Accounting Information System

Course Code: ACT-202

Course Title:
Intermediate Financial
Accounting

Submitted By:
1. Sangita Nandi (211-11-6624)
2. Mamin Akter Shila (211-11-6643) Submitted To:
3. Tamjid Ul Islam (211-11-6645)
Repon Miah
4. Toab Ahmed Rafin (211-11-6660)
Senior Lecturer
5. Mahajabin Binte Marfee (211-11-6667)
Department of Business Administration

Daffodil International University

Team Elite
4/14/2022
Abstract

This study seeks to examine the use of Accounting Information Systems (AIS) by ZBMS Sdn. Bhd.
and its contribution to the knowledge management and strategic role of the organisation.
ZBMS is a company that registered in Kuala Lumpur and operate in construction industry. The
company used automated AIS known as ‘Contract Plus – Financial & Project Accounting’
package commercially developed by a private company (ZYXW). Wide variety of people that
involve in the company’s operation within and outside the organisation uses accounting
information generated by this system for decision-making. Based on input provided by
operational level managers, the Contract Plus software produces monthly projects’ income
statements, balance sheets and statement of changes in financial position for the strategic and
tactical managers to plan, control and make decision on the resources allocation. The role-
played by AIS enhanced the organizations’ accounting functions, and add information value.
The automated AIS speed up the process to generate financial statements and overcome
human weaknesses in data processing. The system enhances management of resources and the
process of monitoring, control and prediction of ZBMS business for better future. With the
advent of AIS, the growth of tacit and explicit knowledge could be seen from the intensive
training of personnel at the early stage of system implementation to the development and use
of company’s own manual in training of new staff and assisting the job of existing staff. Given
the benefit of AIS to ZBMS, this paper recommended that the source of data should be fully
automated, and the existing system should be upgraded through computerize the pre-
tendering and post-tendering of projects to enable AIS integration.

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Table of Contents
Abstract.......................................................................................................................................................1
Introduction.................................................................................................................................................3
What is Accounting Information System.....................................................................................................4
History.........................................................................................................................................................4
How is an Accounting Information System (AIS) used?...............................................................................5
Types of accounting information system.....................................................................................................8
Manual Systems......................................................................................................................................9
Legacy Systems........................................................................................................................................9
Replacement of Legacy Systems..............................................................................................................9
The functions of AIS.....................................................................................................................................9
Benefits of accounting information system...............................................................................................10
Evolution...................................................................................................................................................12
Conclusion.................................................................................................................................................12

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Introduction
Accounting Information System (AIS) is vital to all organisations (Borthick and Clark, 1990;
Curtis, 1995; Rahman et al., 1988; Wilkinson, 1993; Wilkinson et al., 2000) and perhaps, every
organisations either profit or nonprofit-oriented need to maintain the AISs (Wilkinson, 2000: 3-
4). To better understand the term ‘Accounting Information System’, the three words constitute
AIS would be elaborate separately. Firstly, literature documented that accounting could be
identified into three components, namely information system, “language of business” and
source of financial information (Wilkinson, 1993: 6-7). Secondly, information is a valuable data
processing that provides a basis for making decisions, taking action and fulfilling legal
obligation. Finally, system is an integrated entity,
Accounting Information Systems (AIS) and Knowledge Management: A Case Study 37 where the
framework is focused on a set of objectives. The combination of the three words Accounting
Information System indicate an integrated framework within an entity (such as a business firm)
that employs physical resources (i.e., materials, supplies, personnel, equipment, funds) to
transform economic data into financial information for; (1) conducting the firm’s operations
and activities, and (2) providing information concerning the entity to a variety of interested
users. Indeed, the combination or interaction between human, technology and techniques
would permit an organisation to administer its knowledge effectively (Bhatt, 2001; Thomas and
Kleiner, 1995). Currently, the world and human life has been transformed from information age
to a knowledge age (Syed-Ikhsan and Rowland, 2004: 238; Thomas and Kleiner, 1995: 22), and
knowledge has been recognized as the most valuable asset. In fact, knowledge is not
impersonal like money and does not reside in a book, a data bank or a software program
(Drucker, 1993). Drucker believed that knowledge is always embodied in a person, taught and
learned by a person, used or misused by a person. As the world moving into knowledge era, this
paper will examine how ZBMS Sdn. Bhd. manages its knowledge in order to remain competitive
amongst the construction industry. Probst, Raub & Romhardt (1999, p.1) stressed that
companies must learn to manage their intellectual assets (i.e. knowledge) in order to survive
and compete in the ‘knowledge society’. Indeed, knowledge management is concerned with
the exploitation and development of the knowledge assets (Davenport et al., 1998). This paper
seeks to examine the Accounting Information Systems (AIS) used by a Malaysian company
named ZBMS Sdn. Bhd. The paper will highlight the users of the system and the way
information adds value to the organisation. In addition, the paper will investigate the way
knowledge is managed through the process of creating, storing, disseminating and applying and
how information system plays an important role throughout the process and the AIS
contribution in the organization’s strategic role. The remainder of the paper is organized as
follows. The following section describes the background of ZBMS and the use of accounting
information systems. The third section provides research findings on accounting information
systems employed by ZBMS. The fourth section offer suggestions for future research. The final
section concludes the paper and outlines the limitations of the study.

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What is Accounting Information System
An accounting as an information system (AIS) is a system of collecting, storing and processing
financial and accounting data that are 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 financial reports can be used internally by
management or externally by other interested parties including investors, creditors and tax
authorities. Accounting information systems are designed to support all accounting functions
and activities including auditing, financial accounting & reporting, -managerial/ management
accounting and tax. The most widely adopted accounting information systems are auditing and
financial reporting modules.
An accounting information system (AIS) consists of:
• People
• Procedures
• Data
• Software
• Information technology

History
Traditionally, accounting is purely based on a manual approach. The experience and skillfulness
of an individual accountant are critical in accounting processes. Even using the manual
approach can be ineffective and inefficient. AISs can support the automation of processing a
large amounts of data and produce timely and accurate of information.
Early accounting information systems were designed for payroll functions in 1970s. Initially,
accounting information systems were developed "in-house" as no packaged solutions were
available. Such solutions were expensive to develop and difficult to maintain. Therefore, many
accounting specialists preferred the manual approach rather than computer-based. Today,
accounting information systems are more commonly sold as prebuilt software packages from
large vendors such as Microsoft, Sage Group, SAP AG and Oracle Corporation where it is
configured and customized to match the organization's business processes. Small businesses
often use accounting lower costs software packages such as Tally, ERP 9, MYOB and
QuickBooks. Large organisations would often choose ERP systems. As the need for connectivity
and consolidation between other business systems increased, accounting information systems
were merged with larger, more centralized systems enterprise resource planning (ERP). Before,
with separate applications to manage different business functions, organizations had to develop
complex interfaces for the systems to communicate with each other. In ERP, a system such as
an accounting information system is built as a module integrated into a suite of applications
that can include manufacturing, supply chain, human resources. These modules are integrated

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together and are able to access the same data and execute complex business processes. Today,
Cloud-based accounting information systems are increasingly popular for both SMEs and large
organisations for lower costs. With adoption of accounting information systems, many
businesses have removed low skills, transactional, and operational accounting roles.

How is an Accounting Information System (AIS) used?

Accounting reports and data are the most useful as well as important resource for the
company. Accounting information provides data related to the cost, profits, capital employed,
net worth, shareholder’s value, long-term liabilities and total assets of the company. Such
information is very critical for the business in order to take further decisions like expansions,
acquisitions, long-term investments and dissolution. Any incorrect information, mal report,
misuse and leak of data would affect the investment decisions and may put the company at
high risks or losses. Quality recording of the data and keeping it safe, away from threats and
frauds is the need of an hour. Accounting standards does not determine the quality of the
financial statements; it is the support, dedication and commitment of the management and
related parties that determines the quality of financial statements.
Accounting Information Systems (AIS) are the technology-induced systems that collect, store
and manage the data while reporting financial statements to the concerned parties in a
legitimate manner with high security towards its access and usage (Romney & Steinbart, 2009).
The auditors to check and keep a track on the fraudulent activities done at the business place
use these systems.
Many large and SMEs are now adopting cost effective cloud-based accounting information
system in recent years. Looking back years ago, most organizations, even larger ones, hire
outside either consultants, from the software publisher or consultants who understand the
organization and who work to help select and implement the ideal configuration, considering all
components.
The steps to implement an accounting information system are as follows:

• Detailed Requirements Analysis

Where all individuals involved in the system are interviewed. The current system is thoroughly
understood, including problems, and complete documentation of the system—transactions, reports,
and questions that need to be answered—are gathered. User needs that are not in the current
system are outlined and documented. Users include everyone, from top management to data entry.
The requirements analysis not only provides the developer with the specific needs, it also helps
users accept the change. Users who have the opportunity to ask questions and provide input are
much more confident and receptive of the change, than those who sit back and don't express their
concerns.

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• Systems Design (synthesis)
The analysis is thoroughly reviewed and a new system is created. The system that surrounds the
system is often the most important. What data needs to go into the system and how is this going to
be handled? What information needs to come out of the system how is it going to be formatted? If
we know what needs to come out, we know what we need to put into the system. The program we
select will need to appropriately handle the process. The system is built with control files, sample
master records, and the ability to perform processes on a test basis. The system is designed to
include appropriate internal controls and to provide management with the information needed to
make decisions. It is a goal of an accounting information system to provide information that is
relevant, meaningful, reliable, useful, and current. To achieve this, the system is designed so that
transactions are entered as they occur (either manually or electronically) and information is
immediately available online for management.

Once the system is designed, an RFP is created detailing the requirements and fundamental design.
Vendors are asked to respond to the proposal, to provide demonstrations of the product, and to
specifically respond to the needs of the organization. Ideally, the vendor will input control files,
sample master records, and be able to show how transactions are processed that result in the
information that management needs to make decisions. An RFP for the information technology
infrastructure follows the selection of the software product because the software product generally
has specific requirements for infrastructure. Sometimes, the software and the infrastructure is
selected from the same vendor. If not, the organization must ensure that vendors will work together
without "pointing fingers" when there is an issue with either the software or the infrastructure.

• Documentation
As the system is being designed, it is documented. The documentation includes vendor
documentation of the system and, more importantly, the procedures or detailed
instructions that help users handle each process specific to the organization. Most
documentation and procedures are online and it is helpful if organizations can add to the
help instructions provided by the software vendor. Documentation and procedures tend to
be an afterthought but is the insurance policy and the tool used during testing and training
—before launch. The documentation is tested during the training so that when the system
is launched, there is no question that it works and that the users are confident with the
change.

• Testing
Before launch, all processes are tested from input through output, using the documentation
as a tool to ensure out. This is done in a test system not yet fully populated with live data.
Unfortunately, most organizations launch systems before thorough testing, adding to end-
user frustration when processes don't work. The documentation and procedures may be
modified during this process. All identified transactions must be tested during this step. All
reports and online information must be verified and traced through the audit trail so that
management is ensured that transactions will be handled consistently and that the

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information can be relied upon to make decisions. Before launch, all users need to be
trained, with procedures. This means a trainer using the procedures to show each end user
how to handle a procedure. The procedures often need to be updated during training as
users describe their unique circumstances and the "design" is modified with this additional
information. The end user then performs the procedure with the trainer and the
documentation. The end user then performs the procedure with the documentation alone.
The end user is then on his or her own with the support, either in person or by phone, of
the trainer or other support person. This is before data conversion.
that all processes are thoroughly documented and that users can easily follow the
procedures: They know out. This is done in a test system not yet fully populated with live
data. Unfortunately, most organizations launch systems before thorough testing, adding to
end-user frustration when processes don't work. The documentation and procedures may
be modified during this process. All identified transactions must be tested during this step.
All reports and online information must be verified and traced through the audit trail so
that management is ensured that transactions will be handled consistently and that the
information can be relied upon to make decisions.
Before launch, all users need to be trained, with procedures. This means a trainer using the
procedures to show each end user how to handle a procedure. The procedures often need
to be updated during training as users describe their unique circumstances and the "design"
is modified with this additional information. The end user then performs the procedure with
the trainer and the documentation. The end user then performs the procedure with the
documentation alone. The end user is then on his or her own with the support, either in
person or by phone, of the trainer or other support person. This is before data conversion.
It works and that the procedures will be followed consistently. The reports are reviewed
and verified, so that there's no garbage in-garbage out. This is done in a test system not yet
fully populated with live data. Unfortunately, most organizations launch systems before
thorough testing, adding to end-user frustration when processes don't work. The
documentation and procedures may be modified during this process. All identified
transactions must be tested during this step. All reports and online information must be
verified and traced through the audit trail so that management is ensured that transactions
will be handled consistently and that the information can be relied upon to make decisions.

• Training
Before launch, all users need to be trained, with procedures. This means a trainer using the
procedures to show each end user how to handle a procedure. The procedures often need
to be updated during training as users describe their unique circumstances and the "design"
is modified with this additional information. The end user then performs the procedure with
the trainer and the documentation. The end user then performs the procedure with the

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documentation alone. The end user is then on his or her own with the support, either in
person or by phone, of the trainer or other support person. This is before data conversion.

• Data Conversion
Tools are developed to convert the data from the current system (which was documented
in the requirements analysis) to the new system. The data is mapped from one system to
the other and data files are created that will work with the tools that are developed. The
conversion is thoroughly tested and verified before final conversion. There's a backup so it
can be restarted, if necessary.

• Launch
The system is implemented only after all of the above is completed. The entire organization
is aware of the launch date. Ideally, the current system is retained and often run in
"parallel" until the new system is in full operation and working properly. With the current
mass-market software used by thousands of companies and fundamentally proven to work,
the "parallel" run that is mandatory with software tailor-made to a company is generally not
done. This is only true, however, when the above process is followed, the system is
thoroughly documented and tested, and users are trained before launch.

• Tools
Online resources are available to assist with strategic planning of accounting information
systems. Information systems and financial forms aid in determining the specific needs of
each organization, as well as assigning responsibility to principles involved.

• Support
The end users and managers have ongoing support available at all times. System upgrades follow a
similar process and all users are thoroughly apprised of changes, upgraded in an efficient manner,
and trained.

Many organizations chose to limit the time and money spent on the analysis, design,
documentation, and training, and move right into software selection and implementation. If a
detailed requirements analysis is performed with adequate time being spent on the analysis, the
implementation and ongoing support will be minimal. Organizations that skip the steps to ensure
the system meets their needs are often left with frustrated end users, costly support, and
information that is not current or correct. Worse yet, these organizations build the system three
times instead of once.

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Types of accounting information system
There are multiple types or categories of accounting information systems. What a business firm
uses depends on the type of business, the size of the business, the needs of the business, and
the sophistication of the business.

Manual Systems
Manual accounting information systems are used mostly by very small businesses and home-
based businesses. If a system were manual, it would require the following: source documents,
general ledger, general journal, and special journals or subsidiary journals you might need.

Legacy Systems
Legacy systems are often in existing business firms and were used before information
technology got as sophisticated as it is today. Even though legacy systems may appear to be
old-fashioned, they have some definite advantages to the firm. They contain valuable historical
data about the firm. The firm personnel tend to know how to use the system and understand it.
A legacy system has usually been customized to the specific needs of an individual firm. You will
not find this kind of customization in generic accounting software packages.
Unfortunately, legacy systems also have significant disadvantages. Often, they have no
documentation. It is usually hard to find replacement parts because hardware and software
may become obsolete. Even the computer language that legacy systems use is usually an older
language. Most legacy systems have been built from scratch.

Replacement of Legacy Systems

You can completely replace your legacy system with a new, up-to-date system. That is quite an
expensive solution. You can also update your legacy system. You can use a procedure called
screen scraping, which is a technique that takes the data displayed on the computer screen and
translates it so a newer application can read it. You can also set up an enterprise application
integration system. This type of system networks the different applications in your legacy
system, such as inventory, payroll, and others.
If you are an SMB, unless you are the smallest, home-based variety, you will want your
accounting information system to be up-to-date in order to keep you competitive within your
industry. There are many options to choose from.

The functions of AIS

An accounting information system takes all the data and figures from an organization's financial
records and arranges them into an orderly structure. The accounting information system serves
three basic functions: to collect and process data, to provide information to decision-makers
within the organization and to see that accounting personnel records information accurately
and protects the data.

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  Collection and Processing
In the collection phase of an accounting information system, accountants or bookkeepers gather
and record data from cash sales, receivables, cash purchases, payables and payroll, among other
transactions. In computerized systems, the software program processes all the debits and
credits into a complete information management database.

 Reports for Management

Accounting personnel distribute reports to decision-makers within the organization, such as
sales and marketing managers, production managers, financial managers and all department
heads. Management uses the information generated from the accounting information system to
analyze the organization's current operations and financial condition and make plans and set
goals for the future. For example, a balance sheet created from the system can show
management, owners, creditors and investors where the organization stands financially at a
particular point in time.

 Accuracy and Security

Limiting the number of people who have access to the system best accomplishes the third
function of an accounting information system -- to ensure that the business maintains correct
data securely. The leaders of the organization must decide who that will be. For example,
trained clerks, bookkeepers or accountants require access to verify and enter data into the
system and generate reports. Other associates of the organization, both internal and external,
generally have no need to manipulate the data.

Benefits of accounting information system

In today’s business, companies have been investing heavily in computerized accounting information
systems (AIS) to respond to the complexities and time-consuming procedures in the processing business
transactions. An Accounting Information System is a structure that a business uses to collect, store,
manage, process, retrieve, and report its financial data so it can be used by accountants, consultants,
business analysts, managers, chief financial officers (CFOs), auditors, regulators, and tax agencies.

These are the following significant benefits from Accounting Information Systems;

 Automation
AIS eliminates the manual processing of data. The preparation of data to generate meaningful
reports is done by the system in just one or two clicks. This helps in maintaining electronic
journal books to store and retrieve business data without the need for physical documents.
Today, AIS are also intelligently designed to perform complex computations that would
otherwise be difficult to perform manually.

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 Accuracy
The common mistakes in manual accounting such as posting of a transaction twice in the journal
and calculation errors are addressed. Therefore, reports generated in the system is more
reliable than in manual accounting.

 Data Security
While the inherent risk of manual accounting makes financial information susceptible to physical
loss or theft, accounting systems provide a secure and protected storage of financial data.
Unauthorized access to information is, thus, significantly eliminated. Users can also access
readily available reports in the system dashboard anytime. In a cloud-based accounting system,
users can also access financial data remotely even when on a business trip or a vacation.

 Speed
There is no delay in generating reports for management use as long as all transactions have
been entered into the system. Hence, real-time reports are possible unlike in manual
accounting.

 Cost-effective
The adoption of an AIS helps to streamline the company’s processes thus reducing the staff time
in executing individual tasks, especially during the reporting season. The number of hours that
financial professionals, such as accountants, bookkeepers, and even SME business owners spend
will be significantly reduced since most of the processes in preparing reports are handled by the
system. The movement towards accounting information systems has been a significant part of
every business nowadays. Today, a company that efficiently utilizes the capabilities of AIS has
the edge of coping up and taking advantage of the ever-changing business environment.
However, in the market, there is a lot of accounting systems available. Subscribing to a system
without considering the key factors in selecting the right system for the company would be a
waste of money. Here are the things that the company needs to know in choosing an accounting
system.

 Functionality
An AIS system should be sufficient to cater to the business requirements of a company. While
requirements vary across companies of different industries, an accounting system must be able
to adapt to the general transaction and report requirements.

 User-Friendly
The user interface and navigation of the system should be simple and easy to grasp. Though
training is normally provided to users, an effective AIS must be designed to facilitate quick
understanding from users of different demographics.

 Scalability

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 In choosing the right accounting system for your company, you need to consider also whether
your system provider will have future upgrades of the system or other products or services that
you might need in the future when your business expands. This is to ensure that the system
provider can keep up with your company’s growth.

 Expansion Capabilities
A system that supports multilingual, multi-currency, and multi-standard features is also best for
companies that are planning to expand globally or are already dealing internationally. The
company that has branches around the globe can use the multilingual feature, switching from
one language to another for reporting purposes to the head office can easily be executed. In
addition, those company that deals in different currencies can maintain the same localized
journal data under different accounting standards including requirements set by J-SOX, IFRS or
US GAAP.

 Cloud-Ready
While keeping pace with technological advents and the on-going pandemic, a cloud-ready
accounting system will also prove beneficial in shifting from office-based to home-based working
environments without hampering the business. You can access and monitor your financial data
even you are on a business trip or vacation.

 Integrable with Other System

An accounting system that can be integrated seamlessly with other systems would be perfect for
growing companies. Without considering this factor ahead of time would be harmful to your
business in the future. It will disrupt your business and just waste your money since you cannot
keep up with the growth of your company and might purchase another system to replace the
existing one for you to stay on track.

Evolution
Accounting Information System is characterized by large amount of different approaches and
Methodologies over the past 50 years. Due to the restrictions and weaknesses of previous
models each new model evolved. Interestingly After the production of newest technique the
newer or recent models of evolution dose not eliminate or replace the older or previous
technique instantly. However Several Generations and peers of systems exists among different
institutions, organizations, groups at the same time and possible exists within a single or same
institutions. Similarly The up-to-date inspector needs to be aware with the functioning features
needs to be aware with the functioning features of all ASI approaches that he or she is likely to
encounter. Currently there are four approaches can be identified which has been evolved
during last 50 years.

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Conclusion
In conclusion the accounting information system is a very integrate system. A company needs
to follow the correct steps when using the Strategic mode so that the business does not fail
from the huge makeover that it may be receiving from the Strategic mode. Also Making sure
that the company should also make that it is in compliance with the Sarbanes-Oxley Act of 2022

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