Accounting Information System Analysis: Adam & Co. Case Study

This project report provides a comprehensive analysis of Adam & Co.'s accounting information system (AIS), examining its structure and operational practices. The report delves into the intricacies of the purchase system, detailing the processes from stock ordering to cash disbursement. It further explores the cash disbursement system, outlining the steps involved in payment processing and internal controls. The payroll system is also analyzed, covering employee payment processes, tax calculations, and internal controls to ensure accuracy and transparency. The report emphasizes the importance of internal controls, discussing substantive audit procedures for inventory, valuation, and accounts. The conclusion highlights the significance of a robust AIS in tracking performance, managing accounting records, and facilitating informed decision-making within the organization. The report also underscores how a strong internal control system is crucial for reducing errors and fraud, streamlining processes, and improving overall business outcomes. The study utilizes flowcharts to visualize the systems and references various academic sources to support the analysis.

Running Head: System- AIS 1
Project Report: System- AIS

System- AIS 2
Table of Contents
Introduction.......................................................................................................................2
Purchase system................................................................................................................2
Cash disbursement system................................................................................................5
Payroll system...................................................................................................................7
Internal control..................................................................................................................8
Conclusion......................................................................................................................11
References.......................................................................................................................12

System- AIS 3
Introduction:
Accounting information system is an information technology system which is used in
organizations to collect, store and process the financial data and accounting data of an
organization in order to manage the records and make a decision. It is basically prepared to
track the performance of the business with less chances of error. It helps an organization to
settle all the accounting records and prepare financial statement so that the stakeholders of the
business could evaluate on the basis of their grounds and make a better decision (Pugh,
2016). A proper accounting information system in an organization makes it quite easier for
the organization to boost the performance and motivate the management to get better reports
to make decision.
In the report, Adam and company’s case study has been studied and importance of
accounting information system in an organization has been understood. Adam and co is a
wholesaler Adam and Company which basically imports the goods from different countries
and it is basically situated in the market of Perth. All the process of the Adam and Company
is controlled and managed by different departments such as purchase system, payroll system,
cash management system (Steiss, 2019).
Purchase system:
Adam and company’s purchase system has been programmed in such a way that the
total quantity ordered along with the worth of the product could be identified at one go and it
becomes easier for the management to decide the sale price of the business. In order to
prepare a purchase system, below flow chart has been made:

System- AIS 4

System- AIS 5

System- AIS 6
The flowchart given above explains that how Adam and co checks the entire purchase
system and reach over a conclusion till the cash disbursement system. It explains the entire
process through which the purchase system of the Adam and Company goes through. It starts
with the stock purchase of the Adam and Company. It is the major study of the purchasing
department to check the stock availability and the receipt of the stock to identify the recorded
check and the price of the stock available. After receiving the order, it becomes important for
the business to cross check the goods and process to the vendor machine (Suhail, 2018).
After ordering the material and receive it, it is important for the purchase department
to check the invoice of the bill and match it with the stock received and the stock ordered.
Also, it should be sent to the warehouse of the Adam and Company properly. Further,
inventory clerk would look after the stock (Manyaeva, Piskunov, and Fomin, 2016). After
getting the bill of the products, purchasing department has to send the details of invoice to
accounting department so that they could mark it as accounts payable and make the payment
accordingly. All the other things must be matched with the base things so that the error could
be controlled and Adam and Company could reach over a conclusion soon (Xiaojun, 2017).
Cash disbursement system:
Cash disbursement system is a proper documentation of all the cash receipts and cash
payment system of a business. Cash disbursement system is recorded in the financial
statement of the books in order to get a control over the internal controls and ensure that the
business is making the payment on timely basis. Below is the cash disbursement system of
Adam and co (Laudon, and Laudon, 2016).

System- AIS 7
The above flowchart explains that after getting the inventory, it is imapoctant for the
business to make the payment to the suppliers timely. firstly, after recording the transaction

System- AIS 8
of accounts payable, cash disbursement department is required to look over the supplier
invoices, purchase orders and there reports to cross verify the amount and make the payment,
Department checks the due date of the invoices and prepares a cheque accordingly. After
preparing a cheque, it is sent to the suppliers along with all the required details regarding the
payment and the process (Azudin, & Mansor, 2018).
In the last process of this flow chart, all the accounting works are look after. It
becomes important for the department to check the balances cheque register, control leader,
accounts payable amount etc. The process finally leads to the successful payment of the
inventory system of the business and the successfully filling the financial statement, purchase
order copy, seller statement, received cheque reports and the cheque issued to the supplier of
the business. Overall, this process is useful for the business to run the entire process and
smoothly and manage all the work in the business effectively. It will be helpful to record the
right value in the system process.
Payroll system:
Payroll system is the process which involves all the required things related to payment
to the employees and other internal staff of the Adam and Company along with the
employment taxes. It contains various processes such as tracking over the hours of
employees, wages calculations, taxes and other payment process, offering the cheques and
makes the payment of taxes to the government. Below is the flowchart of payroll system:

System- AIS 9
This system is used to strengthen the overall payment follow and assesse the cash
inflow and outflow in the process (Asamoah, 2018). It is further observed that the payroll
system is majorly supported by the internal control system which is linked with the

System- AIS 10
accounting theories and IFRS rules and standards. This system is used to strengthen the
transparency and set link in the particular system process of Adam and Company.
Nonetheless, the general ledger, books of accounts and other documents are used to record
the financial transaction in the books of accounts. The internal control process set is
promoted to strengthen the overall procedural work and one process is indulged to check
another process to mitigate the errors and mistakes in the system.
Internal control:
The substantive audit procedures to be performed by the auditor to obtain audit
undertaken in the internal control system of the organization to reduce the errors and mistakes
in the system process.
S
. No.
existence valuation
1
.
Physical stock count:
It is analysed that auditors of the
inventory control system should not rely on the
basis of the given details by the management.
There should be set up proper link between the
inventory details and other booked entry for
the same. All the entries of the data should be
double checked with other accounts.
There is need to set up proper accuracy
system to strengthen the system process and
reducing the risk and other issues in the
process.
Reconciliation of high-value
inventory items: For all the items of
inventory, high in value along with the
stock count, the auditor must trace their
recording in business since beginning. The
entries in books at the time or purchase
and further re-valuations must be checked
for the accuracy of valuation arrived on
reporting date.
2
.
In-transit inventory: For the items of
inventory moving from the central warehouse
to the regional warehouses, the inventory count
and details of inventory in transit on
warehouse receipt must be checked. In case of
absence of warehouse receipt any other
document released for inventory transfer must
Re-computation of value: as per
accepted accounting principles, the
inventory items can only be valued at an
amount being lower of inventory’s
recoverable value, or the cost. This must
be verified for the inventory valuation
already done by the management. For

System- AIS 11
be taken into consideration and details should
be verified properly (Mayes Jr, Landes, and
Hasty, 2018).
sample items of inventory selected by
management, the cost of inventory
acquisition as available from purchase
document and the current market price of
inventory should be compared directly.
The lower should be selected. Based on
this amount, the sample inventory items
must be assigned value, which must be
cross checked with value assigned to those
items by management
S
. No.
Valuation Rights & obligations
1
.
Tracing entries and documents:
There is need to arrange the proper sheet
and invoices to assess the inflow and outflow
for the goods and cash in the books of
accounts. There will be the one auditors who
will assess the proper inflow and it will be
rechecked in the system through the double
entry system (Sople, 2016). However, invoices
would be linked with the other books for the
internal control.
Checking accounts and
agreement: Company will check all the
accounts and entry passed in the books of
accounts will be further assessed with the
other account impact. The accounting
information system would be based on the
double entry system which will assess the
impact of the one account with the other
(Collin, Lawrence, and Cagle, 2015). It
will set up strong internal control check to
reduce the complexities and errors in the
developed system process.
Therefore, it could be inferred that Adam and Company needs to set up strong internal
control system if it wants to reduce any errors and mistake in the developed system of Adam
and Company. However, after getting the bill of the products, purchasing department has to
send the details of invoice to accounting department so that they could mark it as accounts
payable and make the payment accordingly. All the other things must be matched with the

System- AIS 12
base things so that the error could be controlled and Adam and Company could reach over a
conclusion soon (Xiaojun, 2017). This will be set up as strong internal control system which
will strengthen the overall outcomes and recording efficiency of the process. Therefore, it
could be inferred that by using the strong internal control system aligned with the advance
technologies and system process, Adam and Company could easily increase the overall
outcomes and reduces the errors and frauds in the recorded system. Nonetheless, this new
process will be useful to lower down the complexities and should be supported by the
technical teams to handle the procedural discrepancies. The system hierarchy process will be
the key pillar for this new developed internal control system procedure to reduce the errors.
However, Adam and company’s purchase system has been programmed in such a way that
the total quantity ordered along with the worth of the product could be identified at one go
and it becomes easier for the management to decide the sale price of the business. This will
also be supported by the internal control system to prepare a purchase system through the
system developed flow charts.

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Conclusion:
After assessing the given case, it could be inferred that .these system checks is performed and
basically prepared to track the performance of the business with less chances of error. It helps
an organization to settle all the accounting records and prepare financial statement so that the
stakeholders of the business could evaluate on the basis of their grounds and make a better
decision. Nonetheless, the system issues and procedural work is sorted by using the internal
control system and strengthen the procedural work in program. This strengthen the overall
outcomes and increase the business process system quality. However, the inventory
management system would also be used in the internal control system which will lower down
the complexities and errors of the system. For instance, this must be verified for the inventory
valuation already done by the management. For sample items of inventory selected by
management, the cost of inventory acquisition as available from purchase document and the
current market price of inventory should be compared directly. The lower should be selected.
Based on this amount, the sample inventory items must be assigned value, which must be
cross checked with value assigned to those items by management

System- AIS 14
References:
Asamoah, G. (2018). Developing an accounting information system for a restaurant and
understanding its potential impact on the business Advances in Management 11(3), pp.16-24.
Azudin, A., & Mansor, N. (2018). Management accounting practices of SMEs: The impact of
organizational DNA, business potential and operational technology. Asia Pacific Management
Review, 23(3), 222-226.
Laudon, K.C. and Laudon, J.P., 2016. Management information system. Pearson Education India.
Manyaeva, V.A., Piskunov, V.A. and Fomin, V.P., 2016. Strategic management accounting of Adam
and Company costs. International Review of Management and Marketing, 6(5S), pp.255-264.
Pugh, L., 2016. Change management in information services. Routledge.
Steiss, A.W., 2019. Strategic management for public and nonprofit organizations. Routledge.
Suhail, T.A., 2018. Case Study: The Influence of Strategic Management accounting on Iraqi Service
Companies' Performance. Advances in Management, 11(3), pp.16-24.
Xiaojun, Z., 2017. Knowledge Management System Use and Job Performance: A Multilevel
Contingency Model. MIS quarterly, 41(3).