Vous êtes sur la page 1sur 23

ACCOUNTING INFORMATION

SYSTEM

Submitted in partial fulfillment of the requirements in the course Accounting


Information System for the summer term of A.Y. 2016-2017

Submitted to:
Mr. Mac Kerwin P. Visda, CPA

Submitted by:
Batalla, John Waren
Belarmino, Maria Djanella
Estraza, Chelsea Joelle
Fabul, Princess May
Quiambao, Arnold Jr.
Santos, Pauline

May 2, 2017
I.
A. Introduction

Accounting Information System

The emerging global economic scenario characterized by


advancement in information technology, rapid changes in production
processes, increased sophistry of the consumer, fierce market
competition and unethical skimming activities
of producers in the drive to survive the unpredictable and complex
business dynamics, has brought to the fore the crucial role of
accounting information in economic and business discourse especially
in relation to administrative effectiveness.

As we all know, accounting speaks the language of business as


it records all transactions of an organization, individual firm or other
bodies that can be expressed in monetary terms. Predicated on the
going concept, accounting is the scheme and art of collecting,
classifying, summarizing and communicating data of financial nature
required to make economic decisions.

Accounting is an information system and managers should


obtain high-quality and suitable information from formal and informal
channels for decision-making. Accounting information system (AIS) is
a part of this system that registers and summarized financial events.
Then it reports information as accounting information to support
managers in decision-making

Accounting Information is naturally characterized with specific


properties, governed by the principles and policies approved and
recognized as conventionally practices in accounting. It is an ingredient
in most, if not all, financial managerial decisions and provides financial
information translated into numbers, which are formulated in the form
of reports complying with its purposes. Thus, accounting information
system is the frame of practical accounting activity, as it tracks the
events of the enterprise, supplies data for the managers decisions, and
organically contributes to the reports for the managers, to the financial
statements, to compiling the expense management systems and last
but not least to the controlling reports.

Accounting Information Systems have been widely adopted by


organizations within both the public- and private sector. Most
economical decisions and strategies to maximize profits and minimize
costs conclude to accounting information. Since accounting measures
economical information and offers it to users and we know it as an
information system, therefore, managers need high-quality information
for success of organizations.

On the other hand, information technology (IT) and AIS are key
elements for removal of location and time limitations, better and rapid
access to information, up to date information, etc. Furthermore,
advances in information technology have driven change in the
collection, measurement, analysis and communication of information
within and between organizations.

The key part of information system needed for decision making


in an organization is accounting information system. Most
organizations focus on developing information system in order to
support decision system, communication, knowledge management, as
well as many others. Information system is developed using information
technology to aid an individual in performing their job within an
organization. However, economic conditions and competition create
pressure about costs of information. Most organizations continue to
increase spending on information system and their budgets continue
to rise. Nevertheless, accounting information system is widely used by
large businesses and even small enterprises because of its ability to aid
difficulties in the processing of transactions concurrently.

Company Profile

Business Name: Lucky Red Enterprise


Head Office: Unit A, Times Commercial Bldg. Alabang-
Zapote Road, Pamplona 3, Las Pinas City,
1740
Branch Office: Loyola St., C.M. Recto, Manila City, NCR
Years of Operation: 8 years
General Description:
Lucky Red Enterprise is a manufacturing business owned
by Mr. Ralph Eric Del Rosario who established its first and main
branch in Las Pinas City, Metro Manila on the year 2009. The
business started as a tailoring shop producing school uniforms
exclusively for the students of University of Perpetual Help System
Dalta in Las Pinas. The owner himself is an alumni of the
aforementioned university whom during his college years is in need
of financial support for his studies, leading to the idea of
manufacturing school uniforms and selling them for a cheaper price.
With the help of her mother, the small tailoring shop became a large
distributor of school uniforms, medical uniforms, and medical
supplies not only in Las Pinas but even in Central Manila.

B. Significance of the Study

The significance of the study and engagement is to provide an


assessment on the current accounting system of the company, if there
is, and to provide and suggest a more suitable accounting system.

It may be beneficial to various internal and external users as


well. It will be most beneficial and significant to the business
environment and the company. As the business environment continues
to evolve and progress over the years through the help of technology,
the researchers aim to help implement and install a system that would
meet the companys needs and most importantly keep them as an
effective organization in this competitive industry.

Manual method of accounting system cannot meet up with the


present business needs all the time. Computerized accounting is
necessary to be adopted by many business entities in order to comply
with advancement in technology. If the accounting system prepared by
the researchers will be permitted to be implemented by the company, it
could be a strategic weapon to the organization by providing meaningful
and useful information through financial statements and reports in a
shorter time frame and financial information will readily be available to
users of accounting information such as the stakeholders and
management for decision making at any time.

To further help its users, the flowcharts prepared by the


researchers will illustrate their suggested accounting system and show
the process of the different business transactions of the company from
its expenditures, revenue and other important transactions. This may
be contribute to its users to trace and identify the needs of the business
in specific areas or segment and help improve its operations.

Moreover, employees will also benefit from this aside from the
management itself because instant and reliable receipts, invoices,
credit notes, sales order, purchase order, payroll documents, and
financial statements may be generated automatically which would
lessen the workload for them while also improving the quality of their
performance. Customers will also benefit if the company applies an
accounting system because they will receive a better quality of service
since their transactions are accounted for, processed faster and has a
customer database for storage. To the future researchers and business
entities, this study can provide baseline information and be used for
decision making on whether to apply an accounting system for their
company.

C. Scope Limitations

The general purpose of this study is to assess further


development of the entitys current accounting system.

The study will cover the current accounting system of the


entity along with their daily business operations and how they are
transacted. The information gathered from the entity will then be used
in order to formulate the design of the proposed accounting system that
is appropriately suitable for the entitys business operations and to
further enhance its data processing in carrying out their routine
transactions with ease and accuracy.

This study will only be limited to the entitys accounting system


and its users. The locale of the study is Las Pinas City. The period of
the study will be conducted from April 6, 2017 to May 20, 2017, which
is the summer term for Bachelor of Science in Accountancy students of
the University of Perpetual Help System DALTA.

D. Introduction of the System

Transaction Process System

A transaction process system (TPS) is an information


processing system for business transactions involving the collection,
modification and retrieval of all transaction data. This will aid the
company in order to perform faster and better accuracy when
transaction occurs. A transaction process system accepts many
requests and all are executed at one time. It requires an interaction of
a user. In transaction processing, there is no delay and the results of
each transaction are immediately available. Although errors can occur
in transaction processing, they are infrequent and tolerated, but do not
warrant shutting down the entire system.

Management Reporting System

A management reporting system is essentially a mechanism in


monitoring the companys objectives. That objectives have been defined
by a formal plan in terms. A management reporting systems capture
the sorts of data needed by a company's managers to run the business.
The sorts of financial data that are presented in annual reports typically
are at their core. However, robust management reporting systems will
house data at much more detailed levels than is presented to the
investing public. They are also critical tools for evaluating the
performance of organizations and managers, and sometimes that of
lower level employees as well.
Financial Reporting System/General Ledger

A general ledger (GL) is a chronological accounting record a


business uses to keep track of financial transactions. Transactions are
categorized and summarized into general ledger accounts. The number
and type of accounts that make up the general ledger is determined by
the chart of accounts. The GL can be thought of as an electronic
database that provides the data required to build financial reports. The
general ledger is at the core of any enterprise resource planning (ERP)
financial management system, which encompasses the functions that
are required to maintain one or more sets of books, generate financial
reports, manage cash and fixed assets and execute payment and
accounts receivable transactions.

II.
A. Transaction Processing System

REVENUE CYCLE

Cash Receipt System

The proposed cash receipt system begins with the receipt of the
check and remittance advice from the customer remittance advice is
a letter sent by a customer to a supplier, to inform the supplier that
their invoice has been paid. It accompanies the check. Then, the clerk
assigned in the department reconciles checks with the remittance
advice and reviews all remittance advice by preparing a remittance list.
The check and remittance advice together with the prepared remittance
list is sent to the cash receipt department.

Cash receipts clerk reconciles and record checks in the cash


receipts journal and then deposit slips are prepared, and then records
and copies of the deposit slip, remittance advice, and remittance slip
are created then stored and kept in a file.
As records are kept in a file, the checks and deposit slips
prepared are sent to the bank, as part of a cash control system.

The companys cash receipt system closes the sales invoice,


posts the transaction to the general ledger and distributes various
management reports for the usage and benefit of the management.
Then lastly, remittance list received from the first department, the
deposit slips, cash receipts journal and general ledger accounts are
reconciled by the clerk/bookkeeper.

Sales Order System

The sales order processing begins with the customer placing


an order sales order may then be a cash or credit sale transaction. If
it is a cash sale transaction, it goes directly to the sales order system;
if a credit transaction, then it will undergo a customer credit check, to
verify the customer details outstanding as to date.
Based on the customer database from the business records,
personnel responsible will then verify credit and approves the order.
Once approved, inventories will then be sent to shipping and record the
appropriate inventory stock release adjustment. The shipping will
reconcile the order with the packing slip and shipping notice, secures
the bill of lading from the carrier, ships item and records transactions
and send stock release to billing.

Personnel responsible will then bill the customer and update


the sales journal. Cash/Accounts Receivable and inventory clerk
update the subsidiary ledgers and general ledger to reflect the
transaction.

Risks and Internal Controls in the Revenue Cycle

The revenue cycle encompasses the entire customer


engagement and payment process from beginning to end.
Sales Order and Cash Receipts Risks and Internal Control:

Undetected data input errors

In manual data inputing it is common to have undetected


data input errors, effective IT controls for this are data
checking and check digit edits. This will help prevent and
minimize errors from manual data input.

Selling to un-creditworthy customers

In transacting with customers it is essential to have


controls in order to avoid credit risks. Physical controls can be
proper transaction authorization, where a manager should
handle the transaction authorization and the authorized
personnel shall handle the transaction processing. IT controls
can be automatic credit checking.

Shipping incorrect items or quantities

It is common to sometimes ship incorrect items or


quantities in business operations. To help minimize these kinds
of problems, physical controls such as independent verification
for each sales order and IT controls such as scanner technology
and automated ordering should be used.

Inaccurately recording transactions in journals and accounts

Errors in recording transactions in journals and accounts


are very much likely to happen, that is why there are special
journals, subsidiary ledgers, general ledger control accounts to
verify, reconcile any errors that mightve possibly occured. Other
physical controls also include, transaction authorization,
accounting records, pre numbered documents, files and
independent verification. IT controls are automated postings and
file backups.

Misappropriation of cash receipts and inventory

Misappropriation can most likely lead to theft, to avoid


such risks: (1) cash receipts function should be separate from the
AR function; (2) cash receipts clerk should not have access to GL
cash; and (3) personnel with physical custody of inventory should
not update records.

Unauthorized access to accounting records and reports

Having no controls to accounting records and reports can


cause risks to the genuiness of the financial statements. To avoid
this from happening access controls and segregation of duties
such that the perpetration of a fraud requires collusion. Also,
passwords and multilevel security for added controls.

Illustration 1.0 Customer List Database


Illustration 1.1 Customer Order Form

Illustration 1.2 Sales Invoice


Illustration 1.3 Stock Release Adjustments

Illustration 1.4 Journal Entry

Illustration 1.5 General Ledger


Illustration 1.6 A/R Summary

EXPENDITURE CYCLE

Purchase Order System

Inventory clerk prepares and prints purchase requisitions by


accessing the purchase requisition file. Then appropriate department
or person in charge will receive the requisition form for review. Once
approved, the form will then be transferred to the system for input.

Then, system inputs will update the following databases: (1)


Purchase Order File; (2) Receiving Report; (3) Vendor Invoices; (4)
General Ledger; and (5) Subsidiary Ledger. Also, after reviewing the
supplier database from the system, a purchase order form will then be
sent to the vendor for the formal placement of orders. Then the vendor
shall issue an invoice to reflect the purchase transaction, afterwards,
invoice details will be entered to the purchase system to update the
General Ledger account and inventory subsidiary ledger.
Cash Disbursement System

The disbursement processing begins with scanning of due date


fields of vendor invoices each day for items due to be paid and payments
are made. Purchase Order and Checks are automatically printed,
signed, and distributed to the mail room for mailing to whoever it is in
favor. Payments and purchases are automatically transmitted to the
system and are recorded in a purchase order file. Once payments are
reflected, vendor invoices are closed.

Settlement of transaction due are then reflected in the general


ledger, accounts payable control account and cash accounts. Lastly,
Reports are transmitted to departments responsible for General ledger
control accounts for management review and filing.
Risks and Internal Control in the Expenditure Cycle

The expenditure cycle consists of activities related to the


acquisition pf and payment of goods and services. This mostly includes
purchase transactions and cash disbursements. Transactions in the
expenditure cycle often affect more financial statement accounts than
the other cycles which is why there should only be a low risk of material
misstatement in the expenditure cycle.

There are certain risks associated to expenditure cycle and


internal controls that the management should apply to prevent and
control this.

Purchase Order Processing and Cash Disbursement Risks and


Internal Control:
Theft of Inventory

Inventory items are those assets that are mostly


susceptible to fraud, theft, and other form misappropriations.
That is why, it is important that an effective internal control to
ensure the security of the former is established.

Physical control to prevent incurring loss of inventory


includes, but is not limited to the following two: (1) segregation
of duties; and (2) periodic physical counts.

Under the segregation of duties, it is understood that the


authority, custody and recording responsibility must not be
vested unto one person alone. However, for small businesses like
the subject entity where there are minimal personnel, the active
participation of the management may be considered in order to
minimize fraud.

Another physical control includes physical count. This is


to reconcile the physical quantity with the recorded date to
ensure the reliability of the information reflected in the
companys books.

Another control includes IT controls which includes, but


is not limited to the following: (1) automated documentation of
intra-company transfers; and (2) multilevel security to provide
segregation of duties.

Unauthorized Inventory Purchase

Unauthorized transaction occurrence happens when


there is a poor security on the access of transaction systems.
Sometimes, inventories are purchased by unauthorized
personnel which sometimes results to loss on the part of the
company.
Physical controls to prevent such unauthorized access
include transaction authorization. This means that only
authorized personnel have access to the transaction processing
of the company.

While IT controls include the following (1) Automated


purchase approval; (2) integrate database of various divisions; (3)
automated reports that link item description to part numbers to
allow consolidation of orders.

Automated purchase approval must be present to ensure


that all purchase transactions be approved before being placed
to prevent unauthorized purchases. While integration of
database of various divisions means there must be a
consolidation of the records of different divisions so that the
management has full sight of the inventory items available in
whole and per segment. Automated report that links item
description to part numbers so that orders will be consolidated
for easy monitoring and control.

Receiving Incorrect Items/Receiving Unordered Goods

In purchasing, receipts of incorrect items are not new to


businesses. That is why, in order to ensure the correctness of
goods, a physical control includes independent verification and
supervision. This means that management, or authorized
personnel, must have full control on all purchase transactions.

Misappropriation of cash, checks, electronic fund transfers (EFT)

Cash, checks and EFT are most common in


misappropriation, to minimize these risks segregation of duties,
so not only one personnel can have access. Proper supervision
and independent verification is also a must. Use of
sequentially numbered checks to reconcile and verify. Strict
access controls for EFT. IT controls include multilevel security,
automated payment approval, use of embedded audit modules,
log encrypt and number all EFT transactions.

Inaccurately Recording Transactions

Errors in recording transactions in journals and accounts


are very much likely to happen, that is why there are special
journals, subsidiary ledgers, general ledger control accounts to
verify, reconcile any errors that might have possibly occured.
Other physical controls also include, transaction authorization,
accounting records, pre numbered documents, files and
independent verification. IT controls are automated postings and
file backups.

Unauthorized Access to Accounting Records and Reports

Having no controls to accounting records and reports can


cause risks to the genuiness of the financial statements. To avoid
this from happening access controls and segregation of duties
such that the perpetration of a fraud requires collusion. Also,
passwords and multilevel security for added controls.

Illustration 2.0 A/P Summary


Illustration 2.1 Check Issuance

Illustration 2.2 Inventory Cash Purchase


Illustration 2.3 Inventory Credit Purchase

Illustration 2.4 Write Check


Illustration 2.5 Supplier Database

Illustration 2.6 Supplier Database