Holmes Institute HA2042 Accounting Information Systems Case Study

This assignment is a case study focusing on accounting information systems (AIS). It begins with an executive summary outlining the purpose of the assessment: to analyze the internal control processes of Adam & Co., identify weaknesses, and suggest improvements. The introduction defines AIS, its functions (data collection, information provision, and control), and its components, including source documents, input/output devices, processing and storage devices, and the people involved. The paper then explores key principles of AIS, such as cost-effectiveness, usefulness, and flexibility. The core of the case study involves system flowcharts for purchase, cash disbursement, and payroll systems. Each flowchart illustrates the steps and roles within these processes. Finally, the study concludes by summarizing the findings and emphasizing the importance of a robust internal control system to prevent operational issues within the company. The assignment is designed to provide a comprehensive understanding of AIS and its practical application within a business context.

Running head: ACCOUNTING INFORMATION SYSTEM
Accounting information system
Name of the student:
Name of the university:
Authors note:

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ACCOUNTING INFORMATION SYSTEM
Executive summary:
Inspection of the internal control process of Adam and Co.’s business and also recognition of
the feebleness, which can affect the operations of the company is the primary purpose of the
assessment. The inspection will be consisting of the flowchart that will be showing the three
variant ways related to cash payments that are made by the business and also identifies the
different roles played by the clerks and senior executives in the entire process. The issues
which are present in the manner of working of the business and even the ways of improving
will be shown in the discussion.

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ACCOUNTING INFORMATION SYSTEM
Table of Contents
Introduction:...............................................................................................................................3
System flowchart of purchase system:.......................................................................................6
System flowchart of cash disbursements system:......................................................................6
System flowchart of payroll system:..........................................................................................6
Conclusion:................................................................................................................................6
References:.................................................................................................................................6

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ACCOUNTING INFORMATION SYSTEM
Introduction:
It is a systematic process for collecting data, converting them into information and
then passing that information to the ultimate users. The actual purpose is to collect, store and
process all the financial and accounting data, which is used by the managers or any other
willing parties to make any decision regarding business. It can be done through using human
resources, but in today generation computerized system is often used for an accounting
information system (Galliers and Leidner 2014).
Functions of accounting information system:
There are 3 basis functions of accounting system:
 The main functions of an Accounting information system are that it is very efficient
and effective collection and storage of data concerning the organization financial
motive. It also records the transactions in the journals to ledgers account. It is the
process of getting the transaction data from the source document.
 The 2nd function of an accounting information system is to provide information
which is useful for making decisions, which include making managerial reports and
financial statements.
 The 3rd functions of an accounting information system are to confirm that the
controls are in place so that it can precisely record and process data.
Parts of accounting information system:
 Securities measures are taken under consideration to protect the data. There is an
internal control to protect data.
 The people who uses the AIS system includes accountable, managers and
business analysis.
 All the data relating to AIS goes in an accounting information system.

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ACCOUNTING INFORMATION SYSTEM
 Software consists of a computer programmer which are used for data processing.
 All the hardware which are used to operate the accounting information system are
included in information technology infrastructure.
 Data are collected, stored, redeem and processed through procedures and
instructions.
Components of accounting information system:
An accounting information system generates a bedrock of five basic principles. It
teaches both principles of control as well as relevance. It also exercises upon flexibility,
compatibility and lust benefits proposition. By doing so, it fulfils the law of GAAP (generally
accepted accounting principle). This system also has more five eccentric components
(Rikhardsson 2017).
Source document:
It is one of the components of an accounting system; it is that document which
contains all the records relating to business transaction. They are the writer proof of commercial
activities. For examples of these documents are purchase orders, invoice and receipts. It is
created at the end of the business transaction they serve as an indicator of business activity and
keeps a detailed record of the sales. Source of the document can be of different mature like
tangible or digital.
Devices to capture input data:
It is one of the significant components of this system. Input devices are used to
maintain the transaction information so that it can be used for accounting purpose. By using
appropriate means, they capture data precisely and allow for its storage (Rikhardsson 2017). It is
often used by the employees; they give aid to enter this information into an accounting
information system. Example of input devices is keyboarded, touchpads and bar code scanners.

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ACCOUNTING INFORMATION SYSTEM
Processes device for information:
It is usually linked to the input devices. It receives raw data from them, processes it
and then inserts it in digital storage file such as ledger, journals. Examples of processing devices
are software and digital tools. Their last objective is to translate accounting data into information
which can be utilized by the decision-makers. New process out is able to process colossal
accounting information in seconds (Schaltegger and Burritt 2017).
Storage devices for information:
It is used to preserve the ledgers and reports that are developed from the processed
accounting date. Traditionally, file cabinet was used as storage devices, but now an accounting
information system is based on a computerized system. Due to which all the storage is
performed in the hard disk, flash drives, memory card and cloud infrastructure is stored in such a
manner so that it can support shared access.
Some principles of accounting information system:
Cost effectiveness:
The accounting information system should be economical and practical. It must
outweigh the information cost. It accounting information system is cost-effective, it can provide
the desired result, and it is flexible, and it will help much in achieving the goals of a person or
the organization as a whole(Neogy 2014.).
Useful output/ necessity:
The accounting information system must be able to provide the necessary output or
result. All the practical information must be such that can be easily comprehend, relevant,
reliable, timely and accurate. The designer of the information system will always take into
consideration the necessity and knowledge of accounting information users.

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ACCOUNTING INFORMATION SYSTEM
Flexibility:
In an accounting information system, there should be flexibility in changing any
information needed by different users. It should be as flexible as to meet the change in market
demand (Daoud and Triki 2013).
System flowchart of purchase system:
It refers to the process of purchasing products as well as services including purchase
of reacquisition as well as order of purchase with the help of receipt of product and also its
payment. Key component of inventory management is purchase system where the monitor
present stock and leads the companies for buying and how much to buy. Purchasing system
can be on the basis if economic order quantity. It can also be said that purchasing system
helps to control cash outflow of company where they can ensure only essential purchases can
be made and which are made at reasonable prices. Purchasing process by purchasing system
are very efficient to help the companies for cost reduction. Purchasing system in the form of
computerized can reduce the administrative costs of the companies, reduce length of cycle of
purchase as well as reduction in human error in reducing shortages. Purchasing system can
simplify tracking system of order and makes it very simple for managing purchase of budgets
by creation of reports related to expenditure. Purchasing system also plays an important role
for cash outflows control. It ensures that purchases in the form of necessity are made at the
reasonable prices. Use of outputs through production planning system are made by purchase
systems. Outputs include amount of inputs required for the process of production. Purchasing
system includes the purchase process with the help of receipt of product as well as payment.
Efficiency is maintained well by purchase system required for purchases and those are
effected with prices that are reasonable. Augmentation of purchase system is there through

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ACCOUNTING INFORMATION SYSTEM
automation system. Purchasing system use economic order quantity model for management
of inventory by number of unit’s calculation the company should be purchasing with its
inventory and for reduction of total costs of inventory (Belfo and Trigo 2013).
Start
Perform a
scheduling
Activities data

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ACCOUNTING INFORMATION SYSTEM
No
yes
Figure 1: Flow chart of Purchasing System.
System flowchart of cash disbursements system:
Small business needs cash disbursement for securely handling of cash payment of the
company. Accounts payable is related to the disbursement of cash and majority of
transactions are then processed through accounts payable in terms of payment of cash made.
Proper documentation is required for efficient function of cash disbursement and there should
be record of cash disbursement in terms of financial records of the company. Internal control
becomes quite important in case of cash disbursement and ensures that cash has been paid for
legitimate. Good internal control in case of cash disbursement are very crucial in order to
prevent the cash loss. Staff of accounts payable should not be in charge of disbursement of
cash in order to prevent invalid transactions payment (Worrell, Wasko and Johnston 2013).
Safeguard of cash account is done through the separation of his duties. In case of
business being too small in this arrangement employee should not get involved in terms of
Prepare the MRPs
GA optimization
of engine
Return of the best solution
found (as well as the
optimized of delivery
schedule)
Requirement of
materials
The cost of
material data So all the
materials are
processed
End

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ACCOUNTING INFORMATION SYSTEM
accounts payable and should reconcile the account of bank each and every month and should
perform audits for payment of cash in order to evaluate payments in the form of cash are
there for valid transactions or not. Moreover, cash disbursement refers to cash outflow which
can be paid in exchange of good provisions or of services. Cash disbursement is made for
refunding to customer being to be recorded as sales reduction. Payment of dividend can also
be considered as disbursement of cash to be recorded as corporate equity reduction. Cash
disbursement can either be in the form of bills or can be in form of checks or can be transfer
of electronic funds. Cash disbursement can also be usually made with the help of system of
accounts payable but there can be disbursement of funds either through system of payroll or
petty cash. Process of cash disbursement is outsourced for bank of the company that can issue
payments as per date authorization by equity payment by use of funds (Worrell, Wasko and
Johnston 2013).
Documentation of original sales
Receive return Sales journalCustomer
Update the
inventory
Inventory record

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ACCOUNTING INFORMATION SYSTEM
Credit memo and customer check
Credit
Check
Figure 2: Flow chart of Cash disbursement system
Preparation of
credit memo
Preparation of
return check
Cash disbursements
Sales return
General ledger
Accounts
receivable

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ACCOUNTING INFORMATION SYSTEM
System flowchart of payroll system:
When it comes to an accounting information system, the payroll system, the
employers are recording all kinds of suitable payment information of individual employees. If
the systems contain more than an employee, then the automatic payroll system should be
there (Brandas, Megan and Didraga 2015).In the end, this will make the tax and legal process
more comfortable .as well as this system is very costly and expensive, and any small
organisation cannot implement the payroll system. In this system, third-party payroll can
cause security problems. In case of in this system choosing the wrong payroll system, then
the business or organisation is hampering, and it is so difficult to decide the perfect payroll
system order. So selecting the system is depends on the size of the organisation and amount
of the payroll system.
Yes No
Figure 3: Flow chart of payroll system.
Initialize model
Identify the
candidate models
Evaluate
candidate models
Better
candida
Stop
Update
model
Expert System

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ACCOUNTING INFORMATION SYSTEM
Conclusion:
In this report, the above discussion of the accounting information system and various
components and principles of AIS. They discussed the different types of accounting
information system and analyzing and comparing them. Accounting information system
makes the information processes more straightforward and helps in cost optimization. It also
increases the efficiency of work. In addition to this, the internal control system of the Adam
& co and the possible measures which can be taken by the management of the company for
ensuring that such weaknesses do not affect the operations of the business in future.

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ACCOUNTING INFORMATION SYSTEM
References:
Belfo, F. and Trigo, A., 2013. Accounting information systems: Tradition and future
directions. Procedia Technology, 9, pp.536-546.
Brandas, C., Megan, O. and Didraga, O., 2015. Global perspectives on accounting
information systems: mobile and cloud approach. Procedia Economics and Finance, 20,
pp.88-93.
Daoud, H. and Triki, M., 2013. Accounting information systems in an ERP environment and
tunisian firm performance. International Journal of Digital Accounting Research, 13.
Galliers, R.D. and Leidner, D.E., 2014. Strategic information management: challenges and
strategies in managing information systems. Routledge.
Hilton, R.W. and Platt, D.E., 2013. Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.
Ismail, N.A. and King, M., 2014. Factors influencing the alignment of accounting
information systems in small and medium sized Malaysian manufacturing firms. Journal of
Information Systems and Small Business, 1(1-2), pp.1-20.
Mancini, D., Vaassen, E.H. and Dameri, R.P., 2013. Accounting information systems for
decision making.
Neogy, D., 2014. Evaluation of efficiency of accounting information systems: A study on
mobile telecommunication companies in Bangladesh. Global Disclosure of Economics and
Business, 3(1).
Otley, D. and Emmanuel, K.M.C., 2013. Readings in accounting for management control.
Springer.

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Rainer, R.K., Cegielski, C.G., Splettstoesser-Hogeterp, I. and Sanchez-Rodriguez, C.,
2013. Introduction to information systems: Supporting and transforming business. John
Wiley & Sons.
Rikhardsson, P.M., 2017. Information systems for corporate environmental management
accounting and performance measurement. In Sustainable Measures (pp. 132-150).
Routledge.
Sačer, I.M. and Oluić, A., 2013. Information Technology and Accounting Information
Systems' Quality in Croatian Middle and Large Companies. Journal of Information &
Organizational Sciences, 37(2).
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues,
concepts and practice. Routledge.
Simkin, M.G., Norman, C.A.S. and Rose, J.M., 2014. Core concepts of accounting
information systems. John Wiley & Sons.
Sledgianowski, D., Gomaa, M. and Tan, C., 2017. Toward integration of Big Data,
technology and information systems competencies into the accounting curriculum. Journal of
Accounting Education, 38, pp.81-93.
Worrell, J., Wasko, M. and Johnston, A., 2013. Social network analysis in accounting
information systems research. International Journal of Accounting Information
Systems, 14(2), pp.127-137.

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