Accounting Information System

Table of Contents
Part SL
No.

Page
What is AIS

Revenue Process
a) Sales
b) Sales Return
c) Cash Collection

Expenditure Process
d)Purchase
e)Purchase Return
f)Cash Disbursement
g)Payroll

Conversion
i)Planning
j)Resource Management
k)Logistic

Administration
l)Capital
m)Investment
n)General Ledger

An accounting information system (AIS):

AIS Is a system of collection, storage and processing of financial and
accounting data that is used by decision makers. An accounting
information system is generally a computer-based method for tracking
accounting activity in conjunction with information technology
resources. The resulting statistical reports can be used internally by
management or externally
byInformation
other interested
Accounting
System parties including
investors, creditors and tax authorities. It includes education in the
latest database management techniques and system modeling
Revenue
Expenditure
Conversion experience
Administration
approaches, and provides
the Internet implementation
necessary to practice systems development in today's technological
Planning
Capital
Salesenvironment.
Purchase
Sales Return

Cash Collection

Purchase Return

Resource Management

Investment

Cash Disbursement

Logistic

General Ledger

Payroll

1. Revenue:

Revenue process includes

a)
Sales
b)
Sales Return
c)
Cash Collection

a) Sales process
Purchase order

Price Verification

Sales order

Credit Limit

Inventory & sales

preparation

Prepare shipment
documents

Update accounts
receivables

Update General
Ledger

Purchase order
A purchase order (PO) is a commercial document issued by a buyer to
a seller, indicating types, quantities, and agreed prices for products or
services. Bangladeshi mans wear brand Cats eye company ltd submits
a purchase order of 500 pcs of shirt to Micro Fiber Company Limited.
Price Verification:
Micro fiber company ltd (seller) submit a price quotation of Tk 650 per
pcs to Cats eye (buyer). Buyer verifies the price and confirm the final
price at Tk 600 per pcs.
Sales order
A sales order records the customer's originating purchase order which
is an external document. The customer's PO is the originating
documents which trigger the creation of the sales order. In a
manufacturing environment, a sales order can be converted into a
work order.
Credit Limit
As a regular customer, The Cats eye company ltd gets a credit facility
of Tk 7,00,000 from Micro Fiber company ltd. After receive the PO, the
company immediately verify the buyers credit limit for future
operations.
Inventory & sales preparation
After checking the credit limit, the seller checks the availability of the
product in warehouse. If the product is available and matches with the
buyers sample, then the seller prepares the goods for shipment as per
the buyers requirement.
Prepare shipment documents
Seller sends the goods to the buyer after preparing the invoice and
packing list. After that seller update the sales record accordingly.
Update accounts receivables & General Ledger

Seller updates the accounts receivable as per the sales record and
prepare monthly statement and general ledger accounts.

b) Sales return process

Receive goods
from customer

Warehouse &
Inventory

Update sales
record

Update account
receivable

Update General
Ledger

Receive goods from customer

Buyer (Cats eye company ltd) returns 50pcs of defective goods (shirt)
to the seller (Micro Fiber Company Ltd). The billing departments of
seller match the return goods with the original sales invoice while
receive.
Warehouse & Inventory
Warehouse checks the condition of the returned goods. If it is in
repairable condition then repair it and send to the buyer or update the
inventory and COGS. If it is not in repairable condition, it consider as
scrap.
Update sales record
After receiving the sales return, seller update the sales return record
and prepare a credit memo and send it to customer.
Update account receivable
After the sales return, seller updates the account receivable accounts,
cash record and general ledger.

C) Cash collection process

Cash receive from
customer

Update account
receivable
Cash receive
Seller receives cash/cheque payment from buyer and prepare a cash
receipt journal while it match with the original sales invoice.

Update account receivable

After receiving the cash payment, seller updates the accounts receivable
accounts and general ledger.

2. Expenditure:
Expenditure process includes
d) Purchase
e) Purchase Return
f) Cash Disbursement
g) Payroll

d) Purchase:
What is purchase?
Purchase defined as the acquisition of needed goods and services at the

optimum cost from competent, reliable sources in a timely manner..

Though there are several organizations that attempt to set standards
in the purchasing process and the process can vary between
organizations to organization.
The Golden Rule of Purchasing:
Purchasing must acquire needed goods and services:
Of the right quality
In the right quantity
At the right price
At the right time

Purchase process
Where information technology is not heavily ingrained - Traditional
Purchasing processes tend to be characterized by high levels of
bureaucracy, encumbered with manual authorization (often requiring
multiple signatures independent of the order value.), slow
communications and a focus on unit price rather than long term
commodity arrangements.
The diagram below provides an example of a traditional purchasing
process.

Purchase
requisition

Authorized
purchase

requisition

Select vendor

Prepare purchase
order and send to
vendor

Receive goods (if

match) and
prepare receiving
record

Receive invoice
from vendor and
Update inventory

Update account
payable
Purchase return
(if need)
Update general
Update account
Update inventory
ledger
payable
record (after
return)
Purchase requisition & Authorized purchase requisition
A purchase requisition provides authorization for the Procurement
Department to initiate a purchasing transaction. The requisition form
is available from the Procurement Department, and contains a
complete list of information that is required to complete a purchasing
transaction.
Vendor selection
The vendor selection process can be a very complicated
Purchase order
A completed purchase requisition will be reviewed and approved in the
Procurement Department according to the organizations policy for
requisition approval. Once the requisition has been approved, it will be
used to create a Purchase Order (PO).
Receive goods
Vendor prepares to supply the goods and service to the buyer after
receives the PO. Buyer prepare a receiving record after receive the
goods.
Update inventory record
Buyer receive invoice from seller (supplier) and update the inventory
records.

Update accounts payables

Buyer updates the accounts payable after the new purchase record.
Sales return & update accounts payables (if need)
Buyer updates the accounts payable if any purchase return occur.
Update General Ledger
Buyer updates the general ledger as per the purchase records.

e) Purchase return process

A purchase return occurs when a buyer returns merchandise that it
has purchased from a supplier.

Rejected goods
from customer

Authorization to
return goods

Document Match

Prepare debit
memo & send to
vendor

Receive credit/
cash from vendor
& update account
payable

Update inventory
record

Update General
Ledger
Rejected goods return from customer
Goods can be return to vendor for various reasons with a authorization
of return.
Return goods with a debit memo

Return goods after match with the purchase invoice and send a debit
memo to the vendor.
Update account payable, inventory record & general ledger
Update account payable and inventory record after receiving refund or
credit memo from vendor against return.

f) Cash Disbursement process

Cash disbursement means the payment of money against purchase.

Identify the
invoice of due
payments
Update accounts
Update cash
payable record
record

Prepare for
payments

Cheque sign after

document check

Payment to vendor

Update General
Ledger

Identify the due invoices

Identify the vendors invoices which payment is still due and prepare
for payment.
Payment to vendor and update the cash record

Payment of the vendor against the due payments after cheque sign
and update the cash records.
Update account payable and general ledger
Account payable and general ledger accounts will upgrade after
payment to vendor.

g) Payroll process
The payroll is the amount of money that a company pays its employees
at any given time. Sometimes every two weeks, or sometimes once
every month

Time sheet submit

by the employee

Working hour
correction and
approve the time
sheet

Prepare payroll
register

Prepare payroll
Voucher

Transfer fund to
payroll bank
account

Update general
ledger

Time sheet submission & checking

Employee submits there time sheet where there working time was
recorded. Authority will approve that after checking/correction the
working hours.

Prepare payroll register & voucher

The payroll register will prepare as per the corrected working hours.
Payroll voucher and transfer fund in payroll bank
Payroll voucher will create as per the payroll register. The fund will
transfer to the payroll bank and update general ledger.

3. Conversion:
Conversion process includes
h) Planning
i) Resource Management
j) Logistics

h) Planning
Business planning is a process that involves the creation of a mission
or goal for a company. The process of business planning can be very
broad, encompassing each aspect of the operation.

i) Resource Management
The process of using a company's resources in the most efficient way
possible is considered as resource management. These resources can
tangible resources such as goods and equipment, financial resources,
and labor resources such as employees. Resource management can
include ideas such as making sure one has enough physical resources
for one's business.

j) Logistics
Logistics is defined as a business planning framework for the
management of material, service, information and capital flows.

4. Administration:
Administration process includes
k) Capital
l) Investment
m) General Ledger

K) Capital:
Capital is the money that is going to be invested in a business. Some
of the money will come out of from personal investment. Some of the
money may come from another source of financing, such as a bank or
a small business center loan. Thats the capital for starting a business.
Knowing how much capital needs to start a business will be a deciding
factor on the type of business might be start.

Here we consider tk 50 lac as our capital, where tk 25 lac from

personal investment and tk 25 lac from bank loan.

l) Investment:
Investment encompasses a wide variety of funding options. While
funding for capital investment is generally in the form of common or
preferred equity issuance, it may also be through straight or
convertible debt. Funds invested in a firm or enterprise for the
purposes of furthering its business objectives. Capital investment may
also refer to a firm's acquisition of capital assets or fixed assets such
as manufacturing plants and machinery that is expected to be
productive over many years.

m) General Ledger:
The general ledger is a collection of the group of accounts that
supports the value items shown in the major financial statements. It is
built up by posting transactions recorded in the sales daybook,
purchases daybook, cash book and general journals daybook. The

general ledger can be supported by one or more subsidiary ledgers

that provide details for accounts in the general ledger. For instance, an
accounts receivable subsidiary ledger would contain a separate
account for each credit customer, tracking that customer's balance
separately. This subsidiary ledger would then be totaled and compared
with its controlling account (in this case, Accounts Receivable) to
ensure accuracy as part of the process of preparing a trial balance.