Business-Accounting Information Systems - Report Example

All businesses need to have specific financial data about the operation of the company. A sound financial system provides management with the information they need to make decisions such as inventory purchase reorder points, analysis of costs, determination of profitability of the company and the value of the company. Stakeholders such as lenders require financial statements of a company before they extend any credit to a business. Accounting is the discipline that allows businesspeople to keep track of the inputs and outputs of a company within a systemic system that has been around for several thousands of years (Anders). The purpose of this report is to provide a company with an inadequate accounting system the basic elements of an accounting system and which computerized accounting system can provide assistance for the company. Accounting is the information system that identifies, records, and communicates the economic events of an organization to interested users (Weigant & Keiso & Kimmel, 2002, p.2). The identification process involves the recognizing economic events which create activity that affects the bottom line of a business. These activities include expenses, sales of physical goods or services, purchase of materials or inventory, payroll, accounts payables, account receivables, recognition of liabilities and equity investment transactions. The activities must be recorded in a book called the general journal which can be either manual or electronic. The general journal is a simple system which records transactions as two input transactions where a debit and its corresponding credit are recorded for every economic transaction. In all accounting systems the sum of all credits must equal the sum of all debits. The reporting of the financial results of a company is illustrated within its financial statements. These must be created at the end of an accounting cycle which is typically a one year cycle. The four basic financial statements are The Income Statement, The Balance Sheet, The Statement of Cash Flow and the Statement of Stockholders Equity. In order for a company to create the end result of the accounting system which is the financial statements, a series of procedures occur over the course of a year which is called the accounting cycle. Appendix A provides a flow chart which illustrates the 9-step process of the accounting cycle. The accounting discipline is self regulated and people practicing accounting must follow a strict set of standards which are called generally accepted accounting principles (GAAP). There also four basic assumption and four principles which guide people while performing accounting duties. The four assumptions are economic entity, going concern, monetary unit and periodic reporting. The monetary unit assumption mandates that transactions be expressed in terms of money, while the periodic reporting assumption stipulates that the personal finances of the owner be kept separate from the business books. The four basic principles are historical cost principle, matching principle, revenue recognition principle and full disclosure principle. The matching principle says that expenses must be matched with revenue generating activity. Another important rule that must be followed to perform accounting transactions is the basic accounting equation. The basic accounting equation stipulates that assets equals the sum of liabilities plus owner’s equity (A=L+E). Appendix B shows an illustration of the basic accounting equation. Greenwich ICT Services Limited is a company dedicated to providing computer and communications infrastructure support to various enterprises in South East London. During its first year of operation the company was able to generated 350,000 euros of revenue. The amount represents a significant amount of economic activity. The company has two directors and other technical staffs within its workforce. None of these employees have any knowledge concerning accounting disciplines, thus the company is currently keeping tracks of its finances through a basic daily book of transactions. A company generating over a quarter million euros has no excuse for having such a primitive financial system. This company is in immediate need of a legitimate information accounting system. The company has an operation in which its employees are computer savvy. The best option for this company is to integrate a computerized accounting information system into its regular information system. Accounting information systems make accounting processes simpler by utilizing a computer program to compile financial data to be utilized to perform taxes, payroll and other bookkeeping requirements (ChristiaNet, 2007). There are numerous accounting software packages in the marketplace. These software packages cost anywhere from a hundred dollars to thousands of dollars, but there are plenty of good solutions in the price range of $100-$700. A few of the different accounting software solutions are Peachtree Accounting, Intuit QuickBooks Accounting, Microsoft Great Plains, MYOB Account Edge, Quicken, Checkmark Multiledger 7.0 and AME Accounting Software. The company decided to study three different accounting software packages in order to choose the solution that better fits the company’s needs. The three accounting software the company analyzed are Peachtree Accounting, Intuit QuickBooks and Microsoft Great Plains. Appendix C shows examples of financial statements of a company that could be created with computerized accounting information system. Microsoft Great Plains was launched in the year 2000 by the software giant to provide a comprehensive platform to help small, medium and large companies with their administrative financial work. Great Plains offers fully mature financial analytics, and a business management system that unifies data and process across your business, integrates easy with other solutions and connects employees, customers, and suppliers regardless of their location (Icbconsulting, 2007). The tools allow business owners to significantly reduce the time spend on administrative work and provides a way to integrate information. The capabilities of the software are illustrated in the list below: Financial management Manufacturing Distribution HR Management Analytics Project Accounting E-Commerce Field Service Management Microsoft Business Solution Business Portal Customization and Business Tools (Icbconsulting, 2007). The financial management function provides all the basic tools of a good accounting information system. It has a general ledger, the capability to manager A/R and A/P, ecommerce, analytical accounting and many other tools to property analyze business transactions and the overall financial results of an enterprise. Great Plains is a great business solution, but it is quite expensive. Microsoft Great Plains costs $50,000 - $250,000 depending on the overall package the company purchases (2020software, 2007). Peachtree Accounting is an accounting software solution developed by Sage Software. Peachtree comes in four different versions depending on the sophistication of the user. The four versions are basic, standard, advance and premium. The prices go from $70 for the basic up to $500 for the premium version (Peachtree, 2007). A user can upgrade between versions at any time for a fraction of the overall cost. The software provides an accounting information system with capabilities such as general ledger bookkeeping, management of payables and receivables, cost accounting, internal auditing, payroll, creation of invoices, and full financial reporting including creation of financial statements. The software helps an accountant perform the entire accounting cycle. The software is easy to use, but a user must have basic accounting knowledge to be able to work with the platform. QuickBooks Accounting created by Intuit is a great business solution for small business owners. The accounting information system is very easy to use and it is very affordable. QuickBooks comes in four versions with different set of prices. The four versions are: QuickBooks Simple Start - $99.95 QuickBooks Pro - $199.95 QuickBooks Premier - $399.95 Enterprise Solutions - $3,000.00 (QuickBooks, 2007). QuickBooks creates an accounting information system that help business owners perform tasks such as tracking sales and expenses, create checks to pay bills, create invoices, bank reconciliations, payroll, and creating financial reports including financial statements. The great thing about the QuickBooks platform is that it does the accounting behind the scenes. A person with little accounting knowledge can utilize the system since it performs transaction by using common templates business owners recognize such as invoices and checks. Greenwich ICT Services Limited had three alternative computerized accounting systems to choose from. Microsoft Great Plains has a lot of capabilities, but is an expensive solution. Peachtree is cheap and it is a complete accounting information systems, but it requires accounting knowledge the current staff within the company lacks. The best option is QuickBooks software. It is an affordable user friendly solution. The company purchased three licenses of QuickBooks Pro. After installing the software the company needed training for its people, especially for the owners of the company that need to understand the outputs of the system. They purchased QuickBooks Video Professor Training, QuickBooks for Dummies lessons and an online training for QuickBooks. The next step was to hire a part time administrative worker with QuickBooks knowledge. The worker would be hired on three month contract basis, with three company option to renewal the contract for additional three months spans. Additional help for the company would come from college business administration students to be recruited from local universities to perform internships with the company. The contract worker would utilize the old manual system to input the financial data into the system. The person would also be responsible of training the college interns on the accounting information systems. The purchase of the three licenses was to provide software for the contract worker, the intern and one version for the owners. Accounting information systems are an essential element of any sound business practice. It simplifies the recording of business transactions and have the power of creating financial reports for internal or external purposes. Greenwich ICT Services needed a legitimate accounting information system for their business. They choose QuickBooks Pro as the optimal solution because of the simplicity of the system and its low price. The implementation of an accounting information system at Greenwich ICT Services will allow this company to become more effective and increase its profitability. References Anders. A brief History of Accounting. Retrieved July 21, 2007 from http://www.financeprofessor.com/francis/accountinghistory-anders.htm Ccbn.net (2007). Retrieved July 22, 2007 from http://ccbn.mobular.net/ccbn/7/1959/2153/print/print.pdf ChristiaNet.com (2007). Accounting Information Systems. Retrieved July 21, 2007 from http://www.christianet.com/accounting/accountinginformationsystems.htm Icbconsulting.com (2007). Microsoft Business Solutions. 7. Retrieved July 21, 2007 from http://www.icbconsulting.com/GreatPlainsBrochures/GreatPlains_Overview.pdf Peachtree.com (2007). Corporate website. Retrieved July 22, 2007 from http://www.peachtree.com Quickbooks (2007). Corporate website. Retrieved July 22, 2007 from http://quickbooks.intuit.com/product/accounting_software/windows_financial_management_software.jhtml Weygandt, J. , Keiso, D. , Kimmel, P. (2002). Accounting Principles (6th ed.) John Wiley and Sons. 2,148. Appendix A: Accounting Cycle (Weygandt, et.al., 2002, p.148) SsssssS Appendix B: Illustration of Basic Accounting Equation Accounts balances Cash 20000 Accounts payables 5000 Account receivable 15000 Owners equity 20000 Long term debt 10000 Assets = Liabilities + Equity Cash + Account Receivable = (Accounts payables + Long term debt) + Equity 20000 + 15000 = (5000+10000) +20000 Appendix C: Financial Statements (Ccbn, 2007). Read More