disposals or return of assets. Companies need to
determine what, when and how much is to be brought. The purchasing system functions in
controlling the companies that are based on economic order quality for reduction of supply
cost as well as cash outflow for ensuring cost of resources as well as cash. This system also
helps the company to reduce the administrative cost, and it is one type of computerized based
system. The process of purchase system is material requirement planning, request for
quotation (open market), purchase requisition to the purchase department, vender selection,
issue purchase order (Hilton and Platt 2013) .Goods receipt to the vender issue goods to the
factory or plant to create a goods receipt note, invoice verification process, release payment
to the vender and last one is vender evaluation the reporting to the management. Some
various types of disadvantages in purchase order are as follows:
One of the time reducing process is to sending the purchase order to the creditor as per the
requirement of purchasing department of the company.
 Due to situate in local geographical area the company may not able to get local
advantages (Rikhardsson 2017).
 Due to automatic procedures the decision making regarding the purchasing system are
complex.
 It is difficult to centralize a purchasing systems because of its complexity and
largeness.
 There are high quality systems and huge capital is needed for the maintenance of
these system which is out of the expenses of small industries.
The budget should be
check and prepare
should be specification
A requisition for
purchase has to be
prepare
Requisition of
check and
authorization
Obtain
quotations

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Figure 1: Flow chart of Purchasing System.
Cash disbursement system:
Cash disbursement suystem is normally the procedure of cash outflow system of an
organization during a particular time period. In case of Adam & Co. such disburesement is
used for payment of loan, salary to the employees, payment to the suppliers, other petty and
daily run expenses. Some objective of this system is the payment is received by the valid
creditors and the payment amounts are timely and correct. This system is controls the
companies cash payments and it is vital to record all the financial information. The process
of these system is due to identify the liabilities, prepare the cash disbursement system and
updating the accounts payable record, and finally the post to general ledger. Some of the
disadvantages of this system are as follows: If in these system internal control is not strong
then this cash disbursement system may not be effective and there is a chance of fraud if
duties are not properly assigned (Otley and Emmanuel 2013). In cash disbursement system
documents are not available .if in these system single department fails then the internal
control system create a weaknesses.
Panel of purchasing
(selection of
supplier)
Purchase order issuedGoods received
Check receive
invoice
Preparation and
authorization of
payment voucher
Payment of
suppler invoice
Payment entered
in cash book

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Figure 2: Flow chart of Cash disbursement system
Payroll system:
In case of an accounting information system the payroll system one type of system where
employers are keeping record of all the relevant payment details of individual employees.
The system of automatically payroll should be there, if the business have more than one
employee. It will eventually makes the tax and legal process easier. (Mancini, Vaassen and
Dameri 2013. The disadvantages of payroll systems are:

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 This system is costly.
 This system cannot be implemented by the small business.
 3rd party payroll can cause security problems
 In case choosing the wrong payroll system, then the company is hampered and as it is
so difficult to decide the perfect order (Neogy 2014).
 The Selecting the payroll system depends on the size of the business and price of the
payroll software
Figure 3: Flow chart of payroll system.
Conclusion:
Accounting information make the accounting information processes simpler and helps in
cost optimization. It also increases the efficiency of work. In this report explained the (AIS) and
explained the various components of AIS and principles and operating in an organizational.
Then discussed the various types of AIS by analyzing and comparing them. Then finally

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discussed the different methodology to evaluate various types of AIS. The 6 components of AIS
works in coordination and helps in the business activity by collecting information, retrieving
financial data, store, processes and report.