HA2042 Accounting Information Systems Case Study: Adam & Co Analysis

This case study analyzes the accounting information systems (AIS) of Adam & Co., a wholesaler based in Perth, Australia, with outsourced inventories. The assignment examines the place of AIS within the organizational structure, focusing on the centralized system and networked terminals. It identifies, analyzes, and compares different AIS types, including MYOB Essentials, QuickBooks, and Xero. The study evaluates AIS methodologies based on source documents, input devices, information processors, storage, and output devices. System flowcharts are provided for the purchases, cash disbursements, and payroll systems. Furthermore, the assignment describes internal control weaknesses within each system and associated risks, such as data redundancy and mismanagement of information. This comprehensive analysis aims to understand and improve the efficiency and security of Adam & Co.'s accounting processes.

Running head: ACCOUNTING INFORMATION SYSTEM
Accounting Information System
Name of the Student
Name of the University
Author Note

1ACCOUNTING INFORMATION SYSTEM
Table of Contents
Introduction................................................................................................................................2
Place of an accounting information system in the context of the organisational structure
and operating practices...........................................................................................................2
Identification, analysis and comparison of different types of accounting information
systems...................................................................................................................................5
Different methodologies to evaluate various accounting information systems.....................7
System flowchart of purchases system..................................................................................8
System flowchart of cash disbursements system...................................................................9
System flowchart of payroll system.....................................................................................10
Description of internal control weakness in each system and risks associated with the
identified weakness..............................................................................................................10
Conclusion................................................................................................................................11
References................................................................................................................................12

2ACCOUNTING INFORMATION SYSTEM
Introduction
The Accounting Information Systems or AIS are the systems that help in the
collection of the accounting data available within any organization that uses the accounting
information system within the organization. This also includes the management and storage
of the accounting data that further makes a feasible ground for the business systems within
the organization for information-based provisions for making the perfect decisions as
provided by the identified data. This is why, organizations are most likely to implement an
AIS within the organization to infiltrate the computer-based methods for the identification of
the involved accounting data, their tracking system and the information about the available
resources from time to time (Mancini 2016). Since the organization is based in Perth,
Australia, the decision is taken to understand the possibility of the inventories and the ways
by which the outsources inventories in China, Thailand and Vietnam and how they are
handled with the centralized accounting system even with the networked terminals at the
different locations.
Place of an accounting information system in the context of the organisational structure
and operating practices
The organization of Adam & Co. is a wholesaler organization that is located chiefly in
Perth, Australia. The organization is also having different inventories that are primarily
outsources from the different manufacturers from China, Thailand and Vietnam. The
accounting system that the organization has is a centralized accounting system that also
comprises of the networked terminals that are also located at the different locations. The
system comprises of the inclusion of the different procedures for the organization of Adam &
Co. which has the purchase system, the cash disbursement systems and the payroll systems
included in the expenditure cycle system.

3ACCOUNTING INFORMATION SYSTEM
Mostly, the AIS comprise of a system which is mostly computer-based that forms the
primary method by which an organization tracks the activities in an organization related to
the accounting systems and it is supported by the information technology sources as provided
by the organization and the business operations (Seow and Pan 2017). The primary purpose
for an AIS is to provide a proper outline to the business organization related to the proper
collection, , processing and storage of the financial or the accounting data for helping them to
provide a vast range of the decision making support system by making the accounting data
make the decisions involving the business decisions.
It is typically the computerized program for the handling and the management of the
information within an organization related to the accounting systems and the transactional
reports within an organization. The system is primarily programmed to handle the detailed
information regarding the financial statements in an organization. For the organization of
Adam & Co. as well, the handling of the inventories and the other specific identification of
the different systems related to the financial transactions for the business would be feasible to
be handled by an accounting information system or AIS. There are various ways in which the
AIS provides a huge load of support to any business organization by handling the warehouse
management system and its transactional information as well as the other functions like
business transactions, accounts payable, accounts receivable, financial statement and the
information related to the year end closings. This is why, the organizations would be at their
own benefit if an AIS is provided to the organization for handling most of its financial data in
the business. The identification of the AIS to find out the suitable one to fit in the purchase
system, cash disbursement systems, and payroll systems and all the processing that it has
related to the employees and the provided transactional information related to the business
processes.

4ACCOUNTING INFORMATION SYSTEM
The organization of Adam & Co. would be providing the different phases of the
transactional system in the following way:
The purchase system: The purchase system and its transactions begin with the
inventory subsidiary ledger where a clerk in the organization starts to check the system and at
the same time the terminal begin every morning. Then the clerk finds out the item that is
priced too low to create the digital purchase order by selecting a vendor from the valid vendor
file. The clerk starts to imprint the hard copies of the purchase orders for both the vendors
and the purchasing department (Collier 2015). The organization also collects the information
about the different aspects of the purchase system including different procedure following
throughout the purchase department that is required for the accounting information to be
managed with the help of a computer-based system.
The cash disbursement system: The accounts payable department following the
purchase system in the organization then follows through the cash disbursement system such
that the clerks cannot file the documents until and unless the payment reaches the due dates.
This is also a probable step by step procedure where the reaching of the due dates makes the
clerk within the organization prepare for the cheques required for the amount to be invoiced.
It is then set to the treasurer to acknowledge and then the signed cheque by the treasurer
would go to the vendor as an approval (Willis 2016). This is the step after which the check
register is updated and the receiving clerk finally approves of the files that inputs all the data
related to that are required to use the files of invoces, the purchase order copy, the report of
receival and the copy of the cheque for the department.
The payroll system: This is the transactional system within the organization of Adam
& Co. that values the payment to the employees followed by the record of their working
hours according to the information recorded in their time cards per day (Quinn and Strauss

5ACCOUNTING INFORMATION SYSTEM
2017). The supervisors are there to review the information in the time cards for not having
any issues with them before they are recorded to generate the pay scale of the workers with
the help of the information taken from the hours that they have worked. The systems review
every detail about the workers and their working hours including the printing of the
associated documents in the light of the generated salary for the particular worker. This is
why the general ledger clerk has to be receiving the voucher and the payroll register where
the clerk is responsible of the posting of all the transactional information to the general
ledgers from the computer department terminals and the filings of the vouchers and the
payroll registers within the department.
Identification, analysis and comparison of different types of accounting information
systems
Accounting
Information
Systems
Identification Analysis Comparison
MYOB
Essentials
This is an online accounting system
that helps in providing the solution
to the business organizations
irrespective of the sizes of the
organization.
The system
has the ability
of providing
the tools for
various
accounting
information
solutions
related to the
management
of taxes, the
invoicing, the
payroll
management
and reporting.
Compared to
the other AIS
systems,
MYOB
happens to
have a little
over the
budget first
cost for the
implementati
on in the first
place (Hair et
al. 2017).
QuickBooks This is an easy to use accounting The software The use of the

6ACCOUNTING INFORMATION SYSTEM
software that specializes in the
invoices that collects the taxes in the
most feasible way possible.
is extremely
easy to use for
the different
associated
users with
limited
knowledge for
handling an
AIS software
such that the
software can
be handled
feasible
without
thorough
knowledge
about use of
the AIS
software.
QuickBooks
software can
be a bit
expensive for
a small sized
organization
as the $300
cost provided
use allowing
3 users to use
the software
at a time and
the premium
cost can raise
above $500-
$1,200 with
the allowance
of almost 5
people able to
be using the
system at a
time
(Brandas,
Megan and
Didraga
2015).
Xero The AIS software of Xero provides
the information related to the
business organization and their
transactional systems with the
online connections for the huge
range of business services.
The AIS
software
prepares the
business for
the further
cloud
implementatio
Compared to
the other
business
systems, this
is the one that
helps to
provide the

7ACCOUNTING INFORMATION SYSTEM
ns as well. It is
ready to use
the cloud
provisions as
well.
best possible
advanced
solution for
the
transactional
systems in the
cloud. Xero is
way ahead of
the other AIS
in
comparison.
Table 1: AIS comparison table
(Source: Created by the Author)
Different methodologies to evaluate various accounting information systems
Every Accounting Information System is found to have five basic components that
comprise the accounting information system in the most feasible way by which the
accomplishment of the transactional works within the organization are established. This is
also found to be associated with the different steps that the AIS software is easily able to
handle and provide feasible information (Trigo, Belfo and Estébanez 2016). This is why the
basic evaluation of every AIS software occurs through these basic five components. These
are, the source documents that the AIS system uses, the input devices for the registering of
the information related to the transactional systems, the information processors as used by the
AIS system, the storage of the information and the output devices.
Various researches have found that the AIS systems have been rigorously
experimented to establish which one of the software would be the most feasible and also
supported by the evaluation of the AIS (Diatmika, Irianto and Baridwan 2016). The effective
utilization of the comparison between the basic components in the AIS would find out which

8ACCOUNTING INFORMATION SYSTEM
one of the different types of available software would be working together in the best
possible way and would offer the employees with the proper chances of storing, collecting,
processing, managing, reporting and retrieving the financial data.
System flowchart of purchases system
Figure 1: Purchases System
(Source: Created by the author)
inventory subsidiary
ledger
digital purchase
order
Printing of the hard
copies
Generation of
digital purchase
order and the
packing slip

9ACCOUNTING INFORMATION SYSTEM
System flowchart of cash disbursements system
receipt of the
documents from the
accounts payable
department
filing of the
documents until
their payment due
date
preparing a cheque
for the invoiced
account
Acknowledging the
cheque to the
vendor
Figure 2: Cash Disbursements System
(Source: Created by the author)
System flowchart of payroll system

10ACCOUNTING INFORMATION SYSTEM
Figure 3: Payroll System
(Source: Created by the author)
Description of internal control weakness in each system and risks associated with the
identified weakness
The following would be the identification of the internal control weakness that
prevails between all the three systems and the risks associated with each of the systems as per
the descriptions provided for the organization of Adam & Co:
Name of the Systems Internal Control Weaknesses Associated Risk
Purchases System It is a manual system with several
intermediate stages to generate
the digital purchase orders.
The associated risk
can refer to the
redundancy in data
related to the
manual input of
the transactional
values in the
record their hours
worked on time
cards
supervisors review
the time cards for
correctness
submit them to the
payroll department
at the end of each
week

11ACCOUNTING INFORMATION SYSTEM
ledgers.
Cash Disbursements System The received receipts in the
accounts departments is manually
handled that can have several
issues as well.
There is a chance
of loss of data and
mismanagement of
the accounting
information related
to the purchases
(Guragai et al.
2015).
Payroll System The payroll system is also
handled manually while the
working hour data is automated
in the time cards of the
employees.
The time card data
is auto generated
and handled
digitally, but has
the risk of having
mismanagement or
data loss when
they are manually
handled.
Table 2: Identified internal control weaknesses
(Source: Created by the Author)
Conclusion
Therefore, from the report as represented above, it can be said that Adam & Co. has
been using manual systems that required handling through the automated AIS systems. This
is the same reason by Adam & Co. wanted to implement the Accounting Information System
within the organization so that they would have a complete evaluation of the procedures
related to the different processes running within the organization, their risks and the internal
controls throughout the expenditure cycle. The identification for the same has been
represented as above.