Analysis of Adam & Co.'s Accounting Information System (HA2042)

This case study analyzes the accounting information system (AIS) of Adam & Co., a wholesaler based in Perth. It examines the expenditure cycle, which is divided into three key processes: the purchase system, the cash disbursement system, and the payroll system. The analysis includes flowcharts illustrating the data flow and internal controls for each process. The purchase system covers inventory management, vendor selection, and goods receipt, while the cash disbursement system focuses on payments to vendors. The payroll system addresses employee time tracking and payment processing. The report identifies potential risks and internal control weaknesses within each system, offering solutions to improve efficiency and mitigate errors. The assignment aims to provide a comprehensive overview of Adam & Co.'s AIS, highlighting areas for improvement and ensuring the stability and accuracy of its financial processes.

Running head: ACCOUNTING INFORMATION SYSTEM
Expenditure cycle report
Student name:
University name:

ACCOUNTING INFORMATION SYSTEM
Executive Summary
This assignment talks about the accounting system of Adam and Co.’s three important
processes, which are cash disbursement, purchases and payroll repeating their flowcharts to
explain the flow of the work and the way the data is handled and utilized by every level in the
said departmental process. The following flowcharts that illustrate the inputs and the outputs of
all the procedure that is significant to the working of the subsequent section in procession.
The internal controls of such departmental procedure are based on setting up to classifying
any possible fault that may exist in the abovementioned departments. These solution aims to
eradicate any risks that associate witch such problems and faults or any risks that may arise in
the future because of some unforeseen events.

ACCOUNTING INFORMATION SYSTEM
Table of Contents
Executive Summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
Purchase System.........................................................................................................................................4
The flowchart..........................................................................................................................................4
Internal control........................................................................................................................................8
Cash disbursements system........................................................................................................................9
The flowchart..........................................................................................................................................9
Internal control......................................................................................................................................11
Payroll System...........................................................................................................................................12
The flowchart........................................................................................................................................12
Internal Control.....................................................................................................................................14
Conclusion.................................................................................................................................................15
References.................................................................................................................................................16

ACCOUNTING INFORMATION SYSTEM
Introduction
Centralizing accounting system is influential to the stability of data and process flow in
any association, but on the account of the comprehensive variety related with such accounting
system, it is very important to have a cognitive presentation for each system. This will boost the
higher tiered management to prepare its results based on clear areas resulting through the
presentation that needs instant notice.
The firm measured for the intention of this assignment is Adam and Co, who is known to
be the industry wholesaler based out of Perth who brings in necessary purchase requirements
internationally from Thailand, Vietnam, and China. The entire cycle of expenditure has been
divided into various departmental level processes that are based on the purchase system, the
payroll system, and the cash disbursement system.
Purchase System
The flowchart
The whole purchase systems of Adam and Co. have programmed to a definite quantity
with value to sourcing in materials for sale to its customers (Bahn and Gandhi, 2015). The entire
purchases systems are illustrated by the following flowchart:

ACCOUNTING INFORMATION SYSTEM

ACCOUNTING INFORMATION SYSTEM

ACCOUNTING INFORMATION SYSTEM
The flowchart that abovementioned is to show the various processes that are vital towards
the implementation of the entire purchase system as a whole. The flow of entry is the inventory
that starts the entire process (Goodarzi et al., 2017). The purchase department looks after the
inventory receipt to find out an inventory deficiency that if any, is swiftly ordered and accounted
for by cross-checking the account subsidiary ledger and consequently match with a potential
vendor is generated. It later results in a very good inflow (that can be seen in the above-
mentioned flowchart) that goes along with a packing slip and a dealer statement.
In the next level, the flowchart shows an inspection of the goods that are received by the
department through an understanding of the packaging slip and the dealer statement which

ACCOUNTING INFORMATION SYSTEM
further results in the making of a receiving report. The same copies are printed into two where
the inventory clerk sends one of the copies to the department of the inventory for filling it
subsequently (Cho and Lee 2016). The second copy is sent to the account payable department
that is in charge for the settlement of the receiving report, the statement of the suppliers, the
order of the digital purchase is to remove any disagreement that may arise, and after this, a
double process is treated on. In the first place, there is an update of the system in particular
general heads of both the secondary and control accounts payable ledgers and the inventory
maintenance ledger (Libby, 2017). Lastly, it is updated service copies, and after omitting all the
material faults it is further sent to the cash disbursement team.
Internal control
Most of the section in this is computerized; effective inner control needs to be into place to
guarantee unremitting flow throughout the work. Many potential solutions can arise here are the
solutions:
 In the close days, an incorrect feed could flow over to wrong data feeds in all the
forthcoming days- control mechanisms for every department are supposed to be placed
into place even though control accounts are being maintained for specific ledgers
(Masum et al., 2018). A control system is supposed to be checked as to whether any
department’s efficiency has been compromised since there is a verification of all details
indulged into by different departments at least twice.
 Generation of the demand of materials for which a vendor subsystem does not exist- a
sustaining ledger consist of the extensive information of the entire possible seller in the
area that comprises of the services and the cost of the products offered by them. They are
supposed to be maintaining the system in such a way that a cross-reference is likely in
case of new demand. The problem of the vendor will be solved if any faults arise in the
system (Berlinger, Bihary and Walter 2018).

ACCOUNTING INFORMATION SYSTEM
Cash disbursements system
The flowchart
The cash disbursement system plays as a mediator and acts an important role between
adequate compensation delivery to both the vendor and the next system incorporating
employees who are working very efficiently and delivering the products that are delivered by
the vendor (Mukherjee, 2017). The system is illustrated in the flowchart mentioned below:

ACCOUNTING INFORMATION SYSTEM
This flowchart demonstrates the receipts by the cash disbursement system from the
purchases system in the structure of the supplier invoice, the receiving report and the digital
purchase order. This system is in charge of sufficient and appropriate payments to the sellers to
uphold good reputation relations (Nakano and Kondo, 2018). The system’s clerk will recognize
the due date of the payment from all of the abovementioned statements, and after merging them
will arrange a cheque in the name of the seller. This check will be further sent to the company

ACCOUNTING INFORMATION SYSTEM
treasure who confirms it, the cheque will be further sent to the vendor for the final payment
agreement.
The last step of this system carries more of an accounting work where there take payments
to the seller. The system’s clerk will put in an on-system update in the cheque register, accounts
payable additional and control ledger (Prasad and Green, 2015). This final output is the making
and succeeding filing of the final seller statement, physical purchase order copy and receiving
report and cheque that was issued in the name of the seller.
Internal control
Since the whole scheme, rotates around the outputs and the inputs of the cash
disbursement clerk, any matter with errors on the clerks part will include this system’s output as
a whole. Hence, certain problems arise which can be resulting in the following:
 The entire system contains no mechanism for continual adaptation towards the payment
procedure- it is very uncommon that the same payment mechanism for every seller as it
will follow for the lifetime in the life of an organization. There can be safety-based
changes that could a higher level. The last payment approval runs or newer government
system to make sure any possible cash embezzlements indulged into by the company’s
employees (Qing, 2017). So to control the flow of the whole system without interfering it
when any of the specified situations come up the external party can be appointed towards
doing the procedure of audit of this system on a particular date for a precise period
constantly.
 Conscious or unconscious manipulation of the account payable control ledger by the
clerk- the outcome can be an inaccurate figure booking for the seller who may still be
highlighting a creditor of the company in spite of the cash outflow. To protect this
different control, the area requires being established (Mahajan, Shukla and Soni 2015).

ACCOUNTING INFORMATION SYSTEM
Payroll System
The flowchart
This system is the end of the association that means that it aims at effectively rewarding
the organization resources that amuse the sustainability of the company as a sum (Sledgianowski
et al., 2017). The system flowchart encompasses various levels: