Developing and implementing product strategies

Submitted by: Imran Azad Roll no: AD514942 Submitted to: Mr Sohail Book: Financial Accounting Code: 5533 Course: MBA Submitted on: October 20, 2009

Accounting Information System:

It is a subset of management information system (MIS). It is responsible to provide timely and accurate financial and statistical reports for internal management decisionmaking, and for external parties such as creditors, investors, and regulatory and taxation authorities. The main purpose of Accounting is to provide the information to its user and others who are interested into the business enterprises for example the invertors are interested in the return they will get same as the government officials and even employees as well. We can say that accounting is the language of business it can communicate in form of cost, prices, sales volume, profits and return on investment and we can say that these all are accounting measurements. So we can say that the accounting information is an integral part.

Types of Accounting Information:

There are three main types of accounting information.

Financial Accounting:
It refers to information describing the financial resources, obligations, and activities of an economic entity (either an organization or an individual). It describes the financial resources and obligations at a point in time and the term results of operations to describe its financial activities during the year. It is designed to assist the investors that whether they invest there investment into the particular organization or not. It is also used in tax return. Financial accounting information is used for so many different purposes that it often is calledgeneral purpose accounting information.

 Management Accounting:
It is also known as managerial accounting it involves the development and interpretation of accounting information. The main objective of management accounting is to know about the performance of individual as well as departments and through management accounting managers set their organizations overall goals. It is the way to decide whether to introduce a new line of products.

Tax Accounting:
Financial accounting is used to file tax return however, the information often is adjusted or recognized to conform to income tax reporting requirements. The most challenging aspect of tax accounting is not the preparation of an income tax return but tax planning. It means to estimate how the financial transactions affect the tax liability of a company and how to reduce the tax burden.

Accounting Systems:
Accounting system consist of personnel, procedures, technology and records used by an organization for two purposes For developing of accounting information And to communicate this information to the decision makers. Design and capabilities of the accounting systems vary form organization to organization. In small businesses, accounting systems may consist of cashbook and chequebook or just up to the income tax. And there accounting system may be finished on the manual systems. Where as in case of large organization they need computers, highly trained personnel, and accounting reports that affect the daily operations of every department. Basic purpose of the accounting information system remains the same that is to meet the organizations needs for information as efficiently as possible. There are many factors that affect the

structure of the accounting system within a particular organization among the most important are The companys need for accounting information. The resources available for operation of the system.

DETERMINING INFORMATION NEEDS:

The types of accounting information that accompany must develop vary with such factors as the size of the organization, whether it is publicly owned, and the philosophy of the management. The law may prescribe some type of accounting information need. For example, for income tax regulations it is required every business to have an accounting system that can measure the companys taxable income and explain the nature and source of every item in the companys income tax return. Same as every company wants to know that how much they have owed from its creditors and how much they have given to their customers. And uses generally accepted accounting principles for financial reporting.

COST OF PRODUCING ACCOUNTING INFORMATION:

Accounting information should be cost-effective that is the value of the information produced should exceed the cost of producing it. Management has no choice but to produce the types of accounting reports required by law. In other cases, however, management may use cost effectiveness as the criterion for deciding whether or not to produce the information. In recent years, the development and installation of computer-based accounting systems have increased greatly the types and amount of accounting information that can be produced in a cost effective manner.

BASIC FUNCTIONS OF AN ACCOUTNING SYSTEM:

Basic functions of an accounting system is as follows Interpret and record the effects of business transactions. Classify the effects of similar transactions in a manner that permits determination of the various totals and subtotals useful to management and used in accounting reports. Summarize and communicate the information contained in the system to decision makers.

Principles of Designing Accounting System:

There are four main principles of designing Accounting system.

Cost Benefit Principle:

The cost-benefit principle holds that the benefits derived from an accounting system and the information it generates must be equal to or greater than the systems cost. Costs may either be tangible or intangible. Tangible costs include personnel, forms, and equipment. Intangible costs include the costs of wrong decisions.

Control Principle:
The control principle requires that a system provide internal control features in order to protect a firms assets and assure its data are reliable.

 Compatibility Principle:
The compatibility principle states that the design of an accounting system must be in harmony with the organizational and human factors of the business.

Flexibility Principle
The flexibility principle holds that an accounting system must be flexible enough to allow the volume of transactions to grow and organizational changes to be made. We can say that accounting information system may be manual or it may be a software in general speaking accounting information system is one which provide the information about the accounting activities in manual different registers maintained by an organization like cashbook, receipt book, payment vouchers are manual sources of accounting information system where as while using integrated accounting software which automatically generated some results are examples of software there are many software available in market like Peachtree, Quick book etc.

Case Study of AIS in a selected organization

Organization visited

QUALITY FEEDS
Sister Concern of

Vety Care Group

Introduction to the organization:

Vety care group is a manufacturing concern related to the poultry field and they are the larger manufacturers of Poultry Feeds as well as Poultry medicine their aim is to provide healthier and safe poultry products to their consumer and they stands services on first then there own benefits. And Quality Feeds is totally related to the Poultry Feeds industry and aim is same as whole of the group.

Data Collection Method:

To collect data I have personally visited the organization and with the permission of their Technical Director I have granted a permission to visit Accounts and IT Departments and they have given me opportunity to interview different employees of these departments so that I will understand about my topic in a practical way all of the data I am going to present is given to me by Head of Accounts Department of Quality Feeds. And information I am going to present in my report is based on question and answer replies by employees as well as head of department.

Accounting Software and Accounting System used:

In Quality Feeds they have their own IT department and they have there own maintained and prepared accounting software based on Fox Pro. And they are using accrual basis of accounting system, on which we purchase and sell the goods on cash as well as on credit. It makes them able to maintain their actual position in an appropriate way. They also are using some manual books and sheets to check the accuracy of the financial transactions

posted by the lower staff and for satisfaction and authentication of their accounting procedures. Books used in this organization are as follows: Cash Book Journal Ledger Stock register Cash bank vouchers Journal Vouchers Purchase day book Sales invoices Sales day book Material ledger

Flow of Accounting Information:

Flow of accounting data or information in this organization is quite simple first the physical evidence is being generated with the supported documents and then they will be transferred to the accounts department for further processing here I would like to explain it by giving the example of the purchase.

Example

of

Purchase

to

understand

the

Flow

of

Accounting Information:
Following procedure is being granted to purchase a certain material first of all purchase order is given to the procurement department by the production department then procurement department arrange the material and while unloading the materials certain tests are done by production department to know about the quality of the material then they unload the material and cut out the GRN (Good Receiving Note) with following documents in support Weight Slips (Gross weight both company and party)

Builty (Transport Company evidence) Calculation of weights (Both net and gross weights) GRN (Goods Receiving Notes)

These all documents are transfer to the accounts department for further processing here they get the bill of the certain material from the vendor and then make a PVR (Purchase Voucher) with all of these supporting documents and then posted them in to the ledger of material as well as all other effects are given in other heads like vendor freight is posted into its expenses account and material purchase with its net quantity is booked. Same kind of things are done to the sales and payments and receipts from the customer supported documents are very essential in every case for example while giving payment to the vendor their requirement is the receiver should provide the photo copy of their CNIC and signature as well and if he is getting payment on party behalf a proper letter written by the main party in name of him and give him authority for collection of that payment. After that all working the next step is the FINANCIAL STATEMENT which consist of the following Reports - Trial Balance - Profit / Loss Statement - Balance Sheet - Cash Flow

Cost and Revenue Determination:

The main way from where they are incurred costs are mostly related to the production department and sales department. As in production department they have system of overtime and daily wages where as to motivate the sales staff they have different strategies like commission on sale and cars are provided to the staff and more important is to give the commission on recovery to the recovery staff. And in administrative department the main source of cost is the interest on loan taken from the bank and salaries and nothing else. The main way for generation of revenue is sales.

Assets and Liabilities:

As they are selling there product on credit basis as well so accounts receivables are generated and there policy is to sell a product on 2 to 3 days credit so almost all of the payments are received within the allocated time The main liability, which they have to pay, is vendors payment and they pay to the vendors according to the agreements like 20% payment on balance and other terms are also involved. And as they have taken an over draft account from the bank so they have to pay almost 3 % interest on the limit used in a certain quarter.

SWOT Analysis Strengths:

Proper supporting documents. Own software. Flexibility of the accounting system uses by them. Accounting system is computerized and working is easy. Management properly checks authentication.

Weaknesses:
No passwords are given to the employees. Everyone can change the data. It supports up to the Trial Balance and manager through manual system makes other Financial Statements. Time consuming, as Financial Statements are not auto generated.

Opportunities:
As they have own IT department so they have opportunity to create software according to their needs. Proper look after of the accounting system is possible.

Threats:
As no passwords are allocated to the staff so no one should be blamed for wrong doings. Other companies of same field have more appropriate softwares. Secrecy leakage.

Recommendations
Though they have computerized accounting software but there are some drawbacks I have observed into that accounting system and there are my recommendations for Quality Feeds so that they can improve their accounting system.

Provide proper password to every employee. Edition and deletion power must be given to only one employee. Every employee must have accounting system related to his own job descriptions. Use IT department and insert the Financial Statement generation features into your accounting software.

Conclusion:

After all above discussion we can say that in any company without accounting system you can never be success, so its necessary for any company that they have an accounting system. The accounting system is one of the basic need of todays world and we can only go hand to hand with this world when we use a proper and authenticated systems which tells us about the current standings and future investment areas as well. While visiting the Quality Feeds I have witness that they have invested something to their IT department and that is very good and they have their own accounting software but they have to up grade there software time to time as they have many weaknesses and threats authentication must be increase by using password strategy and other tools. Last but not least organization needs to overcome its weaknesses and to improve their accounting system, which can automatically generate the Financial Statements and save our time as well.