Report For Strategic Information System Of Financial Revenues Favorable

Accounting information systems

Describe about the Report for Strategic Information System of Financial Revenues Favorable.

The performance of an organization in a business is dependent on the scope of realization of financial revenues which could be favorable. Recordkeeping has been a significant attribute in the development of business organizations over the years and the implications of financial recordkeeping are formidable requirements in the strategy for framing business decisions. Information and communication technologies have created many prominent changes in the mode of business operations (Galliers & Leidner, 2014). Consistent access to reliable information could help organizations to prepare sustainable strategies alongside emphasizing on the existing scenario. The information system is intended to establish a formal setting in which the data would be collected, interpreted into legible information and delivered to users (Shapiro & Varian, 2013). The following report depicts a comprehensive illustration of the various types of accounting information systems and the application of different systems or software for selected case studies.

The accounting information systems implemented by organizations are derived from concerns for various elements such a business processes and resources. The sustainability of an organization is dependent on the transparency of its financial records and the different inferences which can be drawn from the financial performance of the company. The application of information systems in the process of monitoring the financial documents related to an organization is considered as a cognizable approach for producing informative reports which can assist managers for building business decisions (Haux et al, 2013). However, the significance of tracking financial developments and pitfalls is observed in the collection, storage and processing of financial as well as accounting data has become more flexible with the introduction of computers and the internet. Connectivity is the keyword for development in the domain of business and hence the availability of necessary resources to establish the required framework can be apprehended as a promising platform for implementation of AIS or ERP systems. The sophistication of new business methodologies has also obtained drastic benefits from the utilization of AIS which can also be considered as a major outcome of transition from manual accounting information systems to computer based systems (Osman, El Beltagi & Hardaker, 2015). The functionality of accounting information systems can be studied from a comprehensive illustration of the components and functions of AIS. The trend of growing inclination towards information systems is characterized by three profound requirements. The foremost objective of establishing formidable AIS is realized in the plausible collection and storage of data related to the financial activities of an organization. AIS utilize collection of transaction data through source documents, illustrating the transactions in journals and translation of data from journals to ledgers. Accounting information systems are also responsible for generation of financial statements and managerial reports which are necessary for managers to acquire information relevant to decision making requisites (Ward & Peppard, 2016). Another profound function of AIS is observed in the establishment of formal controls for precise collection, interpretation and processing of data. Performance measurement systems must also be placed for evaluating the standards of performance followed by the organization in its financial domain. Multitude of functions and the proficiency of AIS in catering the strategic requirements of a business serve as credible indicators for implementing AIS systems or software in business applications (Waters et al, 2013).

Components of AIS

Prior to the implementation of accounting information systems, an organization must be aware of the components of an AIS in order to ensure cognizable measures for addressing the needs of an organization. The AIS consists of six integral parts such as people, procedure, data, software, internal controls and IT infrastructure. Each of the components has a distinct role in defining the functionality of the system. People in AIS refer to the accountants, consultants, business analysts and managers who have the authority to access and use the systems (Uçaktürk & Villard, 2013). They must be aware of the other related factors and the expertise in managing the various interfaces and hardware related to AIS. Procedure in the AIS is related to the methodologies implemented for collection, storage, retrieval and processing of data. The procedure must be clearly outlined in AIS which would help in identifying distinct methodologies for identifying the concerns and prepare contingency plans (Wu et al, 2013). The procedure also assists in preparing a rough impression of the necessary requirements in terms of physical and financial resources. The third component of AIS is the crux of every information system i.e. Data. Data is the major content of an information system and financial data associated with an organization serve as data for AIS of the organization. Software required for running the various procedures for information management is included in the software component of AIS and is largely reflective of computer programs used for data processing. Information technology infrastructure serves as the hardware for operating the AIS and is considered as a complement of the software component (Pearlson, Saunders & Galletta, 2016). The connectivity offered by evolved equipment in the domain of information and communication technology could account for higher efficiency of the information systems. Finally, the design of an accounting information system is completed by the establishment of internal controls which safeguard data from unfavorable practices. Internal controls can be perceived as security measures adopted by an organization to prevent unauthorized access to accounting information of the company.

The performance or the reliability of an accounting information system can be determined from a conclusive reference to five profound and acclaimed standards. The efficacy of accounting information system is primarily evaluated from the perspective of confidentiality, security, processing integrity, privacy and availability. Information systems which satisfy all conditions mentioned above are trusted for their efficiency and sophistication of performances. Security is verified through establishment of protocols for control and limitations on access to system as well as data (Amrollahi, Ghapanchi & Talaei-Khoei, 2013). Confidentiality is ensured through safeguarding confidential information from unwarranted disclosure. The processing integrity criteria are satisfied by the verification of accuracy, completion and time required for data processing under proper authorization.  Availability of a system is judged on the basis of its capability to address contractual and operational obligations. Finally, the prerequisite of privacy is evaluated by determining the collection and use of personal information of customers. If the personal information of customers is not subject to excessive exposure then the privacy criteria of AIS is fulfilled (David & David, 2016). These criteria assist in comprehensive judging of the capabilities of an accounting information system which in turn would be helpful for resolving information management issues of an organization from the right perspective. In many situations, it has been observed that organizations fail to realize the implementation of AIS and thus face critical setbacks in terms of misappropriation of documents, confusion over the taxable returns and increased complexity of cash flow descriptions (Abdelhak, Grostick & Hanken, 2014). Therefore, organizations must aim to develop information systems which could help them to acquire and collate relevant information associated with an organization’s financial aspects.

Measuring the performance of AIS

Accounting information systems are characterized by variations owing to the changes in context of the business environment. Factors such as magnitude of business, data volume and nature of data are responsible for framing new information systems. Electronic data processing (EDP) and the traditional relational database management systems implemented for data management in business organizations are prolific examples of implementation of technology in storage of relevant data (Bernus, Mertins & Schmidt, 2013). The accounting process is complicated and is characterized by the starting process of recording financial transactions and ranges to preparation of financial statements. The consistent development in information systems technology of business organizations can be considered as an initiative to comply with the Sarbanes-Oxley Act 2002. The classification of accounting information systems can be apprehended from the understanding of different types of business processes. Business transactions are classified into revenue and return processes, administrative, conversion processes and expense and return processes. Revenue and return processes comprise of indication to massive volumes of daily sales and cash inflows. Conversion process includes transactions which are implemented in work in progress and raw materials transactions (Ali, Mohamad & Tretiakov, 2013). Expenditure and return process imply references to payroll transactions while administrative processes involve capital, investment and borrowing transactions.  The above mentioned processes are documented in the form of external and internal financial reports. Internal reports include sales inventory status report or schedule of receivable accounts while external financial reports comprise of balance sheet, income statement and cash flow statement.

The types of accounting information systems used in the contemporary business scenario are also dependent on the nature and size of the organization alongside the organizational objectives. The two distinct classifications of AIS include manual and legacy systems. Manual systems are generally implemented by small businesses and home based enterprises. The examples of manual systems include requirement of source documents, special, general and subsidiary journals. Manual systems have been computerized in the recent times which require manual input and processing of data (Whittington, 2014). The computer framework utilized for the process is meant for storage of information solely. Legacy systems are considered as the sophisticated system of information storage and were implemented way ahead of the age of information technology (Willcocks, 2013). The information acquired from legacy systems is relevant to the historical data associated with an organization and could be apprehended flexibly by the personnel of the firm. Furthermore, the implications of legacy systems are cognizable for the employees of the organization which accounts for higher sophistication of outcomes. Accounting software packages lack such type of customization as observed in legacy systems.

Types of Accounting Information Systems

The case study provided for analysis is related to Disk4U which is a business established in Australia. The company is a small family-owned business and is characterized by its four outlets in Sydney. The expansion of operations of the company through the internet and acquisition of orders via phone has prompted the organization to undertake computerization of its accounting information systems. The organization faces major issues in the domains of business reporting and accounting which can be addressed by taking several factors into account. The recommendations of an accounting and business systems consultant must be aligned with implications of magnitude of the business, nature of the business and the volume of data associated with the company (Haron, Sabri & Zolkarnain, 2013). The implementation of manual system of accounting has been tried by the organization with limited results in terms of flexibility of maintaining information related to accounts, transactions, sources and interfaces. Hence the recommended AIS for Disk4U would be QuickBooks which is a conveniently framed accounting software package. The selection of QuickBooks can be validated by the multitude of reasons such as flexibility of managerial accounting and scope for including diverse and customized space for accommodating data. Since Disk4U has ventured into the online business through eBay, the organization would be liable to experience a higher influx of data volume which can be catered only through an information system capable of dealing with an invariable rise in the volume of information (Reeves, 2014). Information systems, especially in the domain of accounting are largely concerned with associate factors such as customer behavioral preferences and comparative reviews of financial performance in various financial years. The sales of Disk4U on the online platform is executed through a third party i.e. eBay and hence the AIS for the company must accommodate ample fields in order to enter data pertaining to transactional incentives which are exchanged between the organization and the vendor i.e. eBay which is helpful for reviewing the performance of an organization at any time. The company can find revenue which is lost in terms of product exchanges, replacements, supply chain costs and areas which are facing substantial barriers financially. The additional impact of the AIS for Disk4U includes the reference to cost accounting which depicts a clear representation of the costs pertaining to delivery of products and services along with a comparative review of the costs with the standards (Peppard, Galliers & Thorogood, 2014). The revised accounting information system in form of QuickBooks can facilitate monthly reports to the organization in terms of sales reports, performance comparisons, cash flow statements and income statement. Translation of information is also a major challenge which emerges in case of Disk4U and its AIS. The information pertaining to the firm is accessible in physical form and consists of descriptions of transaction documents, source documents and ledgers which have to be interpreted for inclusion in the new information system framework. The organization has to ensure that information associated with the manual accounting information systems implemented by the organization has to be reiterated precisely in the new information system. The sustenance of conventional information is necessary for inducing the characteristic of a legacy based system which can prove to be substantially helpful in reviewing the financial performance of the organization from the perspective of its past performance (Bajdor & Grabara, 2014). However; the system has to be implemented with coordinated effort from all perspectives of the information management system. Negligence for any particular element could lead to massive consequences for the organization in terms of lack of information related to specific organizational issues, financial instability and shortage of managerial effectiveness to cater the requirements of the company.

The case of Sungate foods implies the organization’s background in Victoria. The organization’s primary products include rice. The resources and infrastructure available for the organization include processing locations, milling facilities, rail spur, pollution control equipment and farms. The resources of the organization are excessive and the magnitude of the organization can be purportedly determined from the expanse of operations and intensity of outcomes of the organization. Scope for error in the AIS framework is derived from volume of data, inefficiency of personnel and the ambiguous integration of information systems in the case of Sungate foods. The outcome of the faulty implementation of AIS can be attributed to these above mentioned causes and their replacement can be considered in the form of implementing a developed framework for collecting, interpreting and representing the data associated with distinct sectors of the company (Vernez, Culbertson & Constant, 2014). The AIS system would be inclusive of distinct technologies for revenue process, expenditure process, conversion process and administrations process. Since Sungate foods is an organization with multiple resources and substantial potential for generating financial returns, the AIS for the company must be comprehensive and should indicate illustrated references to each of the business transactions observed in the company (Vernez, Culbertson & Constant, 2014). The interrelation among the various business transactions is also a significant indicator of the complexity required in the accounting information system. First of all, the revenue of the company has to be maintained distinctly alike other transactions. Revenue of the company is observed in the form of sales, returns on sales and cash collection. The data pertaining to each component involved in the processes of revenue collection is included in AIS (Vernez, Culbertson & Constant, 2014). The use of a generic accounting software package for Sungate foods cannot be considered as a plausible option since, the volume of data as well as variability could create certain concerns for the framework. The magnitude of the organization demands a customized framework for storing, processing and retrieving information related to the accounting aspects of the company. The extent of Sungate foods and its operations in the market also account for demands of AIS framework which can be understood effectively by personnel of the organization and thus the information system can be used effectively for the benefit of the organization. Sungate foods faces challenges in terms of financial resources in implementation of AIS which can be tackled by emphasizing on the critical aspects of accounting information such as cash flow and income statements rather than trivial issues. Detailing of individual procedures of an organization and the impact of each of the procedures is a mandatory requirement for the AIS that should be implemented in Sungate foods (Vernez, Culbertson & Constant, 2014). The recommendation assumes references to the inabilities of the existing AIS framework of the organization in reporting and accounting details. The formulation of the new accounting information system for Sungate foods is reviewed from the perspective of the company’s magnitude of operations. The massive scale of the organization is noted as a preliminary requisite for framing the AIS since it is also responsible for the invariable rise in the amount of information related to the company’s financial transactions. The output of the organization is derived through round the clock effort of employees and the diversity of the organization can also be observed from the processing locations, marketing office, milling facilities, farms and pollution control equipment. Therefore the recommended AIS system should be capable of interconnecting the information systems at each of the facilities which would assist in acquisition of real time data pertaining to collection from farms, processing data, stock details and data associated with packaging, distribution and sale of rice (Haron, Sabri & Zolkarnain, 2013). As suggested in the recommendations, Sungate food should aim at deriving comprehensive AIS which would be able to capitalize on the existing framework of information systems and data silos available for data storage.  The compilation of data from various domains of the organization’s activities such as marketing, production, distribution, expenditures and sales into a single report creates ambiguities and hence the recommended AIS framework could facilitate viable prospects for management of accounting information related to the organization.

Conclusion:

The significance of accounting information systems has been depicted in the report with conclusive references to solutions of two case studies. The case studies were primarily directed towards the lack of proficiency in areas such as business reporting and accounting. The issues were addressed in individual cases through consideration of influential factors such as organization type, size of the organization and the resources available for the organization. The capability of AIS infrastructures has been a widely doubted entity in the domain of information management owing to the various customized or legacy frameworks adopted by certain organizations (Willcocks, 2013). However, AIS has the capability of addressing the performance requirements of an organization from the perspective of estimations of accounting transactions and maintaining them in a coordinated fashion. Monitoring the financial framework of an organization through accounting information systems has proved to be a substrate for the development of packages and accounting software which could prove functional in keeping as well as monitoring records of business transactions and accounting reports. The emergence of online accounting software has also served as a vital boost for the domain of accounting information management as such platforms enable flexibility of interaction (Ali, Mohamad & Tretiakov, 2013). The emphasis on components of an accounting information system, specifications of the organization and objectives could serve as significant attributes for framing a functional and productive accounting information system.    

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