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Organisation structure & AIS

The structure of an organization helps to allocate

1. Responsibility roles defining

2. Authority define access control

3. Accountability whose accountable to which assetcommon method segment by business function

Business AIS helps improve operation efficiency make

better decisions , maximizing profit.

NPO/NGO

improve operations efficiency, maximizebenefits derived from their resources

Business activities Organizing capital, premises&equipment Acquisition,Recruiting employees, Acquiring inventory, Manufacturing products,

Marketing&selling a product/service, cash collection, cash disbursement

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Organizational Structure for a DistributedProcessing system

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Transactions Processing

Manual TP: journal ledger summarize,

produce meaningful information.

Computerized TP : capture record posting

data

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Suggestion designing a form

1. simple and easy to understand

2. name describing its function3. Have serial specific ID no. very important control

4. Sufficient space provided for recording necessary information

5. Related information should be grouped together

6. If need multipart form create by filled out once, reducerepetitious writing

7. explanatory note provided in a suitable place if there is ambiguity

8. Related forms that has similar information are placed in the same

position ease burden of completing the form

9. multipart form Routing instructions in an appropriate place.

Eg: coloured paper where each copy is to be sent.

10. Information on the form follow a logical sequence

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RECORDING TRANSACTION

made on a journal, Types of journal :

1. Specialized journal

Used for repetitive transactions and simplify the process of

recording a large number of similar transactions exp. Sales

journal, purchases journal, cash receipts journal and cashpayment journal.

2. General journal

Records the transactions that cannot be categorized and

recorded in any of the specialized journal ( non- routinetransaction such as purchase or sale of asset, interest accruals

and adjustment.

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POSTING TRANSACTION

Data in journals posted to ledgers groupings similar transactions types

meaning full information to be obtained.1. General ledger : Many accounts are recorded at summary level for the

assets, liability, expenses and revenue.

2. Subsidiary ledger: Maintained for AR, AP & inventory (large number

of transaction occurred). The summary recorded in special accounts

(control account in GL), to help preserve the completeness.

Posting process

accounts in ledger would be arranged in a logical manner by assigning

each account with a unique number or account code.

The list of all the account names and codes

chart of accountsA well-designed chart of accounts should accomplish the following:

adequate description of each account

distinction between account titles

assistance in the preparation of required reports

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Information for decision making2nd function of AIS

1. financial statements: Statement of financial performance Income statement Statement of financial position (balance sheet)

Statement of cash flows

Statement of changes in equity

2. Management reports for management control purposes. For example: inventory levelsto monitor low or high turnover of product decide

on reorder level, marketing strategy

profitability of each productto decide which product should be focus

on

performance of each salespersonfor reward and incentives, training

requirements

daily cash balances and commitmentsshort term cash management

extent of back ordersdelaying customers orders is not good, should

decide to change vendor

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Internal Control IssuesAdequate internal controls are required to:

facilitate the capture of reliable business data

safeguard assets and business data

enable the execution of management objectivesInternal control principals include:

documented procedures

quality of personnel

authority

recording of transactions

internal verification

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Impact of IT on AISManual system is a system composed of human resources.

Computerized system is system composed of computer

resources.

Computer-based accounting system is accounting systemused by both human and computer resources.

Information technology (IT) is the processing of

information using computer systems.

Computers assist in processing high volumes of data at highspeeds and the power of computers has increased because

of improvement in technology.

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Transforming the Data into Information

Functions for transforming data into

information according to the general AIS

model:

1. Data Collection

2. Data Processing

3. Data Management

4. Information Generation

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3. Data Management

Storing

Retrieving

Deleting

4. Information Generation

Compiling

Arranging

FormattingPresenting

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The Evolution of IS Models: The Flat-File Model

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Data Redundancy Problems

Data Storage - excessive storage costs of paper

documents and/or magnetic form

Data Updating - changes or additions must be

performed multiple times

Currency of Information - potential problem of

failing to update all affected files

Task-Data Dependency - users inability to obtain

additional information as needs change

Data Integration - separate files are difficult to

integrate across multiple users

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The Evolution of IS Models: The Database Model

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Information Systems

for Business Transactions

Payment

Accounts

Payable

Receiving

Purchasing

Old Process

Supplier Supplier

Goods

Invoice

Purchase

Order

Receiving

Documents

Copy

Of

Purchase

Order

New Process

Purchasing

Accounts

Payable

Receiving

Data-

base

Goods

Payment

Purchase Order

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ISSUE OF ACCOUNTINGINDEPENDENCE

Information reliability requires accounting

independence.

Accounting activities must be separate andindependent of the functional areas maintaining

resources.

Accounting supports these functions with information

but does not actively participate. Decisions makers in these functions require that such

vital information be supplied by an independent

source to ensure its integrity.

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Basic AIS Functions

1. Collect and store data about the

organizations business activities and

transactions efficiently and effectively2. Provide information useful for decision

making

3. Provide adequate controls to ensure thatdata are recorded and processed

accurately.

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1. Collect and store data

Capture transaction data on sourcedocuments.

Record transaction data in journals,which present a chronological recordof what occurred.

Post data from journals to ledgers,which sort data by account type.

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TRANSACTION PROCESSING

ProcessInput Output

SensorControl

Feedback Loop

Data Files

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Capture Transaction Data on

Source Documents

Sales Invoice

Sales Order Purchase Order

O

Source documents are special

forms used to capture

transaction data.

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Capture Transaction Data on

Source DocumentsControl over data collection isimproved by prenumbering each

source document.Accuracy and efficiency in recordingtransaction data can be further

improved if source documents areproperly designed.

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System - Inputs

Input documents can be categorizedinto three types . . .

Source Documents

Product Documents

Turn-around Documents

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Data

Collectio

n

1

23

SalesSystem

Customer

Order

Sales

Order

Creation of a Source Document

Source

Document

1

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Data

Collectio

n

Source

Document

1

23

SalesSystem

Bill

Remittance

Advice

Product

Document

Customer

Order

Sales

Order

A Product Document

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Data

Collection

Source

Document1

2

3

Sales

System

BillRemittance

Advice

Product Document

Customer

Order

Sales

Order

A Turnaround Document

Cheque 12

Remittance Advice

Cash Receipts

System

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Source Document Function

Sales Order Record Customer OrderDelivery Ticket Record Delivery to Customer

Remittance Advice Receive Cash

Deposit Slip Record Amounts Deposited

Credit Memo Support Adjustments to Customer A/cs

Revenue Cycle

General Ledger and Reporting System

Journal Voucher Record entry posted to general ledger.

General Ledger & Reporting System

E dit C l

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Source Document Function

Purchase Requisition Request that purchasing departmentorder goods.

Purchase Order Request goods from vendors.

Receiving Report Record receipt of merchandise.

Cheques Pay for items.

Expenditure Cycle

Source Document FunctionW4 forms Collect employee withholding data.

Time cards Record time worked by employees.

Job time tickets Record time spent on specific jobs.

Human Resource Cycle

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ProcessInput Output

SensorControl

Feedback Loop

Data Files

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Data Processing

Updating previously stored informationabout the resources affected by theevent and agents who participated in

the activity.

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Batch vs Online

batch processing

Periodic updating of the data stored

A system whereby business transactions are accumulated

over a period of time and prepared for processing as a singleunit or batch.

on-line (real-time) processing.

A system whereby each transaction is processed

immediately, without the delay of accumulating transactionsinto a batch.

Always current.

Immediate updating as each transaction occurs

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Control Posting

can be achieved through audit trail

An audit trail provides a means to

check the accuracy and validity ofledger postings.

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ProcessInput Output

SensorControl

Feedback Loop

Data Files

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Storage

Ledgers and files provide storage of data inboth manual and computerized systems. The General Ledger

The Accounts Payable Ledger

The Accounts Receivable Ledger

A ledger is a book of financial accounts, whichreflect the financial effects of the firms

transactions after they are posted from thevarious journals.

Fl f f F h E

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Sales

Order

Customer

Order

Flow of Information From the EconomicEvent to the General Ledger

Journal

EntrySales

Journal

General

Ledger

AR Sub

LedgerPeriodically reconcile subsidiary

ledger to General Ledger

PostPost

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File

A file is an organized collection of data. Files may be in Manual or Computer (magnetic)

A transaction file is a collection oftransaction input data - normallytemporaryin nature.

A master file is a collection of data that areof a more permanentor continuing interest

A reference (table) file contains data thatare necessary to support data processing

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2. PROVIDE USEFULINFORMATION

Information is provided in theform of reports that fall into

two main categories:financial statements

managerial reports

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3. PROVIDE ADEQUATECONTROL

Ensure that the informationproduced by the system is reliable.

Safeguard organizational assets.Ensure that business activities areperformed efficiently and in

accordance with managementsobjectives.

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Internal Control Considerations

1. Provide for adequate documentation ofall business activities. allows management to verify that assigned

responsibilities were completed correctly.

2. Design the AIS for effectivesegregation of duties.

refers to dividing responsibility fordifferent portions of a transaction amongseveral people.

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Group Presentation for next

week1. Find one accounting package that available in

Malaysian market

2. Explain background (history, developer,

distributor) of that package

3. Explain modules that available in that software.