Financial and Accounting Information System - Essay Example

? Financial and Accounting Table of Contents Introduction 3 Software tools in the Computerized Accounting Information System (CAIS) 3 Accounting software 3 Income tax 4 Audit 4 Word processing 4 Graphics software 4 Image processing 4 Electronic data interchange 4 Electronic funds transfer 5 Purpose of Computerized Accounting Information System 5 Use of CAIS in the functioning of Organization 5 A. 6 Information needed by Management Accountant (MA) 6 B. 7 Information needed by Financial Accountant (FA) 7 C. 8 Satisfying the needs of each accountant 8 References 9 9 9 Introduction Accounting Information System is a set of process and individual activities which a company uses to collect and transfer financial information between various departments. In past, these systems include manual processes but now due to technology advancement the accounting information system changed into Computerized Accounting Information System. Improvement in technology have replaced manual accounting system with computerizes ones. As computers become faster, less expensive, and easier to use; all organizations are using computers in their day to day business. With the help of computers, companies can now capture, process, store, and transmit data. It controls the topics which are related to organization’s economic- financial area. It helps in decision-making process, performance evaluation, facilitating company’s transaction and in internal controls through computerized accounting information system. It combines concepts and accounting principles to record, process, analyse the financial information and then produce it to its end users for the purpose of making economic decisions. Firm’s performance can be improved, through operational efficiency and increased profitability (Fowzia and Nasrin, 2011, p.1). Software tools in the Computerized Accounting Information System (CAIS) Accounting software This software consists of basic accounting functions like input, processing and output. There are two types of accounting software i.e. low-end software and high-end software. Personal computer based accounting system enable companies to provide better and timely information. Income tax Currently tax preparation software is available for companies. So, even in a short period of time complex calculations can be done. Audit Trial balance software helps auditors to handle different types of adjusting entries, to input the working trial balance and mechanically compute the adjusted trial balance. Word processing Word processing software is used by the accountants to prepare reports, memos, billings and financial statement. Graphics software It is used by the managerial accountants and auditors to graph the data in reports and financial statements. Image processing It captures electronic image of data so that it can be stored and shared. Accountants can process all the electronically by just scanning the paper documents in computer. Electronic data interchange A company can exchange documents electronically with other company with the help of electronic data interchange. Electronic funds transfer It enables companies to make collections and payment electronically. So, if companies are in a view to pay for accounts payable to a supplier, it can do it with the help of electronic fund transfer. Purpose of Computerized Accounting Information System Computerized accounting information system (CAIS) can be single programs or even part of a larger system like enterprise resource planning. The purpose of the system is to reduce manual steps in accounting process and offer automated activities in order to improve reporting. Every function plays a minor part in accounting information system. Individual functions include accounts receivable, accounts payable, fixed assets, payroll, general accounting and cash management. CAIS often have modules that enable accountants to handle financial information related to their accounting tasks. Use of CAIS in the functioning of Organization CAIS saves time, reduce errors and eliminate waste by adopting just-in-time production system. Managers try to eradicate the time spend by the products on such activities that do not add value and reduce the time spend by the products in the process of production. With the use of electronic purchase system companies can set up effective communication and connection with suppliers. The CAIS which use electronic selling system enables companies to offer the products to customer within the stipulated time and it also help the organization to reduce the time of finished-goods inventory wait in stock. It helps companies create orderly work environment. It also helps companies to apply total quality management and increase quality. A. Information needed by Management Accountant (MA) In order to do costing of a product the management accountant should first focus on determining the product cost. So, the information that he would require from the system will be product cost. The use of this information is that it will help him to do cost-plus pricing and to do product costing to control business operations. It will also help him to answer the questions such as: Is cost higher or lower than it is expected and what action needs to be taken to control the variance. He also needs to know the direct cost and overhead cost. In order to do product budgeting, the information which MA would require are development budget, production budget, promotion budget, contingency budget and total budget. The usage of this information is that development budget will enable him to estimate the cost for developing product, which includes cost of additional workforce and the cost of establishing quality control standards. Production cost includes cost of packaging, shipping and delivering the product. It also covers all aspects of making or obtaining a product that is ready to go in the hands of customer. Promotion budget includes advertising cost, press release cost and cost incurred in making calls to potential customers. Contingency budget includes the cost needed to manufacture more products if my product sells better than it was expected. Total budget includes all cost from development stage to delivery. On the basis of all these budgets which he requires from the system, he will do the budgeting part. In order to do the monthly management accounting, the information that he would require includes amount of available cash, amount of orders in hand, sales revenue, state of account receivable and account payable, outstanding debts, inventory and raw material. It may also include variance analysis, trend charts, and other statistics. On the basis of all these information he will be able to do costing, budgeting and monthly management accounting. B. Information needed by Financial Accountant (FA) Financial accountant is responsible for the general ledger and all reporting to external stakeholders who include lenders, creditors, government and society. So, the information which he would require from the new system will be the position of assets, liabilities and owner’s equity and also the total balance of revenue and expenses. External stakeholder reporting includes audit and financial reporting. He would require the information of sales, purchase, opening stock, closing stock, other direct and indirect expenses and revenues. On the basis of this he will prepare the income statement and calculate the net profit of the organization. After that he would require the information of total assets, liabilities and owner’s equity to prepare the balance sheet of the company. After that on the basis of the financial statement he will be responsible for the calculation of cash inflows and outflows from investing, operating and financing activities. It shows how changes in the balance sheet and income statement affect cash and cash equivalents. With the help of this information he will prepare final reports that give an exact picture of the performance of an organization for external stakeholders. The FA wants these information to be available from the records of assets, liabilities, owner’s equity, revenue and expenses which is tracked in the system. He will review books and the records in order to ensure that they exactly the operating results of an organization. He will also responsible for interpreting the impact of the accounting results on all aspects of the operations of the company including marketing, HR, investment, borrowing and strategies. After analyzing and reviewing the records and the company’s book, he will offer feedback and advice to senior management relating to the liability position, asset quality, and revenue/expense issue and about cash flow sufficiency. He can also provide advice on the use and status of company resources, result of projections, updates on the budget, and the latest financial news which could affect the operations of the organization. He will be also responsible for giving tax advice to management that will help in reducing tax liability and non-taxable asset swaps so as to remain liquid at taxpaying dates. He can also prepare all reports and tax forms in order to make sure that all tax filing are timely and correctly. So, a financial accountant with the help of its financial statement gives a true and fair view of the financial position and performance of an organization and its adaptability to changes in the economic environment (Degreedirectory, 2013, p.1). C. Satisfying the needs of each accountant As a Chief Financial Officer, I will satisfy their needs by providing them sophisticated analytical techniques which go further than analysing budgets and internal financial information to provide assistance and advice on any new policy proposal and benchmarking organizational program performance against world best practice (Cameron, 2004, p.4). For management accountant I will provide him with the product cost, total budget, available cash, and amount of orders in hand, sales revenue, state of account receivable and account payable, outstanding debts, inventory and raw material. It will help him in doing the costing, budgeting and monthly management accounting. For financial accountant, I will provide him with the asset-liability position and also the revenue-expense issue that will help him in making the financial statement which in return enhance the company’s performance. I will also encourage them by giving them incentives and rewards based on their performance. References Fowzia, R. and Nasrin, M., 2011. Appreciation of Computerized Accounting System in Financial Institutions. [pdf]. Available at: http://www.wbiaus.org/1.%20Mahmuda.pdf. [Accessed 9 March 2013]. Degreedirectory., 2013. What does a Financial Accountant Do. [online]. Available at: http://degreedirectory.org/articles/What_Does_a_Financial_Accountant_Do.html. [Accessed 9 March 2013]. Cameron, J., 2004. Chief Financial Officer: Rolesand Responsibilities. [pdf]. Available at: http://download.audit.vic.gov.au/files/cfo_gpg.pdf. [Accessed 9 March 2013]. Read More