Accounting Information System - Coursework Example

Accounting Information System Chapter 10 The revenue cycle includes the activities that are undertaken in business to have an exchange of money and products or services. The main determinant in the said process is the monetary value or the cash that is exchanged between the parties involved. There are two distinct stages in the revenue cycles namely the physical and the financial phases. The process wherein the goods or services are given to the customers is referred to as the physical phase. In return, the financial phase is the part wherein the client pays the value for the goods or services that are bought (Hall 2004, ch.4). The main parts of the revenue cycle are the sales order processing subsystem and the cash receipts system. The sales order system includes units such as the sales, credit, billing, warehouse, shipping, billing, inventory control, accounts receivable and general ledger. Another important unit is involved with the sales returns on the basis of the fact that the sales made are not always final. The cash receipts system on the other hand is involved in the financial phase of the revenue cycle (Hall 2004, ch.4). 2. Validity checks, completeness tests and reasonableness tests can be used to ensure accuracy of customer orders on the basis of the principle regarding levels of authorization. Validity of the transaction, completeness of the process involved in the sales made and the reliability of the processes undertaken are included in the factors that can determine the finality of the transaction. In addition, the data that are gathered can be used to determine the expected sales in a particular period rendering the amount of funds that can be collected. 3. The CRM refers to customer relationship management which can be considered as one of the important parts of the accounting information systems. It is generally used for storage of customer data (Encyclopedia of Business and Finance). 4. EDI or electronic data interchange is an input device in the AIS that can help the billing and account receivable process by increasing the speed of the phases involved through automatically adjusting the correct input of data (Encyclopedia of Business and Finance). 5. A company can avoid over billing by utilizing a system that can have direct relationship between the customer data and the billing data of distinct customers. 6. In the process of billing and accounts receivable, the documents that are needed are the different invoices and agreements in terms of obligation of liabilities (Hall 2004, ch.4). 7. The credit approval is an important part of the revenue cycle on the basis of the fact that it can be considered as part of the build up for a proper provision for in-debt payments. The said process reduces the risk of over invoicing a non-credit worthy customer, thus, decreasing the risk for unpaid accounts. It serves as a way of counter-checking (Encyclopedia of Business and Finance). 8. The two types of accounts receivable systems are based on the parties involved. There are individual accounts receivable systems that involve credit transactions with certain individuals. On the other hand, the more common accounts receivable systems involve corporations or companies. Such AR systems are referred to as trade ARs (Investopedia). 9. Cycle billing is the processing of accounts on the basis of the different phases involved and on a particular time cycle (Investopedia). Such activities include the tasks of invoicing and updating accounts receivable (Romney and Steinbart ch.10-66). 10. Poor performance in the area of cash collections is a threat to the business. To control cash collection, it is important to constantly review and monitor the status of the customers and the take note of the changes in their payment performance and even the regularity of their purchases. In addition, the personnel that are responsible for the accounts receivable should have no access to actual cash and checks (Romney and Steinbart ch.10-89). Chapter 11 11. The expenditure cycle is one of the primary phases in the system that is involved in the management of the costs that are incurred by the company such as supplies, services and operational costs (Romney and Steinbart ch.11-4). The main activities that are involved in the expenditure cycle are corresponding to the revenue cycle. Such activities include placement of orders on the needed goods, services or products, the receipt of the said items as well as the storage and the payment process (Romney and Steinbart ch.11-8). 12. The EOQ approach is the Economic Order Quantity approach which can be considered as the conventional method of the management of inventory. The main factors that are involved in the EOQ are the management of the ordering costs, the carrying costs and the stockout costs to achieve the optimal order size (Romney and Steinbart ch.11-13). 13. The materials requirement planning (MRP) is an alternative method for EOQ which is aimed to decreasing the inventory expenses through an increased accuracy in the forecasting techniques. In turn the production and the purchasing can be set to the time most suited for the needs of the company (Romney and Steinbart ch.11-15). 14. The JIT or just-in-time method is another method related to the EOQ which reduces and even eliminates the process of inventory by relying on actual sales and needs to purchase and produce goods and services. The process then is composed of more frequent yet minimal phases (Romney and Steinbart ch.11-15). 15. EOQ and MRP are similar on the basis of forecasting the needed goods and services to be produced or purchased while the JIT relies on actual sales to set the operation going. MRP and JIT in terms of efficiency can be considered more favorable than the EOQ due to the objective to be more accurate in the prediction of values. The main difference between the 2 though is based on the application. The MRP are for products of predictable demand while JIT are for those that are least predictable and with short life cycles (Romney and Steinbart ch.11-19). ESSAY 16. MRP is preferable for products that have predictable demand. For that matter, the needs of the consumers can be stipulated. This can also ensure that supplies will be available for purchase by the consumers at any given time in the future. In this case, the JIT is limited in this case since the products that are produced are already sold, thus, any emergency purchases without order prior to production is not possible. On the other hand, JIT is more efficient when it comes to expenditure on the basis of the fact that the products produced are sold for sure (Romney and Steinbart ch.11.18-21). 17. In the expenditure cycle, the majority of payments made are by check thus control issues are applied. One is through the inclusion of documents that can ensure accuracy and reliability of the process. Included in such processes to endure reliability are validity checks and field checks. Also, the complete monitoring of the transfers and recording of the handlers of the products in every step of the way is important (Romney and Steinbart ch.11-67). 18. There are different threats related to the processing of goods in relation to the expenditure cycle. The first threat in relation to ordering is on the stockouts and/or excess inventory. Others are on ordering unnecessary items, purchasing goods at inflated prices, purchasing goods of inferior quality, purchasing from unauthorized suppliers and kickbacks. Other threats are related to the process of receiving and storing goods include such as receiving unordered goods, errors in counting received goods and theft of inventory. Lastly, some threats can be related to the payment process such as failing to catch errors in vendor invoices, paying for goods not received, failing to take available purchase discounts, paying the same invoice twice, recording and posting errors to accounts payable and misappropriating cash, checks, or EFTs (Romney and Steinbart ch.11.76-98). 19. To be able to improve the process of decision-making process and strategic information, the AIS is needed to provide information on the purchasing efficiency and effectiveness, the supplier performance, the time constraints related to the movement of the products from purchase to production and the percents of discounts received. Such process are needed in addition to the services expected of them such as reporting on outstanding invoices, performance of expenditure cycle employees, the PO processing as per purchasing agent, the invoice processing as per AP clerk and the deliveries handling as per receiving clerk (Romney and Steinbart ch.11.118-19). 20. The bar codes on goods and products are important for monitoring on different stages of production. Application of such system reduces and even eliminates loss of items or loss of funds due to other errors in the process of monitoring goods that are produced or delivered. Chapter 12 21. The role of AIS in the production cycle can be considered to oversee the different functions of the production cycle. For that matter, AIS can be applied on the stages of product design, planning and scheduling, production operations and cost accounting, this is through the automation of the whole system and networking every department and units involved in the production cycle (Romney and Steinbart ch.12-9). 22. The accountants are involved in one of the main activities that can be considered fundamental in the process. This is the cost accounting that can ensure the efficiency of the expenditure though the whole production process. In addition, the accountant also has roles with regards to the participation with the AIS activities (Romney and Steinbart ch.12-9). 23. The common methods of production planning are Manufacturing Resource Planning (MRP-II) and the Lean Manufacturing. MRP-II is the succeeding process of the MRP in the inventory process thus the main role of the said method is to determine the availability of the materials to achieve the proposed production in a process referred to as push manufacturing. On the other hand, the lean manufacturing is the succeeding process of the JIT system, thus the activity that are involved are based on short-run production plans mainly based on the order of the clients. The said process is referred to as the pull manufacturing (Romney and Steinbart ch.12.18-20). Chapter 13 24. The main role of the HRM system is to manage the “soft assets” or the knowledge and skills of employees. In addition, the management of such assets involves development and training, appropriate task assignment and monitoring. Other important notions in relation to the employees being an asset of the company is the fact that they can affect the efficiency of the production process and can incur one of the major expenses and operation costs. Although this is the case, such assets cannot be included in the AIS on the basis of the fact that the system does not consider employees as assets and cannot be included in financial statements. Through the GAAP, the human services cannot be measured unless they have been used up (Romney and Steinbart ch.13-15). 25. In the use of a payroll service bureau to process a payroll it is important to consider the requirements of such method. For example, the master file is needed to be presented to the said bureau to be able to perform the processing of the employment of the company. Other requirements include employee time and attendance data. There are advantages and disadvantages of such process. Included in the disadvantages is the inclusion of an outside party to the process of the company. On the other hand, the service would improve the organization and efficiency of the company aside from the fact that it can reduce the labor costs of the said company and make the facilities such as computer storage systems for use in other activities (Romney and Steinbart ch.13.54-56). 26. The HRM/payroll cycle operates on the basis of certain control objectives to ensure the integrity of the system. One is that all process and transactions that are made should be authorized, recorded and validated. Checking if such processes and transactions are undertaken accurately is another important objective. Safeguarding against theft and loss is also required. Efficiency is served as another important goal in addition to the compliance to the law and different forms of regulations. Lastly, every disclosure made is needed to be full and fair (Romney and Steinbart ch.13-57). 27. Unauthorized changes to payroll master file can lead to the increase in expenses related to wages, salaries, commissions, base rates and other forms of compensation due to falsification acts. Another is the inaccuracy in reporting and the possibility of erroneous performance of different processes (Romney and Steinbart ch.13-67). 28. There are different threats to payroll process. Such errors include changes to the Payroll Master File, inaccurate time data, inaccurate processing of payroll and theft/fraudulent distribution of paychecks. To control such errors different methods are undertaken such as segregation of duties, restriction of access to file and increased security (Romney and Steinbart ch.13-66). Chapter 14 29. The ledger and reporting system or GLARS is composed of different processes that reports and summarizes the different activities within the organization along with the maintenance of the general ledger accounts and the monitoring all the accounts within the system (Romney and Steinbart ch.14-4). 30. The four basic activities under GLARS are the updating of the general ledger, the post adjusting of the entries, the preparation of the financial statements and the production of managerial reports (Romney and Steinbart ch.14-7). 31. The journal voucher file is a summary of the journal entries which is mainly used in the update of the general ledger (Romney and Steinbart ch.14-10). 32. Responsibility accounting is the main basis of the budgets and performance reports that are produced. On the other hand, it is mainly based on financial statements of every subunit, updates costs and variances for the month and year controlled by the subunit and the summary of such data reflected for the follow-up on the subsequent period (Romney and Steinbart ch.14-32). 33. Balance scorecard is used to asses the performance of the organization by presenting a multi-dimensional perspective on the organizational performance which includes the financial, customer, internal operations and innovation and learning aspects (Romney and Steinbart ch.14-61). 34. Audit trail is used as one of the guidelines in the general ledger and reporting system. This serves as the record of the activities undertaken in terms of different aspects. 35. XBRL has two benefits. One is the possibility of publication of financial statements in a widely utilizable form. Another is the complete automation and electronic processing of the data. These benefits can be considered to increase the ease in the storage, retrieval and processing of the financial data and statement (Romney and Steinbart ch.14.43-44). Works Cited Encyclopedia of Business and Finance. 2008. Accounting Information Systems. 23 September 2008 Hall, James A. Accounting Information Systems. 4th ed. South-Western Publishing Co., 2004. Investopedia. 2008. 23 September 2008 Minars, David. Accounting: Themes, Keys, Formulas, Glossary of Accounting Terms for Your Introductory College Course. Barrons Educational Series, 2003. Romney, Marshall and Paul J. Steinbart. Accounting Information Systems. Prentice Hall, 2006. The Purdue OWL Family of Sites. 26 Aug. 2005. The Writing Lab and OWL at Purdue and Purdue University. 23 April 2006 . Read More