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Accounting Information Systems

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INTRODUCTION

An accounting information system refers to a set of activities related to the collection, storage and processing of data related to accounting and finance which is generally useful for internal users in order to report to external users like lenders and creditors, tax authorities etc. It is the 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. The company has its headquarters in Malaysia and the address of the company is Red Q, Jalan Pekeliling 5, Lapangan Terbang Antarabangsa Kuala Lumpur (klia2),64000  KLIA, Selangor, Malaysia. The main activities of the company are to provide Air transportation services across the world. The company also provides hotel services and tour packages along with flight tickets. The company sponsors many functions and events held mostly in Malaysia and also plans events in order to provide event tickets along with flight tickets.

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

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TASK

1. Discussion on existing accounting software:

Air Asia conducts its all financial and accounting operations through Xero. It is the most popular and widely used accounting software for the management of various accounting operations and activities in a large corporation. It is a customisable accounting management software system that organises financial and accounting activities as per the company's rules and policies and organises funds or monetary resources according to the budgets of the company in a systematic manner that assists in the creation of a framework for decision making. The 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 the substantial interest of these users or parties in information. The following are the key users of accounting software:

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

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

Auditors: During the auditing process and reporting process auditors of the company use accounting software for the finalisation of accounts. They also evaluate accounting software to identify any technical or clerical errors in the 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 tasks easily and effectively. In large organisations training programs are organised to develop their skills in operating accounting software. Employees and staff in Air Asia use accounting software to conduct their tasks and activities especially accounting and financial activities in a quick 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 help to enhance the creditability and reliability of information or outcomes. In Air-Asia these are the significant internal controls applied with the accounting software Xero:

  • Segregation of duties and tasks in accounting software as their roles and responsibilities.
  • The authorisation level is clearly defined to avoid any irregularity or misuse of information on 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 another.
  • A special team in Air Asia for Regular checking in order to ensure entry in accounting software made is correct.
  • Making regularity in reporting cycle of accounting software for internal purposes.
  • 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 reasons for modification in Air-Asia.

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

Error Rate: It is very hard to avoid or eliminate transaction errors because overall expenses or costs related to correction in such transactions are very high. So motoring and controlling them is the 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 the company, to determine responsibility and frame instructions to avoid any further transaction error of the same nature. Such as in a company a chief accountant wants to reduce the time spent by accounting staff on the correction of transaction errors, so the accountant should analyse this information for the 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 errors which assist in developing a framework for optimisation of error rate.

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2. Description on Role of Accountant in Existing Software:

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

  • The primary role of accountants in Air Asia is to the maintenance of books of accounts in Xero software.
  • Accountants 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 into revenue and capital as their nature and ensure proper treatment of prepaid and outstanding obligations and liabilities etc.
  • Accountants also reconcile Bank balances on a periodic basis to provide updated information on Air Asia.
  • They play a role in securing accounting information by doing timely backup, and authorisation at at time of subsequent modification in entries and also keep some physical records for future reference.
  • Accountants play a role in reporting through accounting software because they ensure compliance with fundamental accounting assumptions, conventions, policies, rules and regulations.
  • They use accounting information for the finalisation of accounts at year end such as statements of financial position, income statements, cash flow statements etc.
  • They interact with Statutory and Internal Auditors to describe the process involved in accounting software and also provide evidence that information generated by accounting software is true and correct in Air-Asia.
  • They use accounting software for the creation of budgets in order to make information compatible with decision-making.
  • They provide accounting software information in an easy format so that management can understand such typical information easily.
  • Accountants by using the information of accounting software identify any potential threat to the company and alert management by reporting this 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 systems can be improved only by improving accounting software because accounting software is a core need of accounting systems. Improvement in accounting software may be in different phases or organisation-wide. In large organisation, each and every business transaction is recorded through accounting software so improvement in large business organisations like should be done in a phased manner. The organisation should evaluate their existing accounting software to assess 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 improvements in accounting software. In Asia management knows about the importance of improvement in accounting software and they improve their software from time to time.   Following are the important recommendations for system improvement in the accounting software Xero:

Keep updated with legislation changes:

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

Embrace new technologies:

In the present scenario technology is changing very quickly and adopting these technological changes helps to improve working in an organisation. As use of old or obsolete technology leads to increased costs for organisations and the adoption of the latest or new technology assists in an increase in business performance. In Asia can use new cloud technology in their software Xero. The use of the cloud leads to enhanced security and data storage. Cloud also helps to run the software smoothly by managing storage capacity. Cloud provides quick asses to all employees in data on an online basis and helps to reduce redundancy in data. The use of the cloud in accounting systems also reduces a lot of paperwork in accounting information systems. It makes it 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 users of accounting software and they help to identify any misrepresentation, fraud and error in the accounting system. They also find any bugs or technological errors in accounting software. So in Air Asia involvement of accountant in the accounting system should be enhanced to avoid any error or fraud. The company should consider feedback from accounting staff to identify areas of improvement in the accounting system or software. In case any senior manager is facing any issue with accounting software then he should directly interact with accounting staff to resolve the issue and encourage them to develop their skills. For the improvement of Xero, management of Air-Asia should increase their role in the 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 an organisation with accounting software leads to a significant improvement in the 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 functions so it is significant for the company to integrate all its accounting information systems to improve accounting software. As integration of HR and accounting will help in the quick analysis of costs related to hiring, recruitment or selection and it 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 departments. Such type of integration provide assistance to ensure the performance and accuracy of accounting software (Omolehinwa and Naiyeju, 2012).

Summary

From the above report, it has been shown that Air Asia is an airline company in Malaysia. It engaged in providing Air transportation services across various countries. The company is also engaged in the hotel business to provide full tour packages in many countries. This report discusses accounting software for the accounting information systems in the company. Air Asia is using Xero accounting software to manage all its financial and accounting activities. The main objective of this report is to analyse the role of the accountant in accounting software and recommendations for the improvement of the accounting system. Besides 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. The accountant of the company is Xero accounting software which is significant for reporting financial performance and condition because it provide assistance in the preparation of financial statements and income statements. In order to adopt or identify the need for improvement in accounting software company should keep updated with the 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 systems and for accountants in order to organise accounting functions in Air Asia.

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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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