Key Considerations For Developing Accounting Information Systems

The kind of transactions that an entity involves in, the business environment of the entity, the level of complexity involved in financial transactions, the complexity in the amount of estimates to be made and the technical competencies of the employees are few of the important information needed to prepare a comprehensive accounting information system.

1. In order to assess the efficiency of an existing system as well as its ability to manage the operational requirements of an organization it is important review the features of the existing system.
2. The objectives to be fulfilled from the accounting information system, the existing accounting system and its weaknesses, the nature of accounting transactions, the complexity in accounting transactions, the complexity in accounting estimates to be made and the level of knowledge of employees of the company are few considerations necessary in this regard.
   1.  
   2. Account reconciliation.
   3. Month ending reporting.
   4. Verification of accounting entries recorded.
   5. Audit trails in accounting system.
   6. Ability to record huge amount of entries i.e. the availability of space.
   7. The authentication process in the accounting system.
   8. The automatic ability to error check.
   9. Ability to provide up-to-date records as and when necessary by the management and other stakeholders.
   10. Reporting capability.    
3. The expected cost of introduction of new system along with expected financial and economic benefits of using the new system. In addition a comparative analysis of the existing system with the previous system shall further help the management to decide the best course of action for an organization. Investment appraisal technique can also be sued in case the investment in introducing the new system is significantly high (Avgerou & Walsham, 2017).
   1. Is the accounting system correctly processing the transactions?   
   2. Operational efficiency of the system.  
   3. The internal controls and securities within the system.
   4. The ability of the employees of an organization to correctly process transactions in the accounting system.  
4. The following information must be included in written communication about the new system: 

1. What are the specific requirements of the organization from the new system?
2. What objectives the organization is looking to achieve from the new system?
3. What kind of information will be processed in the system?
4. The skills and talent in the employees of the organization to process transactions in the new system.
5. Any weakness that the existing system has which has negatively impacted the processing of accounting transactions.
6. The training required to be provided to the employees to equip them to process transactions in the new system.

1. The written confirmation from the users shall be evaluated thoroughly by the system developer before starting the process of developing the new system. It is important to consider the organizational environment and its objectives before developing a new system. Apart from that technical, operational and financial feasibility shall also be conducted to ensure that the new system will be feasible for the organization and as per the requirements of the users.
2. Again the users shall be conducted as to the specific requirements and expectations from the new system. The new system should be capable of handling the organizational requirements and be able to process the accounting transactions correctly.
3. The system documentation shall be kept in both soft copy as well as in hard copy. The soft copy shall be kept at the mainframe computer of the company which should be made available to the stakeholders as and when necessary. The hardcopy shall be filed properly and kept at the accounting department of the organization.    
4. The requirements of the users changes with passing of each day. Since development of a new system takes significant amount of time it is important for the system developers to keep reviewing the requirements and expectations of the users to make necessary changes in the system document to ensure the new system is as per the requirements of the users when it is finally ready for operation (Cleary, 2017).
   1. Understand the requirements of the users.
   2. Start and configure the system.
   3. Conduct user acceptance testing.
   4. Provide training.
   5. Implement the system and track the progress.
5. Importance to have necessary contingency plan in place to deal with possible roadblocks including delays and problems at the time of development and implementation of a new system.
   1. On the job training.
   2. Discussion and tutorials.
6. The data should be transferred by following the steps mentioned below:
   1. System exploration.
   2. Assessment of data.
   3. Migration of data.
   4. Migration build.
   5. Data transportation.
7. Regular update of a system will help an organization to identify any weaknesses in the system immediately. Accordingly, immediate steps can be taken to reduce the losses from such apparent weakness in the system. If systems are up-dated only once a year then the weaknesses in the system will go unnoticed for a long period of time. This could result in huge amount of losses for the organization till the time the weaknesses are rectified.
   1. Alphabetical: The files shall be maintained alphabetically to identify discrepancies and take remedial steps.
   2. Chronological: Chronologically files shall be maintained to identify and remedy discrepancies.
   3. Serial number: The files should have serial numbers.
8. During the system development phase and after the development of new system an integrity report should be ran to ensure integrity of the system. At the time of implementation of the new system integrity report should also be ran to assess the integrity of the system.
   1. Revenue transactions.
   2. Expenditure transaction.
   3. Acquisition of assets.
   4. Sale of assets.
9. The date on which the transaction has taken place along with the nature and amount of transaction shall be available to correctly record the transactions in the books of accounts. It is also important to have specific supporting documents to record the accounting transactions in the books of accounts correctly.      
10. Discussion and meetings shall be held to communicate and promote the processes for recording and classifying transactions. There should be an established internal verification process in place to verify the records and documents. The standard procedures should be followed to correctly record and classify the transactions.
11. It is important to have a standard format for source information and data to maintain data integrity and confidentiality. In order to ensure that the data is genuine and there is no compromise with data integrity on the basis of which the accounting information is to be processed in the system it is of paramount importance to have a standard format for the sources of data input and documentation (Libby, 2017).
    1. Daily back up of data.
    2. Full back of data.
    1. Vouchers to support expenditures.
    2. Receipts to support receipts of cash or cheques.
    3. Supporting documents.
    4. Employee cards for payroll maintaining.
    5. Suppliers invoice.
    6.  
12. Analysis of reporting requirements on regular basis would ensure improvement to the reporting requirements with enhanced financial reporting requirements with passing of each day. The changes in legislations and complex business environment has made it compulsory to enhance the quality of reporting regular assessment of reporting requirements will help in improving the reporting of an organization.
13. All details about the information source document including its nature, number, file number where such source document has been maintained.
14. To ensure that the financial structure of an organization remains unchanged and to maintain all information of financial reconstructions correctly without any unauthorized changes to the financial records.
15. Budgetary controls include use of appropriate assumptions, practical method and principles to ensure that the budgets are practical and achievable by an organization. The implications will be positive on the accounting system if the budgetary controls are practical and appropriate.
16. Only on the basis of costs and depreciation schedule it will not be possible to recommend whether to purchase a machine or not. In order to give recommendation whether to purchase a machine or not it is important know the expected revenue to be generated from the machine in the future.

Astra Plastics is a company that manufactures plastic products in Mascot. The company sell these products to wholesalers in Australia. The company currently does not have an accounting information system. It is looking to implement an accounting system within the company to correctly maintain the accounting records in the future.

The organizational chart is as following: 

The new accounting information system will be very simple and currently available in the market. Since the company has very simple operating structure it has decided to use user friendly accounting information system.           

The accounting information system will be implemented with the objective of maintaining proper records of all financial transactions and subsequent preparation of financial statements from these records. 

Chart of accounts

Sales – Clothing

Service Fees

Royalties

Discount Revenue

Cost of Goods Sold – Clothing

Advertising

Wages – Sales

Depreciation

Accounting Fees

Computer Software & Training

Consulting Fees

Legal Fees

General Insurance

Electricity

Telephone Charges

Cleaning

Repairs – general

Rent

Loss on Sale -non-current assets

Bank Fees

Interest – Finance Companies

Discount Allowed

Bad Debts

Cheque Account

Trade Debtors

Inventory – Clothing

Fixtures & Fittings

Motor Vehicles

Equipment

Computer Equipment

Establishment Costs

Accounts Payable Control

GST Payable Control

Input Tax Credit Control

Bank Loan

Capital – Judy

Profit and loss account
Particulars	Amount ($)	Amount ($)
Revenue:
Sales clothing	117,592.00
Sales -accessories	9,308.00
Royalties	9,000.00
	135,900.00
Less: Cost of goods sold	47,432.00
Gross profit	88,468.00
Advertising	1,250.00
Wages – Sales	6,067.00
Depreciation	13,250.00
Accounting Fees	750.00
Computer Software & Training	3,500.00
Consulting Fees	400.00
Legal Fees	1,350.00
General Insurance	1,200.00
Electricity	560.00
Telephone Charges	550.00
Cleaning	560.00
Repairs – general	1,090.00
Rent	7,500.00
Bank Fees	154.00
Interest – Finance Companies	110.00
Discount Allowed	1,367.00
Bad Debts	2,916.00
Loss on Sale -non-current assets	14,750.00
Loss on computer damage flood	4,090.00
Total expenses		61,414.00
Net profit before tax		27,054.00

Profit and loss account:

Profit and loss account
Particulars	Amount ($)	Amount ($)
Revenue:
Sales clothing	117,592.00
Sales -accessories	9,308.00
Royalties	9,000.00
Discount revenue	900.00
	136,800.00
Less: Cost of goods sold	47,432.00
Gross profit	89,368.00
Advertising	1,250.00
Wages – Sales	6,067.00
Depreciation	21,200.00
Accounting Fees	750.00
Computer Software & Training	3,500.00
Consulting Fees	400.00
Legal Fees	1,350.00
General Insurance	1,200.00
Electricity	560.00
Telephone Charges	550.00
Cleaning	560.00
Repairs – general	1,090.00
Rent	7,500.00
Bank Fees	154.00
Interest – Finance Companies	110.00
Discount Allowed	1,367.00
Bad Debts	2,916.00
Loss on Sale -non-current assets	14,750.00
Loss on computer damage flood	4,090.00
Establishment costs	5,400.00
Total expenditures		69,364.00
Profit before tax		19,104.00

Balance sheet:

Balance sheet
Assets	Amount ($)	Amount ($)
Current assets
Trade Debtors	25,200.00
Inventory – Clothing	34,031.00
Prepaid insurance	1,000.00
Prepaid rent	2,750.00
Cheque account	94,567.00
Royalties receivable	1,000.00
Non-current asset	158,548.00
Fixtures & Fittings	45,050.00
Motor Vehicles	40,000.00
Equipment	17,000.00
		102,050.00
Total assets		260,598.00
Liabilities and equity
Current liabilities
Accounts Payable Control	4,840.00
GST Payable Control	7,570.00
		12,410.00
Non-current liabilities
Bank loan	40,799.00
Owner’s capital
Judy’s capital	207,389.00
Total liabilities and equity	260,598.00

Part d:

To,

Judy,

CEO.

Subject: Software package selection and reasons:

Respected sir,

After considering the nature of transactions and the requirements of the company it has been decided that the company should use MYOB to maintain computerized accounting information system. The software has been chosen for the company keeping in mind the requirements of the company and its operations. The employees shall be provide with necessary training to ensure they are capable of processing accounting transactions in the accounting software. Data storage shall be unlimited with use of cloud computing. The company should take full back up of its data at the end of each week. The system shall be motioned and reviewed regularly to ensure evaluate its effectiveness and efficiency.   

References:

Avgerou, C., & Walsham, G. (Eds.). (2017). Information Technology in Context: Studies from the Perspective of Developing Countries: Studies from the Perspective of Developing Countries. Routledge.

Cleary, P. (2017). Introduction to Accounting Information Systems. In The Routledge Companion to Accounting Information Systems (pp. 25-34). Routledge.

Libby, R. (2017). Accounting and human information processing. In The Routledge Companion to Behavioural Accounting Research (pp. 42-54). Routledge.