Accounting information systems management

 Methodology:

Considering the Literature Review of Emmanuel, Otley & Merchant (1990). Accounting for Management Control, Second Edition, and Chapman Hall the approaches to management control has been discussed in this course work.

Modern scholars Emmanuel et al 1 (1990) has constructed the significance of accounting for management control even though they acknowledge its importance and seek to undermine the pretentiousness of the accounting potentials.

Successful Outcomes Of the Literature Review:

The accounting information systems management analysed that the accounting system is affected by the surrounding environment both inside and outside the organization in which it operates and highlight some of the deficiencies of financial accounting if it were used for management control purpose.

It also emphasized that the decision-making should make more involvement than the financial figure and need of information for smoothly functioning of the organization. The accounting information system prioritized on understanding the difference between the three areas in which management operates and their different information needs.

We must be aware that the accounting information is the only one part of the overall system in which organization operates.

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Our studies review the recording function of accounting, often called bookkeeping and the drafting of the final accounts of different types of organizations. The final accounts represent the account given to the shareholders by the director of their running of the company during a particular year. Financial accounting is necessary from a legal point of view. This study would be incomplete if we had seen the" stewardship" function of accounting. The use of accounting for controlling the activities for a firm is more important.

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Setting out the approaches and developments for my chosen topic and critically discuss the strengths and weaknesses, with particular respect to the role of accounting with reference to the case studies.

Introduction:

The management of the organization has used the extracted information. For the organization the information needs of management may be limited and can be obtained by direct observation. Apart from the requirement of maintaining proper cash level these records do not help in the day-to-day management of business operation. He 2 is responsible for buying grocery for a large supermarket.

The basic decisions about what to buy at a given price remain the same. In the large organization there is a much wider choice of where and how to buy than in the small organisation. In order to ensure that the operations of the firms are carried out efficiently and effectively, there needs to be some criterion to measure the performance of the managers. A management information system should help identify these problems in an organization.

Accounting Information System (AIS):

The system of a management information System (MIS) that processes financial transactions to provide (1) internal reporting to managers for use in planning and controlling current and future operations and for no routine decision making; (2) external reporting to outside parties such as to stockholders, creditors, and government agencies. Accounting Information Systems (AISs) conduct the study and practice of accounting with the design, implementation, and monitoring of information systems.

Accounting Information Technology:

a) Process: The basic processing is achieved through computer systems ranging from individual personal computers to large-scale enterprise servers. However, the underlying processing model is still the "double-entry" accounting system initially introduced in the fifteenth century.

b) Input: The input devices commonly connected with AIS include: standard personal computers or workstations running applications; scanning devices for standardized data entry; electronic communication devices for EDI 3 and e-commerce. Many financial systems come "Web-enabled" to allow devices to connect to the World Wide Web.

c) Output: Output devices utilized include computer displays, impact and no impact printers, and electronic communication devices for EDI and e-commerce. The output may contain almost any type of financial reports from budgets and tax reports to multinational financial statements.

Management Information Systems (MIS):  Management information systems are interactive human systems that that support decision making for users both in and out of traditional organizational boundaries. These systems have been used to support an organization's daily operational activities; current and future tactical decisions; and overall strategic direction. MISs are made up of several major applications including, but not limited to, the financial and human resources systems.

Financial applications introduce the heart of AIS in practice. The modules generally implemented include: general ledger, payables, procurement/purchasing, receivables, billing, inventory, assets, projects, and budgeting.

Human resource applications introduce another major part of modern information systems.  The modules commonly integrated with the AIS include: human resources, benefits administration, pension administration, payroll, and time and labor reporting.

The financial reporting begins at the operational levels of the organization. The transaction processing procedures capture important business incident such as normal production, purchasing and selling operations. These transactions are classified and categorized for internal decision making.

Cost accounting systems are used in manufacturing and service environments. These allow organizations to track the costs associated with the production of goods and performance of services. AIS can provide advanced analyses for improved resource allocation and performance tracking.

The accounting information systems are used to allow organizational planning, monitoring, and control for a variety of activities. This allows managerial-level employees to have access to advanced reporting and statistical analysis. The procedures can be used to gather information, to develop various scenarios, and to choose an optimal answer among alternative scenarios.

Development:

The developments of Accounting Information Systems on five basic phases are such as planning, analysis, design, implementation, and support. The time period associated with each of these phases can be as short as a few weeks or as long as several years.

Planning:

The first phase of systems development is the planning of the project. This includes determination of the scope and objectives of the project, the definition of project responsibilities, control requirements, project phases, project budgets, and project deliverables.

Data Analysis:

The data analysis is through discussing the accounting information that is currently being collected by an organization. The latest data is compared to the data that the organization should be using for managerial purposes.

Analysis:

The analysis is used to both determine the accounting and business process used by the organization. These processes are redesigned to take advantage of best practices or of the operating characteristics of modern system solutions. The process analysis is a review of the organization's business processes. Organizational processes are identified and segmented into a series of events that either add or change data. These processes can then be changed to improve the organization's operations in terms of lowering cost, improving service, improving quality, or improving management information.

Decision Analysis:

The decision analysis is a process through review of the decisions a manager is responsible for making. The preliminary decision that managers are liable for an identified on an individual basis. The methods are created to support the manager in gaining financial related information with the objective of developing. This method is valuable when decision support is the system's primary objective.

Information and Reporting:

Reporting is the driving force for Accounting Information System. If the system analysis and design are successful, the reporting process provides the information that helps drive management decision-making. The accounting procedures make use of a variety of scheduled and on-demand reports. This report shows data in a table or tables; graphic, using images to convey information in a picture format; or matrices, to show complex relationships in multiple dimensions. There are numerous characteristics to consider when defining reporting requirements.

There are three categories of reports.

a) A filter report that separates select data from a database, such as a monthly check register; a responsibility report to meet the needs of a specific user, such as a weekly sales report for a regional sales manager; a comparative report to show period differences, percentage breakdowns and variances between actual and budgeted expenditures.

b) The formulation of screen designs and system interfaces are the primary data capture devices of AISs and are developed through a variety of tools. Storage is achieved through the use of normalized databases that assure functionality and flexibility.

C) The formulation of business process flowcharts is used to document the operations of the systems. Modern AISs use specialized databases and processing designed specifically for accounting operations. This means that much of the base processing capabilities come delivered with the accounting or enterprise software.

Deficiencies of financial accounting:

Before staring to examine accounting for management control let us look first at the deficiencies of financial accounting when we want to control the activities of an organization. Its first deficiency is that it deals with operations that have already occurred. It possible to control something whilst it is happening, and control can be arranged for something that is going to happen, but when it has already happened without being controlled then the activity has ended and we are too late to do anything about control. In this way if a company incurs a loss and we do not realize it until long after the event then the loss cannot be prevented.

The second deficiency of financial accounting is that it is concerned with the whole of the firm. Thus the trading account of a firm may show a gross profit of 60,000, and whilst it is better to know that than to have no idea at all of what the gross profit is, it does not tell management much about past transactions. Suppose that in fact the firm manufactures their products- watches, pens and cigarette lighters. Some possibilities of how much profit (or loss) was attributable to each of the products might be as in Exhibit

Data:

These are only some of the possible figures of profit and loss for each product which could result in an overall GP of 60, 000.  Just the figure of total gross profit would give you very few clues as to what lessons can be learned from studying the past to help you control the firm in the future. If possibility number 2 were in fact the correct solution then it would stimulate further discussion and investigation as to why these results had occurred.

For example, if a building was bought in 1930 for   20,000 it may well be worth 200,000 today, whilst if we rented a similar building now it might cost us   30, 000 a year. We would surely not use the original cost of 20,000 as the deciding factor as to what we will do now with the building. The original cost is now completely irrelevant for the control of the business now or in the future.

Management control:

It is also important to point our that the most important resource of any firm is the people who work in it. A danger exists that a great deal of care and attention may be given to designing a management control system and operating it, but this is absolutely of no use to management if it does not result in action by the human beings in the firm. Who take (or do not take) the necessary action.

A particular department may be that sales will increase soon and that the department will become profitable. If people accepted accounting figures as the only criteria on which action should be based then there would be some very bad actions by management.

Strength and Weakness Accounting Information System:

The Shareholder Value approach described by Alfred Rapp port, EVA™ technique described by Stern Stewart and the Cash Flow Return on Investment (CFROI) approach of the Boston Consulting Group. Information and research about the efficacy of the different approaches are limited and is primarily provided by authors with strong commercial interest in the outcome of any research into the effectiveness of the methodologies.

The objective of the study is to contribute to the developing dialogue on the appropriateness of different financial analysis techniques and performance measures. The view at Value Analytics is that it would be a mistake to believe that any single measure or analytical technique is perfectly suited to all types of financial decision support. Given that no technique can adequately fulfill all roles, a chart is included at the end of this article in which Value Analytix rates the four different financial analysis methodologies in terms of their strengths and weaknesses.

The main advantages of accounting information system are that it is easy to calculate, the data needed is readily available, and they are widely understood and thus easy to communicate. The accounting measures are often used for reporting - both internally for management and externally with investors Due to the ease of communication. Accounting measures describe historical facts in much detail, and give some idea of the historical performance and current status of the company.

I would like to show a Merrill Lynch report*, called Goodwill revisited. The objective of this report is to spotlight inflated profit figures in The Netherlands and thus spotlighting earnings based return measures.

Merrill Lynch mentioned balance sheets and income statements for all AEX and MidCap index constituents and adjusted it more towards Anglo-Saxon accounting principles.. The book value of the goodwill was added to reserves, while depreciation costs were charged to the income statement.

A straight-line depreciation period of 20 years was assumed, starting the year after an amortisation. The conclusion of the research report for the 25 AEX constituents were that earnings per share declined by 10.7%, and return on capital employed declined by 4.0% to 13.4%.

Accounting appraisal will always need to be used for external reporting and statutory and budgetary control purposes. They were not designed for use in valuing companies or driving strategic plans, and they are not suitable for these purposes.

Updated: May 21, 2021
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Accounting information systems management. (2020, Jun 01). Retrieved from https://studymoose.com/accounting-information-systems-management-new-essay

Accounting information systems management essay
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