Accounting Information System Report: Air-Asia's Xero Software

This report provides a comprehensive analysis of Air-Asia's accounting information system, specifically focusing on its use of Xero software. The report begins with an introduction to accounting information systems, followed by a discussion of Air-Asia's financial highlights and the company's curr...Read More

Accounting Information
Systems
1

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
1. Discussion on existing accounting software:...........................................................................3
2. Description on role of accountant in existing software:..........................................................6
3. Recommendation for system improvement in the existing accounting software:...................7
Summary..........................................................................................................................................9
REFERENCES..............................................................................................................................10
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INTRODUCTION
Accounting information system refers to set of activities related to collection, storage and
processing of data related to accounting and finance which is generally useful for internal users
in order to reporting to external users like lenders and creditors, tax authorities etc. It is most
common and computerised method to trace accounting activities from beginning to end while
using various information technology means (Bushman and Williams, 2012). This report
discusses about Air-Asia which is a Malaysian airline company. Company has its headquarter in
Malaysia and address of company is Red Q, Jalan Pekeliling 5, Lapangan Terbang
Antarabangsa Kuala Lumpur (klia2),64000 KLIA, Selangor, Malaysia. The main activities of
company are to provide Air transportation services across the world. Company also provides
hotel services and tour packages along with flight tickets. Company sponsors many functions
and events held mostly in Malaysia and also plan events in order to provide event tickets along
with flight tickets.
This report also describes financial highlights of Air-Asia. Company has reported total
revenue of RM 9710 millions in 2017 whereas RM 6846 millions in 2016. Company's operating
income is increased to RM 2161 millions in 2017 which was RM 2066 millions in 2016. On
other hand Net profit of company has decreased in 2017. In 2017 company has reported Net
profit of RM 1571 million which in 2016 was RM 1619 millions. In 2017 company's net debts
are reduced by RM 1412 millions. Company's common stock is increased to RM 2515 millions
because company received full amount on additional paid in capital. Air-Asia has acquired a
company named VIDI(Formerly Touristly) in April, 2017 for $2.6 millions due to which
shareholder's equity, assets and liabilities are increased. Company is currently using Xero, an
accounting software for accounting and reporting purpose (Financial Highlights, 2018).
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TASK
1. Discussion on existing accounting software:
Air-Asia conducts its all financial and accounting operation through a Xero. It is most
popular and widely used accounting software to management of various accounting operations
and activities in a large corporation. It is customisable accounting management software system
that organise financial and accounting activities as per company's rule and policies and organise
funds or monetary resources according to budgets of company in a systematic manner that assist
in creation of framework for decision making. Following are major aspects which provide
assistance in understanding various aspects of Air-Asia's existing accountant software:
Users: In Air-Asia accounting information is generated using Xero which is used by various
parties or users. The main reason behind using information obtained from accounting software is
substantial interest of these users or parties in information. Following are the key users of
accounting software:
Management: Accounting software is used by management to asses actual and real time
performance of company in order to take vital decisions or to formulate strategies. They also use
these software to modify any existing objectives or strategies and to identify any non value
added activities or process. In Air-Asia management use information provided by accounting
software to analyse performance of organisation and to asses actual outcomes of formulated
strategies.
Owner: For obtaining knowledge about company's actual position and profitability
condition, owners uses accounting software. In Air-Asia, owners and founders of company use
these software to keep update with company's actual per day profitability condition
(Dimitropoulos, Asteriou, and Siriopoulos, 2012).
Auditors: During auditing process and reporting process auditors of company use
accounting software to for finalisation of accounts. They also evaluate accounting software to
identify any technical or clerical error in process of accounting software. In Air-Asia auditors by
using information generated through Xero report their annual report.
Staff and employees: Employees or staff using accounting software can accomplish their
task easily and effectively. In large organisation training programs are organised to develop their
skills in operating accounting software. Employees and staff in Air-Asia using accounting
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software to conduct their task and activities specially accounting and financial activities in
quickly and effective manner.
Internal Controls: Internal controls are major part of an organisation's accounting information
system. These controls can be customised manually or automatically. In accounting software
internal controls helps to enhance creditability and reliability of information or outcomes. In Air-
Asia these are the signifiant internal controls applied with accounting software Xero:
 Segregation of duties and task in accounting software as their roles and responsibilities.
 Authorisation level is clearly defined to avoid any irregularity or misuse of information
of accounting software in Air-Asia.
 Ensuring proper restrictions and control over asses to accounting software.
 Use of fixed or standard documenting process for all accounting information and records
in order to maintain consistency from one period to other.
 A special team in Air-Asia for Regular checking in order to assure entry in accounting
software made is correct.
 Making regularity in reporting cycle of accounting software for internal purpose.
 In accounting software one entry should be authorised at two different levels to ensure
rechecking of each single entry.
 Proper storage and backup process to avoid loss or theft of data.
 For modification of any entry authorisation is required at different levels along with
specific reason for modification in Air-Asia.
Transaction Volumes: It refers to a how much processing requests that an accounting software
or other computer software receives and responds to during a specific time interval. In large
business organisation or corporate companies transaction volume is very high as compare to
small organisations. In Air-Asia approx 1 million transactions or entry is processed across all its
business locations in accounting software Xero (Enahoro and Jayeoba, 2013).
Error Rate: It is very hard to avoid or eliminate transaction errors because overall expenses or
cost related to correction in such transactions is very high. So motoring and controlling them is
best way to minimise transaction errors. In Air-Asia error rate is controlled and monitored in
association with aggregate transactions or entries processed by each individual or personnel in
company, to determine responsibility and frame instruction to avoid any further transaction error
with same nature. Such as in company a chief accountant wants to reduce time spent by
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accounting staff on correction of transaction errors, so accountant should analyse these
information for last accounting period:
Type of activities and
processes
Total number of
Errors
Number of
Transactions
Transaction Error Rate
...Billing transactions 150 1500 10.00%
...Cash receipt transactions 20 350 5.71%
...Payable transactions 200 1800 11.11%
By analysing this information, he can allocate error which assist in developing a
framework for optimisation of error rate.
2. Description on role of accountant in existing software:
Accountants are key user of accounting software in a business organisation. Accounting
software is used by accounts to manage different-different accounting and financial transactions.
Accountants are expert personnel in business organisation who manage accounting transaction in
a systematic manner. They not only records accounting entries but also helps to set objectives
and goals as per actual performance of company (Jones, 2011). In large multinational companies
accountants have equivalent role of management and they play significant role in decision
making activities. In Air-Asia all financial and accounting transaction and entries are recorded by
accountants and they are also responsible for key decisions. Only use of an accounting software
not ensures effective accounting information system because transaction though accounting
software should be recorded by applying accounting policies and other rules or regulations.
Following are the important role of accountant in accounting software Xero in Air-Asia, as
follows:
 The primary role of accountants in Air-Asia is to maintenance of books of accounts in
Xero software.
 Accountant's play a major role in accounting software by ensuring that all accounting and
financial transactions are recorded with physical proof or supporting documents.
 They classify accounting transactions and information in various heads, segregate them in
revenue and capital as their nature and ensure proper treatment of prepaid and
outstanding obligation and liabilities etc.
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 Accountants also reconcile Bank balance on periodic basis to provide updated
information in Air-Asia.
 They play role in securing accounting information by doing timely backup, authorisation
at at time of subsequent modification in entries and also keep some physical records for
future reference.
 Accountant play role in reporting through accounting software because they ensures
compliance of fundamental accounting assumption, conventions, policies, rules and
regulations.
 They use accounting information for finalisation of accounts at year end such as
statement of financial position, income statements, cash flow statement etc.
 They interact with Statutory and internal Auditors for describing process involved in
accounting software also provide evidence that information generated by accounting
software is true and correct in Air-Asia.
 They use accounting software for creation of budgets in order to make information
compatible with decision making.
 They provide accounting software information in easy formate that management can
understand such typical information easily.
 Accountants by using information of accounting software identify any potential threat for
company and alert management by reporting these potential threat in Air-Asia.
3. Recommendation for system improvement in the existing accounting software:
As per changing environment and circumstances every organisation should make changes
in accounting software to improve. Accounting system can be improved only by improving
accounting software because accounting software is core need of accounting system.
Improvement in accounting software may be different phase or organisation wide. In large
organisation each and every business transaction is recorded through accounting software so
improvement in large business organisation like should be in phased manner. Organisation
should evaluate their existing accounting software to asses the need for improvement in
accounting software. Some time improvements are required due to any technological and
regulatory changes. Minor updates in accounting software can not be considered as improvement
in accounting software. In Air-Asia management know about the importance of improvement in
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accounting software and they improve their software time to time. Following are the important
recommendation for system improvement in accounting software Xero:
Keep updated with legislation changes:
To govern and control business organisation government issues various rules and
regulation time to time so it is very important for capacities to keep update and changing with
these latest and new rules and regulations. During recent years have seen unpredictable
legislation changes that affects accounting systems. To retain market share and brand value it is
very important for organisation to apply these changes in accounting system. In order to adopt
these changes in Air-Asia software developers should make changes in accounting software by
using government guidelines. For smooth functioning of accounting system accountants and
managers should adopt changes in accounting software as per to changes in laws (Kuznetsova,
2011).
Embrace new technologies:
In present scenario technology is changing very quickly and adopting these technological
changes helps to improve working is organisation. As use of old or obsoleted technology leads to
increases cost of organisation and adoption of latest or new technology assist in increase in
business performance. In Air-Asia can use new cloud technology in their software Xero. Use of
cloud leads to enhanced security and data storage. Cloud also helps to run software smoothly by
managing storage capacity. Cloud provide quick asses to all employees in data on online basis
and helps to reduce redundancy in data. Use of cloud in accounting system also reduce lot of
paper work in accounting information system. It makes easy for management or owners of Air-
Asia to access accounting information from everywhere.
Involvement of Accountants:
Accountants are key user of accounting software and they help to identify any
misrepresentation, fraud and error in accounting system. They also find any bugs or
technological error in accounting software. So in Air-Asia involvement of accountant in
accounting system should be enhanced to avoid any error or fraud. The company should consider
feedback of accounting staff to identify areas of improvement in accounting system or software.
In case any senior manager is facing any issue in accounting software then he should directly
interact with accounting staff to resolve the issue and promote them to develop their skills. For
improvement of Xero, management of Air-Asia should increase their role in company for
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improvement in accounting software (Ruivo, Oliveira and Neto, 2014). In Air-Asia, management
should conduct or organise various activities and training programs for employees to improve
their working skills with accounting software. In these training programs, special training for
securing data and minimising data loss should be provided.
Systematic integration with other functions:
A coordinated and systematic integration of various functions and activities of
organisation with accounting software leads to an significant improvement in accounting system.
Such systematic or organised integration provide assistance in avoiding or eliminating
duplication of entries in accounting work and helps to attain efficiency. Air-Asia conducts
various activities and function so it is signifiant for company to integrate all its with accounting
information system to improve accounting software. Such as integration of HR and accounting
will help in quick analysis of cost related to hiring, recruitment or selection and its determines
whether to hire individuals or not. There should be integration between HR and accounting
software as HR managers can directly provide or transfer new and updated information about
employee salary and other incentives. Also Administrative and Accounting activities should be
integrated for clarity of work between bot of the department. Such type of integration provide
assistance to ensure performance and accuracy of accounting software (Omolehinwa and
Naiyeju, 2012).
Summary
As from the above report, it has been shown that Air-Asia is airline company in
Malaysia. It engaged in providing Air transportation services across the various countries. The
company is also engaged in hotel business to provide full tour packages in many countries. This
report discusses about accounting software for accounting information system in company. Air-
Asia is using Xero accounting software to manage it all financial and accounting activities. Main
objective of this report to analyse role of accountant in accounting software and
recommendations for the improvement in accounting system. Beside this, this report describes
various users of accounting software, internal controls over accounting software, transaction
volume processing in software and error rates of using accounting software. Accountant of
company is Xero accounting software which is signifiant for reporting of financial performance
and condition because its provide assistance in preparation of financial statement and income
statements. In order to adopt or identify need for improvement in accounting software company
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should keep updated with latest policies, rules and regulations changes, adopt new technology
changes, enhance the role of employees and develop a framework for integration of accounting
software with other functions. Xero accounting software is important for accounting information
system and for accountants in order to organise accounting functions in Air-Asia.
REFERENCES
Books and Journals
Bushman, R. M., & Williams, C. D. (2012). Accounting discretion, loan loss provisioning, and
discipline of banks’ risk-taking. Journal of Accounting and Economics. 54(1). 1-18.
Dimitropoulos, P. E., Asteriou, D., & Siriopoulos, C. (2012). Euro adoption and the quality of
accounting information. Managerial Auditing Journal. 27(3). 299-328.
Enahoro, J. A., & Jayeoba, J. (2013). Value measurement and disclosures in fair value
accounting. Asian Economic and Financial Review. 3(9). 1170.
Jones, M. (Ed.). (2011). Creative accounting, fraud and international accounting scandals. John
Wiley & Sons.
Kuznetsova, S. (2011). The transformation of accounting systems in the chaotic economy
structuring: The synergetic approach. Risk and Decision Analysis. 2(3). 151-160.
Omolehinwa, E. O., & Naiyeju, J. K. (2012). Theory and Practice of Government Accounting in
Nigeria.
Ruivo, P., Oliveira, T., & Neto, M. (2014). Examine ERP post-implementation stages of use and
value: Empirical evidence from Portuguese SMEs. International Journal of Accounting
Information Systems. 15(2), 166-184.
Saleh, F. M. (2013). Critical success factors and data quality in accounting information systems
in Indonesian cooperative enterprises: An empirical examination. Interdisciplinary
Journal of Contemporary Research in Business. 5(3). 321-338.
Ward, K. (2012). Strategic management accounting. Routledge.
Online
Accounting Information. 2018. [Online]. Available Through:
<https://www.stedwards.edu/undergraduate/accounting-information-technology>
Financial Highlights. 2018. [Online]. Available Through:
https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=4484622.
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