Barriers of Implementation of Accounting Information System

Table of contents

Abstract:

Accounting information system is one of subsystems in management information system that is very important in all companies. The current study reviews barriers in implementation by postulating six hypotheses of accounting information system (middle managers, human resources, organizational structure, environmental factors, financial issues, and organizational culture) in companies listed on Tehran Stock Exchange. Finally, some results were obtained in this manner: barrier of organizational structure with 26 percent, middle managers with 26 percent, human resources with 25 percent, environmental factors with 21 percent, organizational culture with 19 percent and finally financial issues with16 percent were identified as barriers factors influencing on the establishment of accounting information systems in listed companies on Tehran Stock Exchange. Generally to eliminate these barriers, management, financial managers and staff must be trained practically by experienced teachers in accounting information systems to use the specialist and professional managers, to lengthen position of managers, to clear financial issues, to inform benefits of system establishment to company’s managers. By giving reward to managers and staff try to encourage these people to use the new system. To justify staff that the establishment of new system would be their advantages; by the lever of reward, to encourage staff to compete in learning and work with the system in staff and learn to compete with systems that can accelerate performing and implementing the system.

Key words: Accounting information systems, Corporate accounting system, financial system

Introduction

Today, dramatic changes have occurred in the field of Information Technology (IT) and its progress has been so pervasive so that it has created changing trends in different in areas. The most important features of it are; high speed data processing, extremely high accuracy, and high speed access to information, to be up-to-date, the possibility of electronic exchange of information, high quality, very cheap and declining price. By considering these factors there will be no need to justify the use of IT in today’s world (Salehi et al. , 2010a). Addition in accounting has to use and apply all or some of the new techniques in their services and obligations. So, providers of information especially accountants, should be the providers of advanced and high-quality information so that their services to be bought in high prices.

Otherwise, in the future they will not have any place. Accounting information System (AIS) is developed between one or two or more units of a company to achieve a specific goal (Salehi et al. , 2010 b; Salehi and Alipour, 2010). It contains small sub-systems that support larger systems, includes people, methods, information and software and information technology infrastructures (Romney and Barrett, 2003). System consists of a set of incorporated components that are affiliated to achieve one or several particular goals in a way that, if one or more input can enter in it, one or more output exits (Frederick, 1984).

AIS is a completely designed system for the production, collection, organization (processing), storage, retrieval and dissemination in an institution, organization or any other defined areas of society. AIS can helps business units and solve short-term problems of managers in the areas of final price, cost and cash flow through providing information to support and supervision of companies in the dynamic and competitive environment, and to help the integration of these companies and the operational considerations and strategic programs in long term (Mitchell et al. 2000). Progress in the fields of accounting, information technology and information systems during the past two decades suggest conditions to consider the role of accounting information system. For example, the evolution of active database technology, implementing new models, such as accounting resources and factors of planning resources and allowing accounting information to attract financial old data. 76 Available literatures show little evidence of developing AIS within medium companies. In fact considerable evidences suggest that financial accountings n medium companies are the main source of information and management (McMahon and Davies, 1994). Advantages of JIT The advantages of the JIT philosophy are many. Giunipero et al. , (2005) say that JIT has led to several benefits which include lower production cost, higher and faster throughputs, better product quality, reduced inventory costs, and shorter lead times in purchasing. According to an American study of U. S. Manufactures, companies can expect improved performance in lead times, quality levels, labor productivity, employee relations, inventory levels and manufacturing costs (White, Pearson, and Wilson, 1999).

Fullerton and McWatters (2001) summarised benefits in to five categories: quality benefits, time-based benefits, employee flexibility, accounting simplification and firm profitability. The increase in performance is usually attributable to a decrease in inventory levels, smoother production flow, lower storage cost and ultimately a decrease in average cost per unit (Hall, 1989). Callen et al. , (2000) reported that JIT plants have significantly less WIP than non-JIT plants. JIT plants also store fewer finished products and have lower variable and total costs than the non-JIT equivalent.

Callen et al. , (2000) further found that JIT plants are significantly more profitable than non-JIT plants, but are neither successful at minimizing WIP and costs nor maximizing profits. It is possible to observe that traditional performance measurement system is inconsistent with JIT system benefiting from technological innovations at a maximum level and also that it prevents or hides broad-based effectiveness of new production methods. In this sense, the restrictions of traditional measurement system in JIT environment might be listed as follows: 1.

Continuous development in production process is basic element in JIT manufacturing environment. To reach this aim easily, it’s intended to make flow of production possible with minimal parties and decreasing stock levels to a minimum. Yet, production and productivity measures of traditional understanding have reported that the productivity is low when small-lot production is made (Drury, 1990). For this reason, traditional accounting system suggests increasing batch capacity rather than decreasing lot size, which leads to raising stock levels, long supply process, increasing cost and declining customer satisfaction (Mcnair et al. 1990). As in standard costing, appropriate operational control of traditional accounting system cannot be carried out in today’s production environment (Allott, 2000; Cheatham and Cheatham: 1996; Ezzamel, 1992). Besides, due to the reliability and consistency of manufacturing processes in JIT environment, deviations do not exist or exist in quite low level and it also leads to less use of deviation analyses. JIT manufacturing system changes will bring about changes in information requirements (Upton, 1998).

As it is known, normally traditional performance, reporting is prepared monthly or weekly and cannot detect on time real reasons of processes that are not realized as expected. Yet, in JIT production system there is a possibility of short production cycle, so it requires information for the problems coming out in accordance with one-day or “real time” principal.

Ahmad et al. , (2004) presented potential benefits and performance improvements achieved through JIT implementation. The summary of main benefits of JIT is listed below:

  • Reduced process time, setup time and lead time; Reduced raw material, wip and finished goods inventory levels and lot size;
  • Improved machinery and reduced machine breakdowns and downtimes; Minimized space requirement;
  • Improved flow of products; Lowered production costs; Simplified production processes;
  • Improved quality;
  • Improved flexibility, multifunctional ability, motivation and problem solving capability of employees;
  • Increased productivity and performance;
  • Improved consistency of production scheduling;
  • Increased emphasis on supplier integration

Following are the main objectives of the study:

  • Identify barriers in the establishment of AISs in companies. Provide strategies for the establishment of the obstacles companies AIS in listed companies on TSE.
  • Theoretical issues and review of literature IT is a company’s key infrastructure that includes physical information technology infrastructures, information technology of human resources to get information (technical and managerial skills), and technology of irreplaceable resources (Bharadvj, 2000).

An important study problem in management accounting and concern about AIS decision-making with organization regarding the need for information is communication and control of accounting information system. Computer system is based on a process that supports financial data for decision-making tasks of managers within the frame of coordination and control of company’s activities that in the researches of different studied models, between accounting information system with technology organization, organization’s structure and organizational environment have been studied (Chen and Hall, 1994).

AIS is an important mechanism of an organization that is vital for effective management decision-making in controlling organization (Zymrmn, 1995). Generally, AIS is classified in two categories: a: effective decision-making for information that is largely for control of organization and b: to facilitate information that is mainly used for coordination of organization in decision-making are used (Kern, 1992). Effectiveness of AIS to increase system integration is to improve internal communications throughout the organization (Huber, 1990).

Top management team with various planning and management information system influences on strategic performance (Gil, 2009). Behavioral changes following Joint development show AIS support and participation of users that has been influencing on in accounting information system development and improved financial performance, which eventually lead to successful troubleshooting cost accounting system, are based activities (Alden burg et al. , 2009).

About the productivity of information technology within the information systems in public accounting is that a small number of respondents aware of the technology components were the major component of respondents information technology data, but not the information system Accounting and usefulness were aware of the development and effects in this study started the organization, human resources management and knowledge of technology and acceptance of data were evaluated (Madshary, 2008).

Comparative advantage as a model of efficiency value accounting information systems research for scholars is significantly effective and that represent the financial resources and human resources as the two basic pillars of research and development supplement industry regarding information systems that are accounting absolute superiority ensures business operations (Eles, et al. , 2008).

Management stress on critical factors in success to implement organizational resources planning systems suggests that the selecting appropriate time, completing the project by one management, training personnel, superiority of project results in comparison with other projects, use of consultants, management interaction with users, the use of project control committee, shows the difference between successful and unsuccessful projects (Bradley, 2008).

Test of textual factors and the impact of characteristics of technology on implementing auditing decisions is in such a way that the use of computer techniques by experienced auditors shows that companies which have experienced the ability of influencing on implementation of new technology using long-term budgets, have assed different courses through indirect control of the software (Curtis and Payne, 2008).

Intelligent business systems and measuring, its effects in connection with business processes and organizational performance when measuring performance is important as information technology systems through specialized texts and literature is outstanding (Bashir, et al. , 2008). Test of the influence of international investors on the quality of accounting information demonstrates that the choice right of investment and increasing work quality of international investors on the quality information has influenced on Russian accounting companies (Baguya, 2008).

Current economic and the traditional model of accounting reports: challenges and opportunities ahead of AIS researches prove that the economy in real condition can accelerate measurement and evaluation of business. Decision-making processes as a 78 new business model results in decrease of internal and hidden processes. Therefore, AISs together with research literature have been successful in development of new models to accelerate accounting processes (Vasarahly and Els, 2008).

Organizational determining factors acceptance and implementation of information technology in mean companies: private and public companies shows that limiting factors in the implementation and information technology overhaul, reform arranged, changes, lack of qualified personnel and Run the same technology and information systems quality are essential (Muyanu and Brook, 2007). Strategic Planning of information systems: case study in inancial services companies in Germany represents that lack of scientific literature in implementation of strategic information systems planning, data transfer isn’t mainly due to scientific literature, although scientific literature inspiring, in practice to run strategic planning, information system not included. Professional characters of management and different resources are of scientific characters. Thus the role of management in the information technology practice through the opinions of staff need more experience (Tabnar, 2007).

More regulatory practices on information technology function of information technology organizations and business sector common understanding with the goals are associated with information technology. For example, active participation in the committee information technology, trade balance, decisions regarding technology information and understanding of strategic policies and administrative information technology in successful exploitation of information technology projects (Buyan et al. , 2007).

Appropriate review between designing of AIS and performance of commercial units by analyzing strategies explains that high performance of commercial units depends on a wide range of accounting information systems (Boolean, 2007). Study of integrated information systems literatures of management accounting with consideration to the existing strengths within the framework of management accounting elements, new integrated information systems of accounting results in more development and understanding of theatrical frameworks in this regard.

It identifies research gaps and suggests using research opportunities with different patterns and different methods. Ranking of AISs on performance of medium companies in Malaysia after study of 310 companies through electronic questionnaire showed that, a significant and important part of medium companies in Malaysia placed in high rank, and only a limited number of medium companies because of low organizational performance were in low level of accounting information systems (Nur Azizi and Kynk, 2005).

Factors of users’ concentration, measurement, and report making, quality of provided management information, reviewing and checking group work of outcomes affect the quality of accounting information (Hong-Jiang, 2005). To develop and spread of AIS a special team should be organized for designing input and output concepts and processing stored information so that company’s decisions for main outputs and comparing of them with computer information to be possible and achievable (Romney and Stein, 2003).

Future development of AIS in investment shows that the successes in avoiding risking the capital of companies are of five categories as:

  • clear and bright offers.
  • Internal changes in institution investment.
  • The variety of variables and repeating information change
  • More use of information for supportive decisions support
  • world-wide impacts on investment.

These evidences are good reasons for the judge and further research in the future and development of AIS (Gavyn et al. , 1997). Mistry (2005) found that, though JIT has been widely implemented, interest in documenting its impact on financial performance and productivity was generated during last few decades. For example, Inman and Mehra (1993) established the link between JIT benefits and bottom line financial measures. Olsen (2004, cited in Swamidass, 2007) is stated that “lean/JIT firms tend to have better return on equity”, since lean/JIT is associated with low inventories. However, according to Fullerton and McWatters, (2002), the use of financial performance measures under the present competitive market conditions appears unsustainable due to various reasons.

Therefore, performance measurement system of a corporate using JIT production system should support basic variations such as increasing product or service quality, continuous development and reducing the losses (Hendricks, 1994).

Research methodology

The statistical society of the study includes the financial managers of the companies listed on Tehran Stock exchange (TSE). For this purpose, a number of 442 companies were selected from TSE website. From the entire number of the selected companies 36 companies were omitted from the list of listed companies of TSE following the session of Security Subscription Board on June 10, 2008. Eventually, the study was concentrated on 406 companies from 36 different industrial sectors. The statistical community in this research could be all of companies all over the country, but with different directions and limitations of the personal facilities and we limited statistical community and selected 100 companies listed on TSE.

Research data collection instrument is a questionnaire which has been standardized in the academic community and validity of it considering the opinions of specialized literatures and comments of expert managers in relevant areas were analyzed and its validity is acceptable. In order to determine the proper size of the specimen and calculate the Cronbach ? coefficient a pre-testing process was conducted. The methodology of the process was as follows: A number of 13 questionnaires of which narration style had been confirmed were distributed by the researcher among the financial managers of the admitted companies of TSE as an initial specimen.

The original data showed that, on average, the affectivity of financial expenses in order to establishing an internet financial reporting was rated at 13. 90 with the standard deviation of 4 within the range of 5-25. In the society average comparison test, with the constant number of 15 (the middle point of the above range), at least, a number of 86 persons at 5% error rate provided 80. 26 percent level of ability. In order to testing of hypotheses, T-Test was employed in the study which it fits to the testing of hypotheses.

Research hypotheses

  • H1: middle managers prevent the establishment of AIS in financial units.
  • H2: organizational structure prevents the establishment of AIS in the company’s financial units.
  • H3: organizational culture prevents the establishment of AIS in financial units.
  • H4: financial problems prevent the establishment of AIS in the company’s financial units.
  • H5: labor prevents the establishment of AIS in financial units.
  • H6: environmental factors influencing on AIS prevent the establishment of the company’s financial units.

Data analysis

In this section, demographic information of participants based on research experience and education level is presented in Table 1. 80. For the above hypothesis single-sample T-test using SPSS software with confidence level of 0. 095 used and the results are mentioned in Table (4) Table (4): the results of testing third hypothesis Test Value=12 The third hypothesis Organizational culture HO: M = 12) (H1: = M; 12 degree of freedom T Significant level 0. 001 Information contained in table (4) shows significant level of 0. 001, and since the significant level less than 0. 005 is, hypothesis H0 rejected, so H3 is approved. Therefore, organizational culture prevents the establishment of AIS in companies based in financial units of companies.

H4: financial problems prevented the establishment of accounting information system in the company’s financial units. Table (5): the results of fourth hypothesis Test Value=6 Fourth hypothesis Financial problems HO: M = 6) (H1: = M> 6 degree of freedom T Significant level 0. 001 Information contained in the table (5) show 0. 001 level of significant, and since the significance level less than0. 005, H0 rejected, therefore, financial problems prevent the establishment of AIS in companies listed on TSE. H5: Labors don’t prevent the establishment of AIS in financial units.

For the above hypothesis one- sample T-test, using SPSS software with confidence level of 0. 95 is used and the results are mentioned in Table (6). Table (6): the results of testing fifth hypothesis Test Value=17 fifth hypothesis Labors HO: M = 17) (H1: = M> 17 degree of freedom T Significant level 0. 001 Information contained in the table (6) shows 0. 001 level of significant, and since the significance level less than0. 005, H0 rejected, so H5 is approved. Hence we can say that issues related to human resources are of barriers in the establishment of accounting information system in companies located in stock exchange.

H6: environmental factors affecting accounting information system prevent the establishment of accounting information system in companies’ financial units. For the above hypothesis single- sample Ttest using SPSS software with confidence level of 0. 95 used and the results are mentioned in Table (7). 82 Table 7: Results of testing sixth hypothesis Test Value=12 sixth hypothesis Environmental factors HO: M = 12) (H1: = M; 12 degree of freedom T Significant level 0. 001 Information contained in the table (7) shows 0. 001 level of significant, and since the significance level less than 0. 05, is accepted, H0 rejected, so H6 is approved. Hence, we can say that environmental factors can also regard as barriers in establishment of accounting information system in companies located in stock exchange.

Conclusion and Discussion:

Middle managers prevent implementation of AIS in companies listed on TSE. Results of above hypothesis through single-sample T-test with confidence level of 0. 95 represent the acceptance of this hypothesis of the research. It means that middle managers are of affecting barriers in failure of implementation of accounting information system in companies located stock exchange .

There is a meaningful relation between middle managers and implementation of accounting information system. Further, environmental factors prevent the implementation of AIS listed companies on TSE. Results of the above hypothesis through single-sample T-test with confidence level of 0. 95 represent the acceptance of this hypothesis in the research. It means that organizational structure is one of affecting barriers in failure of implementing AIS in companies listed on TSE. There is a meaningful relation between and between organizational structure and implementation of AIS.

By the way the results reveal that organizational culture prevents the implementation of AIS listed companies on TSE. Results of the above hypothesis through single-sample T-test with confidence level of 0. 95 represent the acceptance of this hypothesis in the research. It means that organizational culture is one of the affecting barriers in failure of implementing accounting information system in companies located in stock exchange. It means that there is meaningful relation between organizational culture and implementation of accounting information.

The authors come to conclusion that several barriers lead to implementation AIS on listed companies on TSE. In such a condition it seems that without solving these problems the Iranian companies do not enjoy of advantages of AIS, so it cause very big problem in near future. In order to solving these problems all together from top managers to simple clerk should give hand in hand and at least reduce these problems in competition world.

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Accounting Information System 5

Table of contents

Abstract

This study seeks to examine the use of Accounting Information Systems (AIS) by ZBMS Sdn. Bhd. , and it’s contribution to the knowledge management and strategic role of the organisation. ZBMS is a company that registered in Kuala Lumpur and operate in construction industry.

The company used automated AIS known as ‘Contract Plus – Financial & Project Accounting’ package commercially developed by a private company (ZYXW). Wide variety of people that involve in the company’s operation within and outside the organisation uses accounting information generated by this system for decisionmaking. Based on input provided by operational level managers, the Contract Plus software produces monthly projects’ income statements, balance sheets and statement of changes in financial position for the strategic and tactical managers to plan, control and make decision on the resources allocation.

The role-played by AIS enhanced the organisations’ accounting functions, and add information value. The automated AIS speed up the process to generate financial statements and overcome human weaknesses in data processing. The system enhances management of resources and the process of monitoring, control and prediction of ZBMS business for better future. With the advent of AIS, the growth of tacit and explicit knowledge could be seen from the intensive training of personnel at the early stage of system implementation to the development and use of company’s own manual in training of new staff and assisting the job of existing staff.

Given the benefit of AIS to ZBMS, this paper recommended that the source of data should be fully automated, and the existing system should be upgraded through computerise the pre-tendering and post-tendering of projects to enable AIS integration. Keywords: Accounting Information Systems, Knowledge Management, Accounting Functions, Information Value, Financial Statements

Introduction

Accounting Information System (AIS) is vital to all organisations (Borthick and Clark, 1990; Curtis, 1995; Rahman et al., 1988; Wilkinson, 1993; Wilkinson et al. 2000) and perhaps, every organisations either profit or non profit-oriented need to maintain the AISs (Wilkinson, 2000: 3-4). To better understand the term ‘Accounting Information System’, the three words constitute AIS would be elaborate separately. Firstly, literature documented that accounting could be identified into three components, namely information system, “language of business” and source of financial information (Wilkinson, 1993: 6-7). Secondly, information is a valuable data processing that provides a basis for making decisions, taking action and fulfilling legal obligation.

Finally, system is an integrated entity, Accounting Information Systems (AIS) and Knowledge Management: A Case Study 37 where the framework is focused on a set of objectives. The combination of the three words Accounting Information System indicate an integrated framework within an entity (such as a business firm) that employs physical resources (i. e., materials, supplies, personnel, equipment, funds) to transform economic data into financial information for:

  • conducting the firm’s operations and activities,
  • providing information concerning the entity to a variety of interested users.

Indeed, the combination or interaction between human, technology and techniques would permit an organisation to administer its knowledge effectively (Bhatt, 2001; Thomas and Kleiner, 1995). Currently, the world and human life has been transformed from information age to a knowledge age (Syed-Ikhsan and Rowland, 2004: 238; Thomas and Kleiner, 1995: 22), and knowledge has been recognised as the most valuable asset. In fact, knowledge is not impersonal like money and does not reside in a book, a data bank or a software program (Drucker, 1993).

Drucker believed that knowledge is always embodied in a person, taught and learned by a person, used or misused by a person. As the world moving into knowledge era, this paper will examine how ZBMS Sdn. Bhd. manages its knowledge in order to remain competitive amongst the construction industry. Probst, Raub & Romhardt (1999, p. 1) stressed that companies must learn to manage their intellectual assets (i. e. knowledge) in order to survive and compete in the ‘knowledge society. Indeed, knowledge management is concerned with the exploitation and development of the knowledge assets (Davenport et al., 1998).

This paper seeks to examine the Accounting Information Systems (AIS) used by a Malaysian company named ZBMS Sdn. Bhd. The paper will highlight the users of the system and the way information adds value to the organisation. Also, the paper will investigate the way knowledge is managed through the process of creating, storing, disseminating and applying and how information system plays an important role throughout the process and the AIS contribution in the organisation’s strategic role. The remainder of the paper is organised as follows. The following section describes the background of ZBMS and the use of accounting information systems.

The third section provides research findings on accounting information systems employed by ZBMS. The fourth section offer suggestions for future research. The final section concludes the paper and outlines the limitations of the study.

The Use of Accounting Information Systems in ZBMS

ZBMS is a private limited company registered in Kuala Lumpur, Malaysia that operate in construction industry, where the main activities ranging from construction of infrastructure, building, power, waste water to property development as well as engineering, procurement, construction and commissioning (EPCC) in the oil & gas sector.

The company used automated AIS known as ‘Contract Plus – Financial & Project Accounting’ package in their Finance Department, which was commercially developed by a private company (ZYXW). Contract Plus is a fully integrated business solution designed specifically for companies in the engineering and construction industry. The software will generate financial data to be analysed by the accountants and subsequently used by top level of management for strategic decision making, thus, these managers could identify future opportunities and limitations face by the company and industry (McCarthy, Minichiello and Curran, 1987: 243-244). Findings As mentioned earlier in section 2, ZBMS is a company that operate in construction industry. The industry was identified as one of the most difficult to understand due to its complexity mixture of people, plant, materials, locations, technology, knowledge of the law as well as the design and valuation of work done, which are much subjectivity (Capon, 1990: 1). However, these challenges are under control with the advent of technology such as software development that allows systematic data 38 Zulkarnain Muhamad Sori processing.

Users of AIS

The finance personnel that reside at site project office (or called Project Accountants) and head office such as the Financial Accountants, Management Accountants and Finance Manager are the internal users of the system. Also, the management team that consists of Finance General Manager, Chief Operating Officer, Managing Director and Board of Directors are among the internal users of the system.

On the other hand, the external users consist of government agency (i. e. Inland Revenue), external auditors and creditors. Indeed, wide variety of people within and outside the organisation uses accounting information for decision-making (Rahman and Halladay, 1988, Renau and Grabski, 1987).

Function of AIS The main function of AIS is to assign quantitative value of the past, present and future economics events. At ZBMS, AIS through its computerised accounting system (i.e. ZYXW-Contract Plus) produces the financial statements namely income statements, balance sheets and cash flow statement. The system will process the data and transform them into accounting information during input, processing and output stages that will be used by a wide variety of users such as internal and external users (see for example Wilkinson, 2000: 10-11).

Wilkinson noted that an effective AIS performs several key functions throughout these three stages such as data collection, data maintenance, data Accounting Information Systems (AIS) and Knowledge Management: A Case Study 39 management; data control (including security) and information generation.

Usage of Information Within AIS

The construction projects undertaken by the company are divided according to the type of construction activities that comprised of five divisions, namely infrastructure, building, power, wastewater and oil and gas, where each project is treated as a separate company. The number of projects undertaken by each division depends on the contracts being awarded to the company.

The Project Accountants will work closely with the Quantity Surveyors to come out with the appropriate information as illustrated below:

  • Client – The client’s Quantity Surveyors (QSs) will evaluate work in progress (WIP) and come out with percentage of WIP to be agreed by both parties. Once agreed, Progress Billing Certificates (PBC) will be issued by Client’s QSs, which a copy of it will be sent to head office for data processing.
  • Subcontractors – The ZBMS’s QSs will evaluate subcontractor’s WIP at site and come out with percentage of WIP to be agreed by both parties. Once agreed, Subcontractor Progress Certificate (SPC) will be issued by ZBMS’s QSs and verified by ZBMS’s Project Manager, which a copy of it will be sent to head office for data processing.
  • Suppliers – QSs and Project Accountants will ensure that the materials and machineries are delivered in good condition at construction site before delivery orders are accepted. The delivery orders will be attached to supplier’s invoice and sent to Head Office for processing.

The projects’ data will be stored at Projects’ Account Receivables, Account Payables, Fixed Assets accordingly. Projects’ cashbook will be updated automatically after the data being entered to the projects’ Account Receivables and Account Payables. Any expenses incurred at head office will be stored at HQ Maintenance master file by Financial Accountant. The Contract Plus Accounting System software will process the data and produce financial statements of individual company’s projects on

Accounting Information Systems (AIS) and Knowledge Management: A Case Study 41 monthly basis, which subsequently consolidated at group level. The automated AIS play an important role in the ZBMS’s operational level. As indicated by Rahman and Halladay (1988: 20), most modern organisation’s operational control of financial resources depends largely on automated support. This is due to the financial statements are generated by the Contract Plus.

Projects financial statements are generated by the Project Accountants, while the Financial Accountant generates the consolidated financial statements. The Management Accountant uses the consolidated financial statements to prepare company’s Performance Report such as cash-flow forecasts and ratio analysis. Once the Finance Manager (operational level) approve the report, it will then be submitted to the Finance General Manager and Chief Operating Officer (tactical level) to assist them for planning, control and decision making.

The Performance Report will provide the information regarding work in progress relevant information. Therefore, AIS plays very important role at operational and tactical level as the activities at these level depend heavily on the information generated by the AIS.

Value Added of AIS

The role played by accounting functions has been enhanced with the development of AIS, which in turn contribute to the profession’s value added to organisation. In fact automated AIS employed by ZBMS expedite the process to generate financial statement and reduce the human errors compared to non-automated AIS, which add the existing value of accountants. AIS also provide information on both actual and budget data of the organisation that helps company’s management to plan and control business operation.

Good management of resources and better control of cost, budgeting and forecasting enhance the well being of ZBMS to continually generated profits. The AIS also played a crucial role that contributes to ZBMS’s value added by providing internally generated inputs from financial statements. Rahman and Halladay (1988: 19) believed that viable strategic plan must have inputs based on history of organisation, the current assets and capabilities of the organisation, and the trends in operations of the organisation.

Role of Knowledge

At ZBMS, both tacit and explicit knowledge are used as shown by the extensive used of accounting information system to assist business decision-making. The ZBMS begins its computerised accounting system in 1997. During the transformation process from manual to computerised accounting system, all finance personnel were sent for comprehensive computer training.

Development of Automated AIS Training by hands-on experience ZYXW implemented, staffs learned from vendor’s manual Staffs gaining experience; Problems and solution being recorded on paper Improvement on system; Internal manual that suits the ZBMS needs being produced; Widely used in the department; Assists learning process of new staffs Explicit to Tacit System constantly use in Finance Department to generate monthly financial statements Applying of Knowledge Explicit to Explicit As shown in Table 1, the staffs were given hands on experience on the ZYXW System.

During the early stage of system implementation, finance personnel were given flexibility to explore the system due to limited experience on the software at that time, and most of the staffs depend largely on the manual provided by the vendor for trouble-shooting. At initial stage, two-way communications with the vendor were developed to solve problems arised. As the time going on, the personnel were encouraged to record the problems aroused. Problems that have been solved were recorded for future reference.

Currently, the ZBMS Finance Department has its own ZYXW manual that suits with the department needs. The manual provides valuable information to new employees as well as to the existing personnel at Finance Department. Indeed, AIS provide the systematic recording, processing and generating of accounting information, and in the absence of AIS, information would be scattered, random and hard to access, which would become a barrier to the growth of knowledge.

Strategic Role and AIS

To analyse the AIS strategy in ZBMS, McFarlan Strategic Grid will be utilised. The McFarlan’s strategic grid would locate ZBMS to the appropriate category with respect to its information system strategy (Curtis, 1995: 61). Automated AIS is fundamental part of the strategic plan of ZBMS in 1997. It has been improved over the years of implementation and generates accurate and timely accounting information that contributes to a good decision-making. Realising the benefit brought by the AIS, the source of data must be fully automated. The existing system should be upgraded through computerise the pre-tendering and post-tendering of projects in the primary stages of the construction activities.

When the system is upgraded, the ZYXW Contract Plus will integrate the two modules of pre- and post-tendering with the currently automated Financial and Project Accounting. Therefore, the most suitable position to locate AIS at ZBMS on the McFarlan Grid is on Factory Grid as shown in Figure 1-5 below. Accounting Information Systems (AIS) and Knowledge Management: A Case Study

Direction for Future Research

Having mentioned the above opportunities and challenges to the AIS, future research should investigate the AIS contribution on the organisation’s growth of knowledge. Though AIS would organise and structure the data input and knowledge, lack of understanding on the potential effect of human behaviour on the system such as human error, manipulation and work-style. In fact, Ponemon and Nagoda (1990) noted, “the most difficult problems often are caused, or are exacerbated, by those individuals who have erroneous expectations of the new system being implemented” (p. 1).

The study would be fruitful with the use of questionnaire and interview survey. Perhaps, the survey should concentrate on a sample of senior managers of the top hundred companies listed on the Bursa Malaysia (Malaysian Stock Exchange), banks and regulatory bodies. These groups could contribute significantly due to their role as a decision maker in their respective organisations. Secondly, future research should also investigate the possibility to expand the use of AIS to the other areas that still did not use the system such as non-profit organisation and society.

Indeed, the current level of usage shows that the benefit outweighs the investment cost. The successful implementation of AIS could save shareholder’s money and time. Finally, future research should explore issues on the information value generated by AIS to shareholders and stakeholders in making investment decisions. Case study approach on top companies would be appropriate methodology because the understanding on specific AIS model would be more valuable rather than using questionnaire and interview approach that assumes AIS across sampled organisation is identical.

Conclusion

This paper examines the use of Accounting Information Systems (AIS) by ZBMS Sdn. Bhd. The wide varieties of people that involve in the company’s operation get the benefits from the implementation of AIS and the use of Contract Plus software developed by ZYXW. The system assists the operational managers to come out with monthly reports for the top managerial level (i. e. tactical and strategic) plan, control and decide resources allocation. In addition, the paper showed that the AIS add value to information processed within the company. The automated AIS could speed up information process and overcome traditional human weaknesses.

As a result, the system supports the resource management and help ZBMS pursue its projection of continuing business profit. The use of AIS indicate the growth of tacit and explicit knowledge, where personnel were trained intensively and experience and trouble shooting were 44 Zulkarnain Muhamad Sori recorded for future reference and training. Indeed, the successful implementation of an accounting information system can be described as a series of complex, interconnected activities necessitating participants to have technical and managerial skills to sort out prospective problems (Ponemon and Nagoda, 1990: 1).

References

  1. Bhatt, G. D. (2001). Knowledge management in organisations: examining the interaction between technologies, techniques, and people. Journal of Knowledge Management, 5(1): 68-75.
  2. Borthick, A. F. ; Clark, R. L. (1990). Making accounting information systems work: An empirical investigation of the creative thinking paradigm. Journal of Information Systems, 4(3): 48-62.
  3. Capon, G. C. C. (1990). Construction Industry. London: The Institute of Chartered Accountants in England and Wales.
  4. Curtis, G. (1995). Business Information Systems: Analysis, Design and Practice. Wokingham: Addison-Wesley Publishing Company.
  5. Drucker McCarthy, D. J. , Minichiello, R. J. and Curran, J. R. (1987). Business Policy and Strategy: Concepts and Readings. Illinois: Irwin.
  6. Ponemon, L. A. and Nagoda, R. J. (1990). Perceptual Variation and the Implementation of Accounting Information Systems: An Empirical Investigation. Journal of Information System, 4(2): 1-14.
  7. Probst, Raub & Romhardt (1999) Rahman, M. and Halladay, M. (1988). Accounting Information Systems: Principles, Applications and Future Directions. New Jersey: Prentice Hall.
  8. Reneau, J. H. and Grabski, S. V. (1987). A Review of Research in Computer-Human Interaction and Individual Differences Within a Model for Research in Accounting Information Systems. Journal of Information Systems, 2(1): 33-53.
  9. Rowley, J. (1999). “What is knowledge management”. Library Management, 20 (8): 416-420.
  10. Syed-Ikhsan, S. O. S. (2004). “Benchmarking Knowledge Management in a Public Organisation in Malaysia. Benchmarking: An International Journal, 11 (3): 238-266.
  11. Thomas, V. and Kleiner, B. H. (1995). New developments in computer software. Industrial Management & Data Systems, 95(6): 22-26.
  12. Wilkinson, J. W. (1993). Accounting Information Systems: Essential Concepts and Applications. Second Edition. New York: John Wiley & Sons Inc.
  13. Wilkinson, J. W. , Cerullo, M. J. , Raval, V. and Wong-On-Wing, B. (2000). Accounting Information Systems: Essential Concepts and Applications. New York: John Wiley and Sons.

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Current Trends in Accounting Information Systems

  1. Introduction

Cost and margin measurements may seem “not that important” at first glance when one is looking at a financial report or statement. What appears more important at first glance is itself the cost or the margin but not the procedures in obtaining them. It is however not true. When we measure something, we use numbers and operations; the numbers are variables while the operations can be constant but the important thing is also to consider the source or sources of these numbers and the appropriateness of the operations used.

Are we certain that we are using the correct figures? Are these numbers really the exact amount or at least the closest estimate of what they are supposed to represent? No matter which profession we are in if we have wrong inputs, the outputs are sure to be wrong as well: “garbage in garbage out” (Ramamoorti & Curtis, 2003).

In making sure that our outputs are correct, we have to start from the very basic: making sure that out inputs are correct. In accounting context, this is making sure that correct revenue is reported, correct costs are used and therefore, we can arrive at correct margins.

While life is getting modern, accounting practices should also pace up, thus, the evolution of accounting information systems (AIS).  AIS is responsible for providing timely and accurate financial and statistical reports for internal management decision making, and for external parties such as creditors, investors, and regulatory and taxation authorities. (Business Dictionary, 2010) And why is that? It is because not only a single entity trusts this evolving system but the number is growing because these AIS users expect the accounting information system to “produce comparative reports for planning and control purposes.” (Daniels & Beeler, 2001)

Better planning and control results to more accurate or closest estimates of figures that will soon be used in arriving at some important numbers expressing a certain situation within an organization and thereby helping decision makers to act advantageously and to do something for the benefit of the firm. But what is AIS and how does it make costing better and margin determination more accurate?

This paper presents integrated information based on at least ten scholarly, peer-reviewed articles, mostly from business/ finance/ accounting-related journals that generally or specifically discuss about current trends in Accounting Information Systems (AIS), the relevance of costing systems to it, especially the activity-based costing (ABC) and the effects to an organization’s operational margin.

  1. What is Accounting Information System?

Before going through the details of how can AIS make the cost and margin determination better, it is important to understand AIS first. AIS is a  subsystem of a Management Information System (MIS) that, firstly, processes financial transactions to provide internal reporting to managers for use in planning and controlling current and future operations and for nonroutine decision making and secondly, external reporting to outside parties such as to stockholders, creditors, and government agencies. (Business Glossary, 2010)

These days, accounting information is in fact not only systems but expanded to networks, the so called accounting information network (AIN) which, according to Bhimani (2003) are multilevel information systems that aim at organizing, processing and sharing accounting information in order to: (1) Check the state of the relationships among the organizational units of mixed mode organizational structures (by verifying that the actions of the other party are in accordance with expectations.); (2) Master events by that relationship as an entity in itself (through planning a collaborative future by setting down what each party wishes to achieve from the collaboration, how feasible the goals and relative roles are and what actions need to be taken); (3) Support layered decision making processes.

Thinking about AIS, most have the notion that it is something modern and only existed recently. AIS is oftentimes associated to something highly technological, super modern and the likes. This notion is however wrong. You may not believe it but “relatively sophisticated accounting information systems were present as early as the 16th century”. (Daniels & Beeler, 2001) Thus, AIS’ existence dated back as far as five centuries back.

What is important with AIS is not how it was sophisticated before, or yesterday or even today but how it adapts to the level of modernity of the business practices and to the modernity of the world and life in general. AIS has its ups and downs as well as its trends. It is the dynamic trend of AIS that make it survive for five centuries and remain to be still being used. So what’s the current trend in AIS these days? When we ask that question, we are asking: what is hot in the business world; what is more useful; what is fast-paced; what is more practical and convenient to install; what is more end-user friendly; what is hype yet affordable; and so on.

III. Current AIS Trends

So what is the trend or what are the trends these days? These trends may be fresh or may be long-lasting.  According to Axia (2010), an independent consultancy providing impartial time-saving tools and advice to help enterprises specify, select and implement new Accounting, CRM, HR and Payroll software, following are the latest trend when it comes to accounting-related information system:

  1. Web and intranet / internet applications
  1. Web based Accounting, CRM (Customer Relationship Management), Payroll and HR

All the benefits mentioned above, if it is certain that those benefits be acquired by the organization, they would without a doubt lead to lesser operational costs to finance, payroll and human resource functions. Indeed, “the computerization of accounting has done more than streamline the work of CPAs by eliminating post binders, columnar sheets and those quaint posting machines.” (Courtney & Flippen, 1995)

  1. ABC and AIS

The present-day popular activity-centric performance measures rooted itself from activity-based costing (ABC). A fundamental principle of ABC is that products and/ or services are made to conditions identified to add value for the customer. Consequently, according to Meyer, (2002) activities, and hence costs that are unnecessary should be removed without compromising these value-added specifications. Given this approach, should an organization adapt ABC?

Choosing a costing system for an organization is not a piece of cake. There are a lot of factors to be considered before management decides which costing method is best for its operation and best for the business in general. The same rule applies for activity-based costing. Deciding whether ABC is best for an organization is reliant upon a lot of factors. “Although it can offer numerous benefits over a traditional costing system, effective implementation of an ABC system is not an easy task.” (Searcy & Roberts, 2007)

While the model present in ABC is rather uncomplicated and clear-cut, the implementation of such system that, according to Searcy & Roberts, “actually works and delivers on the expected benefits” is not as simple as it appears. Prior to decision of using ABC or not, the organization must examine itself first, putting into consideration its experiences and the lessons learned in the past years of existence and operation.

While ABC is not a magic potion, organizations can obtain noteworthy payback from it if they appropriately approach and apply the system. In the following paragraph, Searchy & Roberts lays out how ABC is best use as AIS and at the same time used outside the accounting context offering the best results to the user organization. No wonder user organizations tend to prefer ABC over other costing systems with their AIS.

Based on the above text, it is no contest that ABC and AIS go along with each other positively. ABC is not only useful as a costing tool per se but also a valuable tool in determining which products are good for the organization’s operational and financial health and which products are not. “As one might expect, the ABC information system often revealed that some products or services were unprofitable” (Baxendale, Raju & Gupta, 2006)

  1. Better Costing and Margin-Determination Achieved

As mentioned, the use of AIS coupled with ABC demonstrates a positive effect. This means that with ABC and AIS current trends put together lesser errors can be committed in determining the real cost of a product and/or a service.

Integrated supply chain management utilizing information systems and a shared supply chain database can enable the company to identify optimal inventory levels, reduce warehouse space, and increase inventory turnover. The new integrated supply chain management systems, if utilized properly, can lead to higher quality products, enhanced productivity, efficient machine utilization, reduced space, and ultimately increase logistics efficiency and flexibility (Narasimhan & Kim, 2001)

Not only that correct margins can be determined through AIS and ABC utilization but as well as greater margin is achievable.

  1. Conclusion

Laying out this paper from introduction up to here, in the conclusion, it was a swift journey analyzing how one thing is related to the other. It is such a tedious process tying or linking one point accounting stand point to another but at the end, it is a great feeling to establish those solid relationships. Taking one step at a time, from one scholarly article to another, counter checking the issues presented at hand and their relevance, this paper can finally conclude AIS is a wonderful tool. Usually, when AIS is mentioned, everyone seems to think limitedly of accounting and technology. However, this reaction has been proved by this paper. AIS does NOT solely refer to accounting but to a lot of other aspects of an organization: human resources, operations, supply chain, customer aspects and many other aspects.

Considering that AIS is not a limited tool, another important point has yet been pointed out: the existence of AIN. Accounting information system interlinked with other systems of an organization, from other aspects of its existence is simply a powerful tool that can create a lot of efficiency.

Finally, what are these systems there for? They are available to help determine the real cost, as accurate as possible, and try to reduce these costs. This was made possible through application of ABC. This procedure of determining the costs correctly or as accurately as possible leads to better and more correct determination of product/service margins while the efforts done to reduce costs naturally causes greater margins. A greater margin is what 100% of financial organizations aim!

References

Baxendale, S. J., Raju, P. S., & Gupta, M. (2006). The Selection of Actionable Cost Objects for an Activity-based Costing System. Management Accounting Quarterly, 7(3), 9+. Retrieved July 16, 2010, from Questia database: http://www.questia.com/PM.qst?a=o&d=5034942548

Bhimani, A. (Ed.). (2003). Management Accounting in the Digital Economy. Oxford: Oxford University Press. Retrieved July 16, 2010, from Questia database: http://www.questia.com/PM.qst?a=o&d=109910610

Brazel, J. F. (2008, November). How Do Financial Statement Auditors and It Auditors Work Together?. The CPA Journal, 78, 38+. Retrieved July 16, 2010, from Questia database: http://www.questia.com/PM.qst?a=o&d=5035412721

Business Glossary. (2010). All Business, a D&B Company. Retrieved 15 July 2010 from http://www.allbusiness.com/glossaries/accounting-information-system-ais/4942866-1.html

Clark, R. L. (2006, October). Revenue-recognition Decisions: a Slippery Slope?. The CPA Journal, 76, 6+. Retrieved July 16, 2010, from Questia database: http://www.questia.com/PM.qst?a=o&d=5035257857

Courtney, H. M., & Flippen, C. L. (1995). A Shopper’s Guide to Accounting Software: Fifteen Leading High-End Packages for PCs Are Examined. Journal of Accountancy, 179(2), 37+. Retrieved July 16, 2010, from Questia database: http://www.questia.com/PM.qst?a=o;d=5000265648

Daniels, R. B., ; Beeler, J. (2001). An Archival Investigation of a Late 19th Century Accounting Information System: the Use of Decision Aids in the American Printing Industry. The Accounting Historians Journal, 28(1), 3+. Retrieved July 16, 2010, from Questia database: http://www.questia.com/PM.qst?a=o;d=5037748866

Definition, Accounting Information System. (2010). Business Dictionary. Retrieved July 16, 2010, from http://www.businessdictionary.com/definition/accounting-information-system-AIS.html

Meyer, M. W. (2002). 4 Finding Performance: the New Discipline in Management. In Business Performance Measurement: Theory and Practice, Neely, A. (Ed.) (pp. 51-61). Cambridge, England: Cambridge University Press. Retrieved July 16, 2010, from Questia database: http://www.questia.com/PM.qst?a=o;d=105052970

Narasimhan, R., ; Kim, S. W. (2001). Information System Utilization Strategy for Supply Chain Integration. Journal of Business Logistics, 22(2), 51+. Retrieved July 16, 2010, from Questia database: http://www.questia.com/PM.qst?a=o;d=5035539516

Ramamoorti, S., ; Curtis, S. (2003). Procurement Fraud ; Data Analytics. The Journal of Government Financial Management, 52(4), 16+. Retrieved July 16, 2010, from Questia database: http://www.questia.com/PM.qst?a=o;d=5037713050

Searcy, D. L., ; Roberts, D. (2007). Will Your ABC System Have What It Takes?. Management Accounting Quarterly, 8(3), 23+. Retrieved July 16, 2010, from Questia database: http://www.questia.com/PM.qst?a=o;d=5035123440

System Trends. (2010). Axia Consulting Limited.   Retrieved 15 July 2010, from http://www.axia-consulting.co.uk/html/trends.html

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Accounting Information System Essay

Accounting Information System (AIS An accounting information system (AIS) is a system of collection, storage and processing of financial and accounting  data that is used by decision makers. accounting information system (AIS) consists of: – People – Procedures – Data – Software – Information technology infrastructure What important functions does the AIS perform in an organization? 1. It collects and stores data about activities and transactions. 2. It processes data into information that is useful for making decisions. 3.

It provides adequate controls to safe-guard the organization’s assets. Uses of (AIS) * Producing External Reports * Supporting Routine Activities * Decision Support * Planning and Control * Implementing Internal Control Producing Businesses use (AIS) to produce special reports that follow a required structure established by organizations such as (FASB). These reports include financial statements, tax returns, etc Supporting Routine Activities Managers need an (AIS) for handling routine operating activities during the firm’s operating cycle.

Computer systems excel at handling repetitive transaction by many accounting software support these routine functions. Decision Support Information is needed for nonroutine decision support at all levels of an organization. Some information are critical for planning, deciding, marketing functions. Planning and Control An information system is required for planning and control activities as well. Historical data can be extracted from the database and used to forecast growth and cash flows. Planners can use data mining to reveal long-term trends and relationships.

Implementing Internal Control Internal control includes the policies, procedures, and information system used to protect a company’s assets from loss and to maintain accurate financial data. It is possible to build controls into a computerized accounting information system to help reach these goals. Benefits AIS * Speed The main benefit of information systems in accounting is the speed of processing tasks. Data is entered once and can then be used and reused in compiling reports by literally pressing a button.

If a transaction needs correction, it is easily done, with reports generated afterward at speeds never possible with manual accounting systems. * Classification When data is entered in an accounting system, manual or computerized, an accountant needs to classify it in a detailed fashion. For example, a transaction could be a sales revenue or an interest revenue. Using information systems, this classification process is easily accomplished with a drop-down menu from which you choose the proper category.

You can also quickly generate reports involving classifications. With a manual system, this process takes much more time. * Safety Once data is entered into a computer, it is safe. The chances of losing data are remote, especially when you perform regular system backups. In manual systems, paper pads can be lost or damaged more easily. You can save data on the Internet, where it will not only be accessible anytime you need it but will also still be secure even if your computer is lost or damaged. One disadvantage of Accounting Information System

One disadvantage of Accounting Information System is that this system cannot identify any future loss or wrong transaction entry. As we know that computer is a machine, and it cannot do any activity itself. Therefore, computer cannot give any advice or warning. However, accountants in business are capable to estimate any future loss on the basis of their knowledge and experience. Due to this disadvantage it is important and wise for small and mid-size businesses to have some accountants in their business on permanent basis to avoid future losses.

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Users of Accounting Information

 Briefly State the Users of Accounting Information Accounting Information provides quantitative and qualitative information about the various transactions and events of an accounting entity. The Accounting Information system of the accounting entity captures quantitative data and processes the pecuniary transactions related to the functioning of the same. Contemporary systems like ERP also encompasses in its […]

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Accounting Information System: Overview

Here is a proposal for implementation of the plan for school payment to keep the student in school. The students shall be compensated on a monthly basis. They shall be paid 20% every month on successful attendance to the classes and a fine of 5% for failure to attend classes for any given day (Unless authorized by the school principal, for whom it shall not be for indiscipline case(s)).

The next 40% of the money shall be paid at the end of every academic year. This is to facilitate the students’ upkeep while out of school as they go on with their research work during the summer holidays.

The remaining amount shall be cumulatively paid upon successful completion of the course during the graduation ceremony. This will be a big boost to the students as the total amount will give the student a better start to either start their own jobs or use it to look for employment.

The payment shall be authorized by the principal upon confirmation from the class teacher of the attendance of the students. This is better done in public so that all those who do not attend school be ashamed of their acts. The payment shall however be effected by the school Bursar. The monthly payments shall be done by cash while the annual and terminal payments shall be effected by check only.

Q3.)

I strongly disagree. The cost of employee hiring and training can never be equated to the expected term of service. This is because, the training that the employee undergoes will later be subtracted from the salary and hence there is no sense in it being that it has to be amortized.

Some companies use that line of though to harass their employees and to silence them anytime they bring their grievances. Training is good both for the individual as well as the organization but amortization is going way overboard (Romney & Steinbart, 2008).

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Accounting Information Sytems

Wikipedia: An accounting information system (AIS) is a system of collection, storage and processing of financial and accounting data that is used by decision makers. An accounting information system is generally a computer-based method for tracking accounting activity in conjunction with information technology resources. The resulting statistical reports can be used internally by management or externally by other interested parties including investors, creditors and tax authorities. The actual physical devices and systems that allows the AIS to operate and perform its functions 1. Internal controls and security measures: what is implemented to safeguard the data

2. Model Base Management

The collection, storage and processing of financial and accounting data that is used by decision makers. An accounting information system is generally a computer-based method for tracking accounting activity in conjunction with information technology resources. The resulting statistical reports can be used internally by management or externally by other interested parties including investors, creditors and tax authorities. An accounting information systems that combines traditional accounting practices such as the Generally Accepted Accounting Principles (GAAP) with modern information technology resources. Six elements compose the typical accounting information system: People – the system users.

Procedure and Instructions – methods for retrieving and processing data. Data – information pertinent to the organization’s business practices. Software – computer programs used to process data.

Information Technology Infrastructure – hardware used to operate the system. Internal Controls – security measures to protect sensitive data.

MANAGEMENT ACCOUNTING

Management accounting or managerial accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control functions.

In contrast to financial accountancy information, management accounting information is: primarily forward-looking, instead of historically model based with a degree of abstraction to support decision making generically, instead of case based; designed and intended for use by managers within the organization, instead of being intended for use by shareholders, creditors, and public regulators; usually confidential and used by management, instead of publicly reported; computed by reference to the needs of managers, often using management information systems, instead of by reference to general.

The process of preparing management reports andaccounts that provide accurate and timely financial and statistical information required by managers to make day-to-day and short-term decisions. Unlike financial accounting, which produces annual reports mainly for external stakeholders, management accounting generates monthly or weekly reports for an organization’s internal audiences such as department managers and the chief executive officer. These reports typically show the amount of available cash, sales revenue generated, amount of orders in hand, state of accounts payable and accounts receivable, outstanding debts, raw material and inventory, and may also include trend charts, variance analysis, and other statistics. Also called managerial accounting.

BUSINESS POLICY

This course examines the components and processes of the strategic management model, using examples from Canada and the United States. Students learn to do case analysis throughout the course. Topics covered include strategic management, social responsibility, environmental and internal analysis and diagnosis, strategy selection, and implementation and evaluation After completing this course, students should be able to:

Perform a rigorous analysis of a company’s strategic direction. Identify and explain a company’s mission and vision statement and relate and critique these statements to the company’s strategic direction. Prepare a SWOT (strengths, weakness, opportunities, and threats) analysis and explain and evaluate the relationship between the SWOT and a company’s strategic direction. Identify and explain all micro and macro forces that shape a company’s strategic plan and determine performance. Analyze and evaluate all the steps for the proper alignment of financial and non-financial resources within a company’s strategic plan.

Analyze a company’s strategic plan in the context of the industry life cycle and environment in which it operates. Analyze, evaluate, and draw conclusions on the effectiveness and performance of control and integration mechanisms. Establish metrics to assess and measure strategic performance. Analyze and evaluate the company’s communication and feedback loop relative to company strategy and performance.

Analyze, evaluate, and draw conclusions on the financial performance relative to the company’s strategic plan. Analyze, evaluate, and identify risks and risk mitigation strategies appropriate to the company’s strategic direction. Analyze, evaluate, and develop strategies for a single or multi-business organization. Assess, analyze, and recommend changes to company strategy based on a full analysis of a company’s strategic plan. Develop and prepare a strategic review document presented in a consistent form and properly documented.

PRODUCTION AND OPERATIONS MANAGEMENT

Production and Operations Management (“POM”) is about the transformation of production and operational inputs into “outputs” that, when distributed, meet the needs of customers.The process in the above diagram is often referred to as the “Conversion Process”. There are several different methods of handling the conversion or production process – Job, Batch, Flow and Group. POM incorporates many tasks that are interdependent, but which can be grouped under five main headings:

PRODUCT

Marketers in a business must ensure that a business sells products that meet customer needs and wants. The role of Production and Operations is to ensure that the business actually makes the required products in accordance with the plan. The role of PRODUCT in POM therefore concerns areas such as:

– Performance
– Aesthetics
– Quality
– Reliability
– Quantity
– Production costs
– Delivery dates

PLANT

To make PRODUCT, PLANT of some kind is needed. This will comprise the bulk of the fixed assets of the business. In determining which PLANT to use, management must consider areas such as: – Future demand (volume, timing)

– Design and layout of factory, equipment, offices
– Productivity and reliability of equipment
– Need for (and costs of) maintenance
– Heath and safety (particularly the operation of equipment) – Environmental issues (e.g. creation of waste products)

PROCESSES

There are many different ways of producing a product. Management must choose the best process, or series of processes.

They will consider: – Available capacity
– Available skills
– Type of production
– Layout of plant and equipment
– Safety
– Production costs
– Maintenance requirements

PROGRAMMES

The production PROGRAMME concerns the dates and times of the products that are to be produced and supplied to customers. The decisions made about programme will be influenced by factors such as: – Purchasing patterns (e.g. lead time)

– Cash flow
– Need for / availability of storage
– Transportation

PEOPLE

Production depends on PEOPLE, whose skills, experience and motivation vary. Key people-related decisions will consider the following areas: – Wages and salaries
– Safety and training
– Work conditions
– Leadership and motivation
– Unionisation
– Communication

GOOD GOVERNANCE

Good governance is about the processes for making and implementing decisions. It’s not about making ‘correct’ decisions, but about the best possible process for making those decisions.Good decision-making processes, and therefore good governance, share several characteristics. All have a positive effect on various aspects of local government including consultation policies and practices, meeting procedures, service quality protocols, councillor and officer conduct, role clarification and good working relationships.

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