Corporate Accounting

2.2 : Accounting Information System:

Accounting information system is the process of collecting, storing, processing and reporting the accounting and non-accounting information of an organization. It can be either manual or automated. (Accounting Edu, n.d.)

In case of micro-brewery, the accounting transactions include selling of beer, which will requires sales invoice, bills, receipts etc. purchasing of raw materials, salaries to the employees and more. The non-accounting transactions include collecting the details of customers or suppliers, creating master list of the customers and more.

Though there are various types of Accounting information systems available, but it is very important to choose the one which meets the requirement of business operations and process and fulfill the overall objective of the information system and management requirements.

The accounting information system is further divided into different sub-systems that caters to the different needs of the organization. It is listed below:

Different Sub-Systems of Accounting Information System:

  1. Transaction processing system
  2. General ledger system
  3. Financial reporting system
  4. Management reporting system

(Evwierhurhoma, 2020)

Explanation

  1. Transaction processing system: This is a process of accounting information system that captures all the daily transactions of the microbrewery. The following transactions would be captured in this subsystem:
  • Daily Brewery operations
  • Documents for each of the entries
  • Tax liability details
  • Recording of alcohol content
  1. General Ledger System: All the transactions recording in the first subsystem would be converted into accounting form in this subsystem. For each of the transactions recorded, the ERP used (Tally ERP 9) would record the corresponding debit and credit and will transfer the amounts to the financial statements of the enterprise. Some of the important points related to general ledger system are listed below:
  • The data of transaction procession system is the input for general ledger system
  • The data would be processed here by transferring the information to different ledger accounts
  • Inventory of the microbrewery would be determined
  • Monthly expenses would be transferred to income statement
  1. Financial Reporting systems: The transactions processed in general ledger system would be processed further into monthly / quarterly / half yearly / yearly reports like the income statements, balance sheet, tax reports, other mandatory reports. It includes the data that is required for audit purpose. Example: Stock summary, stock wastage, financial statements and cash flow statements.
  2. Management Reporting systems: This is a part of accounting information system that helps in generating the reports that are essential for the management of a company for making decisions. It can be budgets, variance reports, cost related reports, responsibility reports, comparative financial statements and more.

Here are the frequencies of each of the sub systems:

Sub-System

Frequency

1. Transaction processing system

Daily

2. General Ledger System

Daily / Monthly

3. Financial Reporting systems

Monthly / Quarterly / Half yearly / Yearly

4. Management Reporting systems

Monthly / Quarterly / Half yearly / Yearly

2.3 : Issues specific to e-business systems: (Yadav, 2015)

  1. Data Security: There is a high risk of data theft and misuse of the information. There are chances that the insiders of the organization can misuse the organization companies. And, there are also chances that the hackers can mis use the card information of the customers. In these two ways, there is a risk of data security.

This risk is not present in the traditional system of accounting as it is all manual process. There is no room for hackers or data theifs.

  1. Speed: Without the use of a high-end computers and high speed broadband, the electronic information system can slow down the process of accounting.

An outdated laptop may not be able to take the load of data and can reduce the performance. Also, it may take time for the employees to process the data. At the same time, without a proper network coverage, the employees may not be able to reach the cloud when required. This again hinders the performance.

This issue will not arise in the traditional system of accounting as only the employee working speed is the only thing that matters to do the work manually.

  1. Offline Vs Online office suits: Though the features available in online office suits and the offline office suits are almost similar, there are certain features that are not present in the online office suits. Also, if the online office suits has to be edited, it requires internet connection.

This situation will not arise in traditional business as the records will be kept in books and hard ledgers.

Solutions to tackle the above problems:

  1. Data Security: The microbrewery has taken subscription of a leading antivirus software to make sure no virus attack happens on the system data. Also, a separate information technology team has loaded the security related software to the laptops to make sure the employees are not misusing the data. Also, the team keeps an eye on the emails and files that goes out from each of the systems. With this security system in place, it is not possible to hack the systems of the employees.
  2. Speed: In order to not to slow down the process, high speed internet and high-end systems are necessary. Hence, the enterprise has installed the latest processor and 8 GB ram in all the employee’s system. Also, to get a good connectivity, the company has installed two high speed broadband internets from two different service providers. Therefore, if the server of on service provider is down, the employees can use the other broadband connection. In this way, internet would not be a reason for slowing down the process.
  3. Offline Vs Online office suits: In order to overcome this issue, the company has decided to use only the online office suits as the company has a good speed internet. In this way, it helps the employees to use only the features of online suits and not bother about the features of offline suits.

2.4 : A managerial decision needs a lot of data and information. In case of financial decisions, the accounting data is much needed. Following are the managerial decisions supported by each of the sub-systems of accounting information system:

  1. Transaction processing system: This is a sub-system that records all the transactions in the microbrewery. Right from procuring the raw material for preparing different types of beer to the customer buying the beer from the counter, all the transactions would be recorded in this sub-system. This provides information about sales, purchases, different expenses, other income and more. This also has data regarding the inventory summary and the details of the cancelled orders.
  2. General Ledger: This is a sub-system that processes the information to derive profit or loss of the enterprise. Hence, this sub-system provides information like gross profit, net profit, tax paid, comprehensive income and more for the purpose of decision making.
  3. Financial reporting system: This is a sub-system that provides statutory report to the management, like, balance sheet, income statement and cash flow statements. These reports helps the organization to understand more about its gross profit, net profit, depreciation, cash flows, cash position and more. Also, the reports generated at this subsystem is used by the auditors to perform statutory or internal audit.
  4. Managerial reporting system: This is a sub-system that provides reports that are required for the purpose of managerial decisions. For example, Tally ERP 9 provides reports like, exceptional reports, cost center reports, cash flows, fund flows, ratio analysis and more. These reports will facilitate the decision making of an organization.

2.5 : Features of Tally ERP 9:

Tally ERP 9 Introduction:

It is an accounting ERP software that enhances the performance of small and medium scale industries. It supports GST computation. This is cost effective and also saves the time of the organization by automating the process of manual entry of transactions. (Tally Solutions, n.d.)

As the micro-brewery is a medium scale organization, also as this software is cost effective, we have chosen Tally ERP 9 as the accounting information system for the microbrewery. The low cost of this software and the high performance of this software made us choose this. Here are the important features of Tally ERP 9 are listed below:

  • It is GST complaint. Hence, it is easy to generate tax invoice.
  • It allows to maintain a different credit period for different suppliers. This flexibility gives the freedom for the microbrewery to negotiate for a better credit period with different suppliers.
  • Different formats of the billing can be maintained. Microbrewery may require two formats of billing-one for alcohol and one for food and alcohol.
  • It supports multi-currency. If the purchases are made from different countries, it is easy to record the transaction as it supports different currencies.
  • Multiple price levels help the restaurant in fixing different prices for different quantity of beer-Pitcher, 1 liter, half liter and samplers.

Following are the requirements for installing Tally ERP 9:

  • Processor: 1.8 GHz x86-64 architecture Intel Pentium
  • RAM: 4 GB
  • Hard Disk: Minimum free space of 150 MB
  • Monitor Resolution: 1024 x 768
  • Operating System: 64-bit editions of Windows

The laptops of Microbrewery will have the following characteristics:

  • Operating System: 64 bits edition of Windows 10 version “2004” – “purchased”
  • Processor: Intel Core i7-8700K – “in built”
  • RAM: 8 GB – “in built”
  • Hard Disk: 1 TB – “in built”
  • Brand: Lenovo ThinkPad
  • Database software: MS Access - “purchased”
  • Network description: WAN and LAN – “in built”
  • Network software: Windows Server 2016 – “purchased”

2.6: Comparison between the system requirement and the brewery laptops:

Requirement

Tally ERP 9

Microbrewery Laptops

Operating System

64-bit editions of Windows

64 bits edition of Windows 10 version “2004”

Processor

1.8 GHz x86-64 architecture Intel Pentium

Intel Core i7-8700K

RAM

4 GB

8 GB

HardDisk

Minimum free space of 150 MB

1 TB

Monitor Resolution

1024 x 768

1366x768 pixels

All the requirements for installation of Tally ERP 9 is fulfilled by the organizations laptops. Along with these requirements, the dedicated information technology team in the organization is striving had to install an updated anti virus software in all the computers. Also, it has restrited the usage of social media websites in office laptops as it is more prone for virus attack.

2.7 :

Level 0 charts of different subsystems:

Transaction Processing Systems

General Ledger System

Financial Reporting System:

Managerial Reporting System:

Narration:

Level 0 diagrams are a type of flow charts that presents the context of the topic. (Lucid Chart, n.d.)

Transaction Processing System :

This is a subsystem that gathers the data together. The following are the important tasks done by Tally ERP 9 in the transaction processing system sub-system:

  • Generating bills for the customers
  • Recording incoming inventory (purchases)
  • Setting up a master list of GST Products and their rates and the item list of Non-GST items
  • Setting up the billing cycle for suppliers
  • Establishing contact list of customers
  • Establishing bank discount offers for different bank customers

General Ledger System :

General ledger system is the subsystem that process the information gathered by the transaction processing system. The following are the important tasks done by tally ERP 9 for general ledger system sub-system:

  • Maintains different ledgers like Accounts Payable, Accounts Receivable, Salaries, Rent, Inventory and many more
  • Segregates the transactions into expense, income, loss and profit
  • Provides data security for all the transactions

Financial Reporting System :

This subsystem helps in providing the statutory reports or the details required by the auditor for carrying on the audit of the organization. Following are the important financial reports provided by Tally ERP 9.

  • Displaying Financial statements
  • Displaying different ledger accounts
  • Displaying stock summary
  • Displaying stock movement analysis
  • Displaying the cash flow statements
  • Displaying the cash book
  • Reconciliation of bank statement.

Managerial Reporting Analysis:

This subsystem helps in providing information to the management through different managerial reports. Managerial reports are the reports used by the management to in decision making. The following are the important managerial reports produced by Tally ERP 9:

  • Cost Center related reports
  • Ratio Analysis
  • Cash flow analysis
  • Funds flow analysis
  • Exceptional Reports

Document systems flowchart for an order received in a Micro-Brewery

Narration:

Above is the flowchart showing a transaction flow across the accounting information system. Below is a brief explanation of each of the steps mentioned in the flowchart.

  • Once the customer is received in the brewery, an employee would attend the customer to take an order. This is the first step in the flow chart.
  • Once the order is taken, the waiter would check if the ordered beer is available in the brewery.
  • If no, the same would be informed to the customer. If yes, the order would be accepted, and preparations would be done for serving the order. This is known as processing the order.
  • Once the order is served, the customer may reject the order for whatsoever reason. In that case, the order will be cancelled.
  • If the customer accepts the order, an invoice would be generated and the same would be entered in the general ledger.
  • After this step, the transaction would reflect under sales category of the income statement.
  • After preparation of income statement and other financial statements, the management may ask for various reports for the purpose of decision making.

It should also be noted that, once the order is processed, the inventory would be reduced and the same would be reflected in the stock summary report. Once the customer enters the brewery, his name and phone number would be taken at the reception to maintain a master list of the customers.

Below are the benefits of using subsystems in micro-brewery:

  • It saves the manual efforts put to know the cash position of the restaurant. It automates the calculation of cash position of the company by end of every month.
  • This system helps to know the sources and applications of funds in an accounting period. It can be either monthly, or quarterly, or yearly.
  • Exception reports gives the details of the orders cancelled. In the comments section, the responsible person can give the actual reason for cancelling the order.
  • We can extract the email ids of the clients in the exception reports. These email ids can be used to send the feedback form, cold emails or follow up emails.

With a proper use of accounting information system, the organization can save the manual labour hours and also can reduce the errors and frauds in the organization.

References for E-Accounting: Challenges and Future

Accounting Edu, n.d. Accounting Edu. [Online]
Available at: https://www.accountingedu.org/accounting-information-systems/
[Accessed 08 September 2020].

Evwierhurhoma, J., 2020. SBAccounting. [Online]
Available at: https://sbaccounting.com.ng/three-major-subsystems-of-an-accounting-information-system/
[Accessed 06 September 2020].

Lucid Chart, n.d. Lucid Chart. [Online]
Available at: https://www.lucidchart.com/pages/templates/data-flow-diagram/dfd-level-0-template
[Accessed 08 September 2020].

Tally Solutions, n.d. Tally Solutions. [Online]
Available at: https://tallysolutions.com/tally/what-is-tally-erp-9-and-how-to-use-it/
[Accessed 08 September 2020].

Yadav, S., 2015. E-ACCOUNTING: CHALLENGES & FUTURE. International Journal of Marketing & Financial Management, 3(05), p. 23.

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Accounting and Finance Assignment Help

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