Accounting Information System Accepted Principles of GAAP

Question: Describe about the Accounting Information System for Accepted Principles of GAAP. Answer: Introduction The Accounting Information System (AIS) is defined as the process that collects, stores and processes both the financial and accounting data (Moghadam et al., 2013). These data are generally used by the internal users of an organization in order to report the particular data and information to the tax authorities, creditors and investors. An accounting information system is usually a computer-based process that helps to track all the accounting activities of a business of an organization in conjunction with the resources of information technology. It has been found that the accounting information system mainly unites the traditional practices of accounting like the Generally Accepted Accounting Principles (GAAP) with the modern resources of information technology (Prasad Green, 2015). AIS include various elements that play an important role in the accounting cycle. These elements include the information and data that are related to the expenses, revenue, employee information, tax in formation and customer information. The specific data involves sales orders along with analysts reports, invoices, purchase requisites, check resisters, inventory, ledger, payroll, financial statement information and trial balance. Thus, selection of proper AIS/ ERP system is a mandatory factor as it helps an organization to make decision regarding investment in accounting software, as it depends on the various types and size of business (Soudani, 2012). Therefore, in this report, the business process of B Bakery along with the business requirements have been analyzed in order to determine the required systems and also to select the accurate software and vendor for better running of the firm. The Process of Business A baker is defined as an individual who bakes cakes and breads and sell them in the market. The cakes and breads are baked by help of oven or other concerted heat sources. The workplace that is used by a baker to bake and make the products like cakes and breads is known as bakery (Du, Huddart Xue, 2015). It can also be said that a baker is a specialized person who is also known as Pastry Chef. Baker can be of various types like Commercial Baker, Retail Baker, Bread Maker, Bakery Chef and Baked Goods Producer (Hall, 2012). A baker is a person who mixes and bakes the ingredients as per the recipes in order to make different kinds of pastries, breads and other baked products. Generally, these baked food items are sold by the wholesalers, grocers, institutional food services and restaurants. It has been found that usually, a baker check the quality of all the ingredients that are required for making any baked products (Abbasi, 2014). These ingredients commonly vary along with the recip e of the food items. In addition to this, a baker prepares the equipments that are required for baking and these equipments also vary with the different food items. A baker also weights and measures the flour and the other ingredients and mixes the measured ingredients by the help of a blender or a mixer. Moreover, a baker is also responsible for kneading, rolling, cutting and shaping the dough (Romney Steinbart, 2015). Then, the baker places the dough in the pan, then molds on the sheets and places this on oven temperatures for baking the particular food item on grills and/ or in hot ovens. Lastly, a baker observes the color change of the baked food item and its state and applies icings, glazes or any other toppings on the baked final product by using brushes and/ or spatulas (Domeika, 2015). The Key Activities of the Business The key activities of the particular business that is the bakery firm include production of the bakery food products, distribution of the manufactured products to target customers and target markets, accounting of the operational activities of the firm manually and employment of the staffs (Dooley, 2015). In addition to these, the other activities of the particular bakery firm involve baking accurately in proper oven temperatures, to fulfill the personnel responsibilities and to maintain inventory of the firm. Moreover, budgeting and cleanliness and safety are also considered as the key activities of the bakery business. Production of the Bakery Food Products The particular organization B Bakery mainly highlights on the manufacturing of bread and other products of confectionary. This also puts spotlight on the health factors of all the food items (Reimers, 2014). Distribution of the Manufactured Products The specified firm B Bakery also sells its manufactured products by help of various distribution channels that involve many pub-chains and supermarkets. Manual Accounting of the Operational Activities It has been found that the specified firm maintains all its accounts of the business activities manually. Thus, the firm has employed an accountant to the business whose function is to record all the transactions of the business and its accounts and also to organize the financial statements of the firm for every year (Dillard Yuthas, 2013). Employment of Staffs As per the case study, the bakery firm B Bakery has employed about 70 employees in order to conduct the operations of the particular business. It has been found that the firm also maintains the salary accounts of its employees through the manual procedure (Zhou, Hou Zong, 2016). Thus, there is a high probability that the firm might make mistake regarding the method of payment and the salary accounts of its employees. Development of Business Requirements Implementation of Essential Business Processes For operating and regulating any business, a huge number of processes or activities are required in order to run the particular business successfully. However, among all, a few of the activities are considered as indispensable (Collier, 2015). For the B Bakery, the activities that can be considered as the most important processes for the operation and regulation of the firm include the identification of the cost of sales, periodical analysis and cost effective process for production. In addition to these, this also includes the proper structure for payroll, information analysis and preparation of financial statements and payment of tax (Meyssonnier Pourtier, 2013). As per the detailed analysis of the particular case study of B Bakery, it can be said that in the last year, the rate of turnover of the organization was quite impressive. The revenue of the firm for the last year was noted to be more than $ 13.5 million and the business was running for more than 50 years. It has been found that the firm employed around 70 staffs, thus, based on all these data, the specified organization can be classified as the medium scale business. Additionally, the organization is enjoying a continuous growth over a few years for some of its unique products. The matter that is concerned is the deficit of proper accounting and the system of recording data. The particular organization should incorporate the below mentioned processes of business in order to make the activities of the business more efficient (Christensen Feltham, 2012). Identification of Cost of Sales The particular organization belongs to the bakery industry, thus, it can be said that the activities of the firm deals with manufacturing. In addition to this, the organization manufactures different types of products that involve various processes and materials. Thus, the specified organization should incorporate an accurate system of accounting that can identify the manufacturing expenses of all the products accurately (Lim, 2013). Cost Effective Process for Production The system of producing various food items should be accounted in such a way that is able to control the expenses of the products and can also help in developing more production systems that will be cost efficient (Li Bai, 2014). Periodical Analysis The bakery is a FMCG manufacturer, thus, it should incorporate such processes that can easily analyze the financial condition of the organization for a short duration. An Accurate Structure for Payroll A proper system of accounting as well as a proper structure of payroll are necessary for paying the salary and the other contributions and are paid to the staffs of the firm (Fang Shu, 2016). Information Analysis It has been found that there are different types of information that are related to the activities of business and these should be analyzed and preserved accurately by help of implementation of appropriate techniques (Demski, 2013). Preparation of Financial Statement The particular firm prepares financial statement each year but there should be an accurate system through which the organization can prepare the crucial configuration of financial statements during any time of the year based on the financial information of the specified period (KneÃ…Â ¾eviĆ¡, StankoviĆ¡ Tepavac, 2012). Payment of Tax For any organization, tax is considered as an important debt. Thus, the organizations should uphold such methods that can make the process of tax return much easier. Required Outcomes for Achieving Business Objectives It has been found that the implementation of essential business processes is required as the proper outcomes or results are necessarily required for achieving the objectives of the organization. Therefore, in order to analyze the above mentioned procedures, the following outcomes can be delivered and these might help the organization to run profitably and successfully. Improved Pricing Strategy It has been noted that the cost of sales is considered as the basic structure for constructing the selling price of a product or a service. Thus, it is important for the management department of a firm to incorporate an accurate system of costing as thus will help the particular organization to identify the proper cost of sales (Tazik Mohamed, 2014). In addition to this, the strategy of implementing proper or accurate pricing method will guide the specified organization in order to identify the selling prices of the food products in a proper way. Moreover, the determination of the selling prices of the various food products will also help the firm to change, modify and implement the accurate strategy of pricing, whenever it is needed easily (Anandarajan, Anandarajan Srinivasan, 2012). Cost Effective System for Production As per the case study, the particular company B Bakery is a firm that belongs to bakery industry. Therefore, the activities of the firm can be considered as manufacturing. Thus, as per the manufacturing unit, it has been observed that within the particular organization, there are several indirect costs that generally increase due to ineffective consumption of labor or material (Codreanu et al., 2012). The system of cost control is capable to identify the factors that are responsible for ineffective utilization and it also helps the organization to abolish or to diminish these factors. Superior Control over the Financial Performances It has been found that according to the periodical analysis of the information and data that are related to the financial matters, the specified organization B Bakery will analyze its financial situation in detail. The reason behind this is that it will help the management department of the organization to understand the performances of the firm for short period of time (Hopwood, Leiner Young, 2012). Thus, it can be said that it will become easier for the management team to take various defensive measures. However, if the outcome of the analysis would become negative and identify some positive traits for the achievement of the firm for a short duration and can use the factors for long run. Increases the Profitability of the Firm The reduction or the elimination of the factors for excessive expenses and the improvement of the effectiveness of the production level and the other activities of the business helps to increase the profitability of the organization (Salehi Abdipour, 2013). In addition to these, the particular organization B Bakery is also capable to analyze the data and information that are associated with the present condition of the market and its competitors in order to set the strategies of marketing properly. Determination of the Requirements of Systems It has been found that any organization including the bakery firm needs proper accounting software that should possesses the following characteristics: Cost Analysis Particular software of accounting should possess some specific characteristics that might record the cost of production efficiently. In addition to this, the accounting software should also be capable in producing financial reports as per the demand or requirement (Iskandar, 2015). Moreover, the specified accounting software can represent the contrast between the different types of cost items for different time periods. Recording of Documentation A medium-sized business entity generally has 1000s of accounting transactions within a particular accounting year. It can be said from the view point of an accounting expert that all the accounting transactions are uniformly relevant and significant, especially for the financial statements of the organization. In addition to this, the financial statements of the prior fiscal time period are also needed in order to evaluate the business performance. Thus, the particular accounting software should possess the system of recording the information and data sporadically (Zhuang, 2014). The reason behind this is that this recording process will help to bring out the information whenever required and can be extracted from the software. Financial Structure (Basic) Accounting software facilitates the basic structure of financing. Thus, it should comprise of accurate systems in order to account the creditors, inventories and debtors. On the other hand, the payroll accounting system helps in recording the payment of salary and other benefits of the staffs (financial). Additionally, the software should comprise of certain features that will help to trace the cash transactions on a daily basis and should also provide information in a summarized manner regarding the financial statements (Iskandar, 2015). Moreover, the software should be regulated by using internal network of the business and security should also be implemented, such that only the selected individuals can get access to important information and data. Selection of Software Accounting Software Package Vendors According to the above stated requirements, there are mainly three vendors for accounting package that have been chosen and its details regarding the individual accounting software packages have been gone through from various websites. The key vendors are MYOB, DacEasy and SAP. Selection of Type of Accounting Software According to Zare et al. (2013), there are different types of accounting software accessible in the present market. However, the particular firm B Bakery has an only option to choose the most accurate one among all the different types of accounting software based on the structure of the specified business and its system of accounting. Opined to Ahmad (2013), the accounting software can be characterized into three segments, these include low-end software, medium-end software and high-end software. Low-end Software for Accounting It has been found that the low-end software for accounting is appropriate for those firms that are very small in size and are regulated by the individual professionals, such as doctors, advocates and many more. This particular type of software has been structured on the basis of the single accounting system. Medium-end Software for Accounting Wu, Yuan Ren, (2012) stated that the medium-end software for accounting has been mainly structured on the basis of the double entry system. This particular software also covers the basic features of accounting for a business venture. In addition to this, it has been found that the medium-end software for accounting is capable to fulfill the key requirements of the firms that are considered as profit-earning business. High-end Software for Accounting It has been noted that the high-end software for accounting is also considered as the highly progressive technology that generally acts as an efficient factor for the advanced system of accounting (Du, Huddart Xue, 2015). This network system of the firm should be improved for superior implementation of the particular software. Therefore, it can be said that the particular firm B Bakery should choose the medium-end software of accounting for running the operations of the business venture. This will help the firm to serve its purpose effectively and efficiently. However, the implementation of the high-end software of accounting would become much expensive for this medium-sized firm and it will also need a long period of time for incorporating the particular software. Selection of Vendor Comparison between the Features of Accounting Software Packages According to Fang Shu (2016), it can be said that the two software packages for accounting that are suitable or appropriate for the small and medium sized businesses include MYOB and DacEasy. From the detailed analysis, it can be said that both the mentioned software that is MYOB and DacEasy are composed of four sections, these are creditors, debtors, stock and pay structure. It has been found that the financial reports of the business are generally prepared in a several numbers of ways. However, the software analysis can be done based on various grounds like ease in utilization of the software, helps in documentation, alternatives of reporting and its scalability. Supporting in Documentation It can be said that both the printed and online documents can be prepared by utilizing both the mentioned software systems. The DacEasy software helps an organization to find a correct location within the index. From the detailed analysis, it has been noted that there are different alternatives, which helps the management department to search by using the help button that is located on the screen (Anandarajan, Anandarajan Srinivasan, 2012). On the other hand, in case of MOB, the button is present on each screen and thus the information and data can be generated quickly. Structure of Payment The DacEasy software helps to set up direct deposits. In addition to this, DacEasy software generally characterizes the tax deposits, quarter, employees, yearend and month with the aim to construct the structure of payment. In case of MYOB, the structure of payment can be managed by utilizing many alternatives; however, the status of the staffs cannot be individualized. Expenses and Scalability The difference between the strategy or pattern of pricing of both the software DacEasy software and MYOB cannot be specified. The version of single use of both systems have been sold, however, the version of multiple user are networked. Simplicity in Using the Particular Software System The structure of the MYOB is comparatively simpler and is also convenient for using. Thus it helps the beginners of the financial management to map the accounting tasks. Additionally, the process of installation of MYOB is also very easy and any part of this program is accessible by using the navigation bar (Reimers, 2014). On the contrary, DacEasy software is able to operate easily and the consumer has an alternative of navigation by screen from one section to another. The tool bars design is not suitable for the consumers as the structure is not designed accurately. Time Scheduling DacEasy software provides the option of time billing; however the section of payroll can be filled with the data of time billing (Prasad Green, 2015). Thus, the billing report is obtained at time, whereas, for MYOB, the billing time along with reference can be set for respective terms of credit. Alternatives of Reporting The flexibility of DacEasy to generate the report is lower and it is able to create fifty different kinds of reports. On the contrary, MYOB can produce more than 190 kinds of reports and this might help to capture and present the data regarding employees, vendors, customers and company. Creditors In DacEasy, the vendor section is composed of many accounts payable, like managing vendors, printing cheques, purchase order and quotes (Du, Huddart Xue, 2015). On the contrary, MYOB supports e-payment and quotes, purchase orders and tax forms can be printed easily. Additionally, it has been noted that through this software, credit memos cannot be developed for the vendors. Debtors DacEasy helps to characterize the details of customers like banking, sales, invoices and many more. The products to be transported cannot be anticipated and the invoices through email cannot be sent by utilizing the particular system (Soudani, 2012). On the contrary, MYOB can easily manage the accounts receivable. Moreover, calculations of incomes, customer charges and different charges that are associated with finance can be perform simply. However, the shipping costs and shipping cannot be estimated and traced respectively, as this particular software does not offer shipment instrument. Selection of the Most Suitable Vendor It can be said that implementation of MYOB is appropriate for the bakery business as it guides to produce various financial reports and is much user-friendly. There is no significance between the differences of costs as the cost of both the packages is similar to each other. The structure as well as the process of installation is relatively simpler for MYOB than DacEasy (Domeika, 2015). MYOB provides two way facility of transfer, however, it is absent in case of DacEasy. It can be said that MYOB is much flexible than DacEasy, thus it provides the facility of billing time which is not provided by DacEasy. Moreover, in case of MYOB, inventory cost can be calculated with the help of both FIFO and LIFO, standard and average costs (Hall, 2012). Additionally, the beginners in the sector of financial management also use MYOB for its simplicity and easy process of installation. Therefore, a medium sized firm like B Bakery can run its operations by implementation of MYOB accounting software. This also offers opportunity to print even the financial charges that are associated with customers. Conclusion Therefore, it can be concluded that for the medium-sized bakery business B Bakery, implementation of MYOB accounting software is the most appropriate one. 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