MS-04 question 1

Describe the accounting information system that is being followed by your organization. Also point out the flaws in the prevailing system, if any, and give suggestions to overcome the same

The organization, I am familiar with is a -a large manufacturer/ marketer of safety products
-the products are used as
[personal protection safety]
[ industrial safety]
-the products are distributed through the distributors as well as sold directly-the products are sold to various industries like mining/fireservices/defence/as well as to various manufacturing companies.-the company employs about 235 people.-the company has the following functional departments
*marketing
*manufacturing
*sales
*finance/ administration
*human resource
*customer service
*distribution
*warehousing/ transportation
*TQM
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THE Components of the Accounting SystemThink of the accounting system as a wheel whose hub is the general ledger (G/L). Feeding the hub information are the spokes of the wheel. These include Accounts receivable/ Accounts payable /Order entry/ Inventory control /Cost accounting /Payroll /Fixed assets accounting These modules are ledgers themselves. We call them subledgers. Each contains the detailed entries of its specific field, such as accounts receivable. The subledgers summarize the entries, then send the summary up to the general ledger. For example, each day the receivables subledger records all credit sales and payments received. The transactions net together then go up to the G/L to increase or decrease A/R, increase cash and decrease inventory. We'll always check to be sure that the balance of the subledger exactly equals the account balance for that subledger account in the G/L. If it doesn't, then there's a problem. Differences between Manual and Automated LedgersThink of the G/L as a sheet of paper on which transactions from all four categories of
accounts-assets,
-liabilities,
-income, and
-expenses-are recorded. Some of them flow up from various subledgers, and some are entered directly into the G/L through a general journal entry. An example of such a direct entry would be the payment on a loan. The same concept of a sheet of paper holds for each subledger that feeds the general ledger. A computerized accounting system works the same way, except that the general ledger and subledgers are computer files instead of sheets of paper. Entries are posted to each and summarized, then the summary is sent up to the G/L for posting. ORGANIZATION OF THE ACCOUNTING DEPARTMENTOrganizing the business accounting system by functions.-credit-accounting-management accounting-accounts receivable-accounts payable-banking/ administration
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Accounting Basics•
Bookkeeping
• Accounting
• Reporting
• Non-financial data
• Financial data Components of an Accounting System
• Revenue Cycle • Order Entry
• Cash Receipts / Deposits
• Accounts Receivable
• Purchase Cycle
• Purchase Orders / Purchasing
• Cash Disbursements / Checks
• Accounts Payable
• Payroll Cycle
• General Journal Cycle
• How does posting work? Accounting Terms and Concepts
• Double-Entry Accounting Basic Accounting Structure
• Balance sheet • Income Statement
• Basic Accounting Formula Accounting Methods
• Accrual Method
• Cash Method
• Percentage of Completion Method Reporting Standards
• GAAP - Generally Accepted Accounting Principles
• The Matching Principle • Conformity
• Valuation • Inventory Valuation
• Materiality Types of Reports
• External Reports
• Compilation
• Review
• Audit
• SEC - Audit
• Internal Reports
Summary
1 Internal Auditing
2.2.2 Payroll
2.2.3 Finance And Treasury
2.2.4 Information Systems
2.2.5 Security Planning
2.2.6 Disaster Recovery
3.0 Management Responsibility
3.1 Accounting Organization
3.1.1 Accounting Department Org Chart
3.1.2 Finance & Treasury Responsibilities
3.1.3 Controller Responsibilities
3.1.4 Accounting Staff Responsibilities
3.1.5 Operations Staff Responsibilities
3.2 Management Commitment
3.3 Management Accounting Policy
3.4 Planning
3.4.1 Accounting Objectives
3.4.2 Accounting System Planning
3.5 Responsibility, Authority, And Communication
3.5.1 Responsibility And Authority
3.5.2 Management Representative
3.5.3 Internal Communication
3.5.4 Referenced Procedures
3.6 Management Reporting
3.6.1 General
3.6.2 Review Input
3.6.3 Review Output
3.6.4 Referenced Procedures
3.7 Business Conduct
4.0 Accounting Management System
4.1 Objectives
4.2 Requirements
4.2.1 Overview
4.2.2 Internal Controls
4.2.3 Audit Findings
4.3 Transactions
4.3.1 Authorization
4.3.2 Timing
4.3.3 Amounts
4.3.4 Accuracy
4.3.5 Referenced Procedures
4.4 Documentation
4.4.1 Accounting Manual
4.4.2 Control Of Documents
4.4.3 Control Of Records
4.4.4 Accounting Transactions
4.4.5 Referenced Procedures
4.5 Security
4.5.1 Physical Security
4.5.2 Disaster Security
4.5.3 Information Security
4.6 Cost Accounting
4.6.1 Costing Purposes
4.6.2 Cost - Time Incurred
4.6.3 Cost - Reaction To Changes In Activity Levels
4.6.4 Cost - Influence On Decision Making
4.7 Basis Of Accounting 5.0 Processes And Controls
5.1 General & Administrative
5.1.1 Chart Of Accounts
5.1.2 Files And Records Management
5.1.3 Travel And Entertainment
5.1.4 Management Reports
5.1.5 Period-End Review & Closing
5.1.6 Controlling Legal Costs
5.1.7 Taxes And Insurance

5.1.8 Property Tax Assessments
5.1.9 Confidential Information Release
5.1.10 Document Control
5.1.11 Referenced Procedures
5.2 Cash
5.2.1 Cash Drawers And Credit Cards
5.2.2 Cash Receipts And Deposits
5.2.3 Problem Checks
5.2.4 Wire Transfers
5.2.5 Check Signing Authority
5.2.6 Check Requests
5.2.7 Bank Account Reconciliations
5.2.8 Referenced Procedures
5.3 Inventory & Assets
5.3.1 Inventory Control
5.3.2 Inventory Counts
5.3.3 Fixed Asset Control
5.3.4 Customer Property
5.3.5 Fixed Asset Capitalization & Depreciation
5.3.6 Referenced Procedures
5.4 Revenue
5.4.1 Sales Order Entry
5.4.2 Point-Of-Sale Orders
5.4.3 Customer Credit Approval And Terms
5.4.4 Sales Order Acceptance
5.4.5 Shipment Of Goods
5.4.6 Invoicing And Accounts Receivable
5.4.7 Sales Tax Collection 5.4.8 Progress Billing
5.4.9 Account Collections 5.4.10 Customer Returns
5.4.11 Referenced Procedures
5.5 Purchasing 5.5.1 Vendor Selection
5.5.2 General Purchasing
5.5.3 Project Purchasing
5.5.4 Receiving And Inspection
5.5.5 Shipping And Freight Claims
5.5.6 Accounts Payable And Cash Disbursements
5.5.7 Referenced Procedures
6.0 Resource Management
6.1 Provision Of Resources 6.2 Human Resources
6.2.1 Accounting Staff
6.2.2 Competence, Awareness, And Training
6.2.3 Separation And Supervision Of Duties
6.2.4 Referenced Procedures
6.3 Infrastructure
6.4 Work Environment
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THE COMPANY USES ''STANDARD COSTING''.THE COMPANY IS MANAGED BY MARKETING ----products' contributionsSALES ----gross contributionsMANUFACTURING --COST CENTRE.SERVICE - PROFIT CENTRE.WAREHOUSING --COST CENTRECUSTOMER SERVICE --COST CENTRER&D --COST CENTREETC ETC
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Also point out the flaws in the prevailing system,if any,and give suggestion to overcome the same.
THE ONLY FLAW , CURRENTLY , IS THE PRODUCT COSTING,DUE TO THE FLUCTATING INTERNATIONAL IMPORTS PRICEDUE TO THE DOLLAR VOLATILITY.WE HAVE DECIDED TO GO FOR -future trading/ transfer pricing.-absorbing the variances into the wholesale pricing.
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