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Accounting Information Systems

INTRODUCTION

Accounting information system refers to set of activities related to collection, storage and  processing of data related to accounting and finance which is generally useful for internal users in order to reporting to external users like lenders and creditors, tax authorities etc. It is most common and computerised method to trace accounting activities from beginning to end while using various information technology means (Bushman and Williams, 2012). This report discusses about Air-Asia which is a Malaysian airline company. Company has its headquarter in Malaysia and address of company is Red Q, Jalan Pekeliling 5, Lapangan Terbang Antarabangsa Kuala Lumpur (klia2),64000  KLIA, Selangor, Malaysia. The main activities of company are to provide Air transportation services across the world. Company also provides hotel services and tour packages along with flight tickets. Company sponsors many functions and events held mostly in Malaysia and also plan  events in order to provide event tickets along with fligh

This report also describes financial highlights of Air-Asia. Company has reported total revenue of RM 9710 millions in 2017 whereas RM 6846 millions in 2016. Company's operating income is increased to RM 2161 millions in 2017 which was RM 2066 millions in 2016. On other hand Net profit of company has decreased in 2017. In 2017 company has reported Net profit of RM 1571 million which in 2016 was RM 1619 millions. In 2017 company's net debts are reduced by RM 1412 millions. Company's common stock is increased to RM 2515 millions because company received full amount on additional paid in capital. Air-Asia has acquired a company named VIDI(Formerly Touristly) in April, 2017 for $2.6 millions due to which shareholder's equity, assets and liabilities are increased. Company is currently using Xero, an accounting software for accounting and reporting purpose (Financial Highlights, 2018).

TASK

1. Discussion on existing accounting software:

Air-Asia conducts its all financial and accounting operation through a Xero. It is most popular and widely used accounting software to management of various accounting operations and activities in a large corporation. It is customisable accounting management software system that organise financial and accounting activities as per company's rule and policies and organise funds or monetary resources according to budgets of company in a systematic manner that assist in creation of framework for decision making. Following are major aspects which provide assistance in understanding various aspects of Air-Asia's existing accountant software:

Users: In Air-Asia accounting information is generated using Xero which is used by various parties or users. The main reason behind using information obtained from accounting software is substantial interest of these users or parties in information. Following are the key users of accounting software:

Management: Accounting software is used by management to asses actual and real time performance of company in order to take vital decisions or to formulate strategies. They also use these software to modify any existing objectives or strategies and to identify any non value added activities or process. In Air-Asia management use information provided by accounting software to analyse performance of organisation and to asses actual outcomes of formulated strategies.

Owner: For obtaining knowledge about company's actual position and profitability condition, owners uses accounting software. In Air-Asia, owners and founders of company use these software to keep update with company's actual per day profitability condition (Dimitropoulos, Asteriou, and Siriopoulos, 2012).    

Auditors: During auditing process and reporting process auditors of company use accounting software to for finalisation of accounts. They also evaluate accounting software to identify any technical or clerical error in process of accounting software. In Air-Asia auditors by using information generated through Xero report their annual report.

Staff and employees: Employees or staff using accounting software can accomplish their task easily and effectively. In large organisation training programs are organised to develop their skills in operating accounting software. Employees and staff in Air-Asia using accounting software to conduct their task and activities specially accounting and financial activities in quickly and effective manner.

Internal Controls: Internal controls are major part of an organisation's accounting information system. These controls can be customised manually or automatically. In accounting software internal controls helps to enhance creditability and reliability of information or outcomes. In Air-Asia these are the signifiant internal controls applied with accounting software Xero:

  • Segregation of duties and task in accounting software as their roles and responsibilities.
  • Authorisation level is clearly defined to avoid any irregularity or misuse of information of accounting software in Air-Asia.
  • Ensuring proper restrictions and control over asses to accounting software.
  • Use of fixed or standard documenting process for all accounting information and records in order to maintain consistency from one period to other.
  • A special team in Air-Asia for Regular checking in order to assure entry in accounting software made is correct.
  • Making regularity in reporting cycle of accounting software for internal purpose.
  • In accounting software one entry should be authorised at two different levels to ensure rechecking of each single entry.
  • Proper storage and backup process to avoid loss or theft of data.
  • For modification of any entry authorisation is required at different levels along with specific reason for modification in Air-Asia.

Transaction Volumes: It refers to a how much processing requests that an accounting software or other computer software receives and responds to during a specific time interval. In large business organisation or corporate companies transaction volume is very high as compare to small organisations. In Air-Asia approx 1 million transactions or entry is processed across all its business locations in accounting software Xero (Enahoro and Jayeoba, 2013).

Error Rate: It is very hard to avoid or eliminate transaction errors because overall expenses or cost related to correction in such transactions is very high. So motoring and controlling them is best way to minimise transaction errors. In Air-Asia error rate is controlled and  monitored in association with aggregate transactions or entries processed by each individual or personnel in company, to determine responsibility and frame instruction to avoid any further transaction error with same nature. Such as in company a chief accountant wants to reduce time spent by accounting staff on correction of transaction errors, so accountant should analyse these information for last accounting period:

Type of activities and processes

Total number of Errors

Number of  Transactions  

Transaction Error Rate

...Billing transactions

150

1500

10.00%

...Cash receipt transactions

20

350

5.71%

...Payable transactions

200

1800

11.11%

By analysing this information, he can allocate error which assist in developing a framework for optimisation of error rate.

2. Description on role of accountant in existing software:

Accountants are key user of accounting software in a business organisation. Accounting software is used by accounts to manage different-different accounting and financial transactions. Accountants are expert personnel in business organisation who manage accounting transaction in a systematic manner. They not only records accounting entries but also helps to set objectives and goals as per actual performance of company (Jones, 2011). In large multinational companies accountants have equivalent role of management and they play significant role in decision making activities. In Air-Asia all financial and accounting transaction and entries are recorded by accountants and they are also responsible for key decisions. Only use of an accounting software not ensures effective accounting information system because transaction though accounting software should be recorded by applying accounting policies and other rules or regulations. Following are the important role of accountant in accounting software Xero in Air-Asia, as follows:

  • The primary role of accountants in Air-Asia is to maintenance of books of accounts in Xero software.
  • Accountant's play a major role in accounting software by ensuring that all accounting and financial transactions are recorded with physical proof or supporting documents.
  • They classify accounting transactions and information in various heads, segregate them in revenue and capital as their nature and ensure proper treatment of prepaid and outstanding obligation and liabilities etc.
  • Accountants also reconcile Bank balance on periodic basis to provide updated information in Air-Asia.
  • They play role in securing accounting information by doing timely backup, authorisation at at time of subsequent modification in entries and also keep some physical records for future reference.
  • Accountant play role in reporting through accounting software because they ensures compliance of fundamental accounting assumption, conventions, policies, rules and regulations.
  • They use accounting information for finalisation of accounts at year end such as statement of financial position, income statements, cash flow statement etc.
  • They interact with Statutory and internal Auditors for describing process involved in accounting software also provide evidence that information generated by accounting software is true and correct in Air-Asia.
  • They use accounting software for creation of budgets in order to make information compatible with decision making.
  • They provide accounting software information in easy formate that management can understand such typical information easily.
  • Accountants by using information of accounting software identify any potential threat for company and alert management by reporting these potential threat in Air-Asia.

3. Recommendation for system improvement in the existing accounting software:

As per changing environment and circumstances every organisation should make changes in accounting software to improve. Accounting system can be improved only by improving accounting software because accounting software is core need of accounting system. Improvement in accounting software may be different phase or organisation wide. In large organisation each and every business transaction is recorded through accounting software so improvement in large business organisation like should be in phased manner. Organisation should evaluate their existing accounting software to asses the need for improvement in accounting software. Some time improvements are required due to any technological and regulatory changes. Minor updates in accounting software can not be considered as improvement in accounting software. In Air-Asia management know about the importance of improvement in accounting software and they improve their software time to time.   Following are the important recommendation for system improvement in accounting software Xero:

Keep updated with legislation changes:

To govern and control business organisation government issues various rules and regulation time to time so it is very important for capacities to keep update and changing with these latest and new rules and regulations. During recent years have seen unpredictable legislation changes that affects accounting systems. To retain market share and brand value it is very important for organisation to apply these changes in accounting system. In order to adopt these changes in Air-Asia software developers should make changes in accounting software by using government guidelines. For smooth functioning of accounting system accountants and managers should adopt changes in accounting software as per to changes in laws (Kuznetsova, 2011).

Embrace new technologies:

In present scenario technology is changing very quickly and adopting these technological changes helps to improve working is organisation. As use of old or obsoleted technology leads to increases cost of organisation and adoption of latest or new technology assist in increase in  business performance. In Air-Asia can use new cloud technology in their software Xero. Use of  cloud leads to enhanced security and data storage. Cloud also helps to run software smoothly by managing storage capacity. Cloud provide quick asses to all employees in data on online basis and helps to reduce redundancy in data. Use of cloud in accounting system also reduce lot of paper work in accounting information system. It makes easy for management or owners of Air-Asia to access accounting information from everywhere.Coursework writing service  available online at Assignment Desk.

Involvement of Accountants:

Accountants are key user of accounting software and they help to identify any misrepresentation, fraud and error in accounting system. They also find any bugs or technological error in accounting software. So in Air-Asia involvement of accountant in accounting system should be enhanced to avoid any error or fraud. The company should consider feedback of accounting staff to identify areas of improvement in accounting system or software. In case any senior manager is facing any issue in accounting software then he should directly interact with accounting staff to resolve the issue and promote them to develop their skills. For improvement of Xero, management of Air-Asia should increase their role in company for improvement in accounting software (Ruivo, Oliveira and Neto, 2014). In Air-Asia, management should conduct or organise various activities and training programs for employees to improve their working skills with accounting software. In these training programs, special training for securing data and minimising data loss should be provided.    

Systematic integration with other functions:

A coordinated and systematic integration of various functions and activities of organisation with accounting software leads to an significant improvement in accounting system. Such systematic or organised integration provide assistance in avoiding or eliminating  duplication of entries in accounting work and helps to attain efficiency. Air-Asia conducts various activities and function so it is signifiant for company to integrate all its with accounting information system to improve accounting software. Such as integration of HR and accounting will help in quick analysis of cost related to hiring, recruitment or selection and its determines whether to hire individuals or not. There should be integration between HR and accounting software as HR managers can directly provide or transfer new and updated information about employee salary and other incentives. Also Administrative and Accounting activities should be integrated for clarity of work between bot of the department. Such type of integration provide assistance to ensure performance and accuracy of accounting software (Omolehinwa and Naiyeju, 2012).

Summary

As from the above report, it has been shown that Air-Asia is airline company in Malaysia. It engaged in providing Air transportation services across the various countries. The company is also engaged in hotel business to provide full tour packages in many countries. This report discusses about accounting software for accounting information system in company. Air-Asia is using Xero accounting software to manage it all financial and accounting activities. Main objective of this report to analyse role of accountant in accounting software and recommendations for the improvement in accounting system. Beside this, this report describes various users of accounting software, internal controls over accounting software, transaction volume processing in software and error rates of using accounting software. Accountant of company is Xero accounting software which is signifiant for reporting of financial performance and condition because its provide assistance in preparation of financial statement and income statements. In order to adopt or identify need for improvement in accounting software company  should keep updated with latest policies, rules and regulations changes, adopt new technology changes, enhance the role of employees and develop a framework for integration of accounting software with other functions. Xero accounting software is important for accounting information system and for accountants in order to organise accounting functions in Air-Asia.

REFERENCES

  • Bushman, R. M., & Williams, C. D. (2012). Accounting discretion, loan loss provisioning, and discipline of banks’ risk-taking. Journal of Accounting and Economics. 54(1). 1-18.
  • Dimitropoulos, P. E., Asteriou, D., & Siriopoulos, C. (2012). Euro adoption and the quality of accounting information. Managerial Auditing Journal. 27(3). 299-328.
  • Enahoro, J. A., & Jayeoba, J. (2013). Value measurement and disclosures in fair value accounting. Asian Economic and Financial Review. 3(9). 1170.
  • Jones, M. (Ed.). (2011). Creative accounting, fraud and international accounting scandals. John Wiley & Sons.
  • Kuznetsova, S. (2011). The transformation of accounting systems in the chaotic economy structuring: The synergetic approach. Risk and Decision Analysis. 2(3). 151-160.
  • Omolehinwa, E. O., & Naiyeju, J. K. (2012). Theory and Practice of Government Accounting in Nigeria.
  • Ruivo, P., Oliveira, T., & Neto, M. (2014). Examine ERP post-implementation stages of use and value: Empirical evidence from Portuguese SMEs. International Journal of Accounting Information Systems. 15(2), 166-184.
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