Computerised Accounting System


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Computerised Accounting System

  1. 1. Computerized Accounting System
  2. 2. INTRODUCTION <ul><li>The world is changing faster than ever before </li></ul><ul><li>The accounting profession is in a mode of serious introspection </li></ul><ul><li>Facing criticism about the profession </li></ul><ul><li>Challenge ourselves to improve the quality of information products and services </li></ul><ul><li>Requires an active participant in the evolution of accounting information systems </li></ul><ul><li>Propose a different philosophy underlying the design, use, and evaluation of accounting information systems </li></ul>
  3. 3. Current Business Environment <ul><li>A very competitive, changing environment in which companies that add the most value and respond quickly succeed. </li></ul><ul><li>Information is becoming one of an organization’s most important resources. </li></ul><ul><li>Advances in information technology have been much more rapid than in any other industry. </li></ul>
  4. 4. The Calls for Change <ul><li>“ The world that is fast emerging from the clash of new values and technologies, new geopolitical relationships, new life-styles and modes of communication, demands wholly new ideas and analogies, classifications and concepts.” Alvin Tofler </li></ul>
  5. 5. The Call for Change <ul><li>Many organizations are reconsidering how they operate and create value. </li></ul><ul><li>Some organizations are implementing change by reengineering business processes </li></ul><ul><li>The accounting profession must reinvent how information is gathered, stored and provided to users or be replaced by a new yet to emerge profession. </li></ul><ul><li>The profession can not continue to rely on audit and tax services </li></ul>
  6. 6. The Call for Change <ul><li>Many information customers are dissatisfied with the quality and timeliness of information provided by our accounting systems:—Result is…. </li></ul><ul><ul><li>managers take matters into their own hands </li></ul></ul><ul><ul><li>real time access to corporate databases has reduced the relevance of compressed Financial Statements </li></ul></ul><ul><ul><li>an expectations gap </li></ul></ul>
  7. 7. A Changing World <ul><li>Al Pipkin, controller for Coors Brewing Company, observes that IT is: </li></ul><ul><ul><li>. . . bringing about a total transformation of the controller’s [accounting] staff, and a re‑definition of the overall financial system. Technology is changing the culture of the controller’s organization just as it is impacting the entire business. In the 21st century, there will be fewer accountants on the controller’s staff, but they will perform in totally new and exciting ways. </li></ul></ul><ul><ul><li>Controller </li></ul></ul><ul><ul><li>The individual or function responsible for using, designing, and evaluating an organizations financial information system. The controller is typically an accounting executive responsible for developing and maintaining an organizations financial records. </li></ul></ul>
  8. 8. Accounting Quotes <ul><li>“ The globalization of the economy, the explosion of technology, the complexity of business transactions and other forces have thrust the financial system into a new age. As the pace of economic change accelerates, so does the need for reliable and relevant information…” </li></ul><ul><li>“ To stay the best, our financial reporting system must be as dynamic as the financial markets themselves …” </li></ul><ul><li>“ Financial reporting is without value if the user does not perceive it to be sound.” </li></ul><ul><ul><ul><li>— American Institute of Certified Public Accountants ( AICPA) </li></ul></ul></ul>
  9. 9. NEED Describe how organizations create value for their customers Describe the historical relationship between accounting and IT professionals Describe the ways that accounting professionals can increase their value Identify the justifications / reasons for changing the nature of accounting and how the use of information technology (IT) can enable such change
  10. 10. Functional Segmentation <ul><li>Material Management </li></ul><ul><ul><li>Purchasing / Receiving / Stores </li></ul></ul><ul><li>Production </li></ul><ul><ul><li>Manufacturing </li></ul></ul><ul><ul><li>Support - Production Planning, Quality control, Maintenance </li></ul></ul><ul><li>Marketing </li></ul><ul><li>Distribution </li></ul><ul><li>Personnel </li></ul><ul><li>Finance </li></ul><ul><li>Information - </li></ul><ul><ul><li>Accounting /Computer Services </li></ul></ul>Materials Labour Capital Information
  11. 11. Management Activities Plan Evaluate Execute Control Information System Planning requires leaders to define the business objectives , to prioritize business processes, and to provide a blueprint for achieving the objectives. They must identify opportunities available to the organization as well as assess the risk associated with each opportunity. Control is exercised by reviewing the results of an activity or an entire business process to see if they are consistent with expectations. The review may cause a change in expectations or a change in the way an activity or a process is performed to bring the actual results in line with expectations. Periodically, managers evaluate the operating results to see if the business processes are achieving the organization's objectives. The results of the evaluation are used to modify the plans, objective, or expectations. Managers execute their plan by dividing business processes into smaller activities, assigning people to perform each activity, and motivating them to do a good job. A clearly defined plan increases the likelihood of proper execution
  12. 12. Types of Business Procedures <ul><li>Acquisition/Payment Processes - acquiring, maintaining, and paying for resources needed by the organization (e.g. human resources, financing, property, plant, equipment, materials and supplies) to provide goods and services. </li></ul><ul><li>Conversion Process - converting the acquired resources into goods and services for customers. </li></ul><ul><li>Sales/Collection Process - delivering goods and services to customers and collecting payment. </li></ul>
  13. 13. Information Processes <ul><li>Are shaped by an organization’s business and management processes. </li></ul><ul><li>Include recording data that describes business processes </li></ul><ul><li>Maintain up-to-date data about an organization. </li></ul><ul><li>Report useful information. </li></ul><ul><li>Information processes must change in response to changes in business and management processes. </li></ul>
  14. 14. Exhibit 1-1 Types of Business Processes ORGANIZATION Conversion Process Customers Provides Finished Goods and Services to Customers Sales/ Collection Process Goods and services for customers Payment for Goods and services Suppliers Acquisition, Payment Process Provides input resources to the organization Requested input resources Payment for input resources
  15. 15. Information System Business event data Business Processes 1.0 Capture and record process Internal events External events 2.0 Maintain process External events Internal events 3.0 Report process Financial statements Reports Management Investors/Users
  16. 16. The Information System and Information Processes Business Processes Information System Primary Information Processes Management Capture Business Data Maintain Business Data Report Useful Information
  17. 17. Exhibit 1-4 Relationship between Business Processes, Information Processes and Management Activities Maintain Data Information System Management Activities Plan Execute Control Evaluate Business Processes Acq./Pmt. Process Conversion Process Sell/Collect Process Manage Business Processes Manage Business Processes Capture Data Provide Reports
  18. 18. Accounting Information System <ul><li>The accounting information system has traditionally captured and stored data about a selected subset of business events, namely activities that meet the definition of an accounting transaction—events that change the composition of the company's assets, liabilities, or owner's equity . </li></ul><ul><li>Could we modify the set of business events and capture data about a broader set of business events than &quot;accounting transactions?&quot; Sure! </li></ul><ul><li>Do we want to broaden the set of business events? Maybe, depending on the type of information our information customers need to make good decisions. </li></ul>
  19. 19. Organizations, Accounting, and AIS Involved in profit or not-for-profit activities to produce valued goods or services for customers Organization support function: Delivers information products to help information customers plan, evaluate, and control the execution of business activities The structure used to store, produce, and report the accounting information products ORGANIZATION ACCOUNTING AIS
  20. 20. Top Management Middle Management Operations Management Operations Personnel
  21. 21. Top Management Middle Management Operations Management Operations Personnel Customers Suppliers Stakeholders
  22. 22. Top Management Middle Management Operations Management Operations Personnel Day-to-Day Operations Information Customers Suppliers Stakeholders Performance Information Budget Information and Instructions
  23. 23. Framework for Information Systems Information System (IS) Accounting Information System (AIS) Management Information System (MIS) The information system is the set of formal procedures by which data are collected, processed into information and distributed to users. A transaction is an event that affects or is of interest to the organization and that is processed by its information system as a unit of work
  24. 24. Accounting Information Systems <ul><li>Fixed Asset System (FAS) </li></ul><ul><li>General Ledger/ Financial Reporting System (GL/FRS) </li></ul><ul><li>Transaction Processing System (TPS) </li></ul><ul><ul><li>Expenditure Cycle </li></ul></ul><ul><ul><li>Conversion Cycle </li></ul></ul><ul><ul><li>Revenue Cycle </li></ul></ul><ul><li>Management Reporting System (MRS) </li></ul>
  25. 25. Accounting Information Systems
  26. 26. A General Model for AIS The External Environment The Information System Data Base Management System Data Collection Data Processing Information Generation External Sources of Data External End Users Internal Sources of Data Internal End Users The Business Organization
  27. 27. Database Management System <ul><li>Data Attributes </li></ul><ul><li>Records </li></ul><ul><li>Files </li></ul><ul><li>Data Base Management Tasks </li></ul><ul><ul><li>Storage </li></ul></ul><ul><ul><li>Retrieval </li></ul></ul><ul><ul><li>Deletion </li></ul></ul>
  28. 28. Information Generation <ul><li>Relevance </li></ul><ul><li>Timeliness </li></ul><ul><li>Accuracy </li></ul><ul><li>Completeness </li></ul><ul><li>Summarization </li></ul>
  29. 29. Attributes of Information Systems <ul><li>Efficiency </li></ul><ul><li>Effectiveness </li></ul><ul><li>Flexibility </li></ul>
  30. 30. The Computer Services Function <ul><li>Centralized Data Processing </li></ul><ul><ul><li>Data base Administration </li></ul></ul><ul><ul><li>Data Processing </li></ul></ul><ul><ul><ul><li>data control </li></ul></ul></ul><ul><ul><ul><li>data conversion </li></ul></ul></ul><ul><ul><ul><li>computer operations </li></ul></ul></ul><ul><ul><ul><li>data library </li></ul></ul></ul><ul><ul><li>Systems development and maintenance </li></ul></ul><ul><li>Distributed Data Processing </li></ul>
  31. 31. Status of AIS <ul><li>Accounting systems are based on pre-computer thinking. (Robert Mednick) </li></ul><ul><li>Information customers are dissatisfied with the timeliness and quality of information. (R. Green & K Barrett) </li></ul><ul><li>Traditional financial statements are extremely compressed and not released in a timely manner. (R. K. Elliott) </li></ul>