ais final smes

8/13/2019 Ais Final Smes

1/29

SUBMITTED BY-

NAME ID

SAHA,ARUP KUMAR 10-16471-2

HOSSAIN IMRAN 10-17188-2

SUBMITTED TO-

MD. JOYNAL ABEDIN

DEPARTMENT OF FINANCE

AMERICAN INTERNATINAL UNIVERSITY -BANGLADESH

AMERICAN INTERNATIONAL UNIVERSITY

BAANGLADESH(AIUB)

The impact of accounting information systems (AIS) on

performance measures.

Bangladesh SMEs

ACCOUNTING INFORMATION SYSTEMS

SECTION-A

DATE-30-11-2013


2/29

2 | P a g e

Table of Contents

LITERATURE REVIEW PAGE

3-6

INTRODUCTION 6-7

OBJECTIVE OF THE STUDY 8

METHODOLOGY OF THE STUDY 9

IMPORTANCE OF AIS 9-11

AIS SUBSYSTEM 12-14

REVENUE SUBSYSTEM 14-17

EXPENDITURE SUBSYSTEM 18-20

HUMAN RESOURCE AND PAYROLL SUBSYSTEM 21-22

PRODUCTION CYCLE 22-24

FINANCING CYCLE 25-26

ANALYZING AND FINDINGS 26-27

SUGGESTION & CONCLUSION 27-28

REFERENCES 28


3/29

3 | P a g e

LITERATURE REVIEW

This research report are made for measuring the relationship between the use of the

accounting information systems(AIS) by the small and medium sized enterprises(SMEs)

in Bangladesh. This study carried out among small and medium sized firms to ascertain

the extent to which development and implementation of accounting information

systems. This study shows how AIS will implement to improve in outcome indicators

and productivity. This research builds the relationship between the application and use

of AIS and performance and productivity indicators in SMEs in Bangladesh.

Small and medium sized enterprises (SMEs)1are playing increasingly important role as

engines of economic growth in many countries including ours. SMEs provide low cost

employment opportunities and render flexibility to the economy. Many of the SMEs are

engaged in export activities suggesting that they are internationally competitive.

Considering the importance of SME sector in the economy of Bangladesh and

understanding the constraints under which such enterprises operate, it is evident that

policies to support the development and growth of SMEs are necessary. In the policy

strategies, smooth and sustainable development of SMEs all over the country will beconsidered as one of the vehicles for poverty alleviation, and generation of more

employment. An attempt has been made in this paper to identify major financing

constraints faced by SMEs in Bangladesh and suggest some policy measures to

overcome those Constraints.

1.Small and Medium Enterprises Development in Bangladesh: Problems and Prospects, author-A.K.M. Helal uz Zaman*

Md. Jahirul Islam**sources ASA University Review, Vol. 5 No. 1, JanuaryJune, 2011


4/29

4 | P a g e

Most of respondent firms2(87%) reported that they had used computers for more than 5

years, while the remaining firms (13%) had only used computers for 5 years or less. This

is an interesting finding as it suggests that respondent firms had considerable

experience with computers. Furthermore, respondent firms reported that the software

applications used the most were accounting (95%), word processing (82%), email (69%),

spreadsheet (66%), and Internet (60%). The most popular AIS applications adopted by

respondent firms were general ledger (91%), accounts receivable (93%), accounts

payable (93%), payroll (78%), billing (74%), inventory (70%), order entry (62%), and

purchasing (60%). Overall, respondent firms primarily used administrative and

transactional-based applications. The adoption of analytical-based applications such asbudgeting, production planning, modelling, and project management is still minimal.

The findings are consistent with the results reported by Lefebvre and Lefebvre (1988),

Raymond (1992), Bridge and Peel (1999), Foong (1999), Timtime et al. (2003), Breen et al.

(2004), and Ismail and King (2007). These studies reported that SMEs used computers

mainly for administrative and operational tasks rather than for strategic planning.

Among these 232 firms, 94% percent of respondent firms reported that they employed

accounting staff, while only 25% of firms employed IT staff. These results suggest that

the respondent firms viewed record-keeping as important to their firm. The less

complicated AIS, which require little technical support, often adopted by SMEs might

explain the low engagement of IT personnel. The results indicate that most respondent

firms sought support from multiple external experts for their AIS implementation. The

2This survey result take from the FACTORS INFLUENCING AIS EFFECTIVENESS

AMONG MANUFACTURING SMES: EVIDENCE FROM MALAYSIAauthor- Noor

Azizi Ismail

College of Business

Universiti Utara Malaysia


5/29

5 | P a g e

majority of respondent firms (81%) reported that they sought advice from vendors,

consultants (60%), accounting firms (47%), and also government agencies (29%).

This survey results show us that AIS effectiveness is very important in SMEs

organization. It will increase your performance and productivity in your organization.

Another literature review was conducted for this research. That research was about

impact of AIS of planning, controlling and decision making in Jodhpur hotels 3.THAT

research find the following results that- The Jodhpur hotels facing difficulties that are

related to the application of accounting information system. where Cadres that

implement the methods of accounting information system are not qualified, Costs of the

application of accounting information system are relatively high, Senior management isnot convinced by the methods of accounting information system, Software required by

the application of accounting information system is not available, there is no

competition that urges the application of accounting information system, and the

information system is not developed enough to the optimal application of accounting

information system .

So I think that The Jodhpur hotels management should depend on accounting

information systems in planning for sales & cash collections in revenue cycle and

purchasing & cash distributions for expenditure cycle. The Jodhpur hotels management

should use accounting information systems in control information to get more relevant,

cost effectiveness, accuracy, timeliness and clarity, hotels management should depend

on accounting information systems to make financing decisions.

3.The Impact of Accounting Information System in Planning, Controlling and Decision-Making Processes in Jodhpur Hotels

Author- Dr. Omar A.A. Jawabreh

Tourism and Hotels Sciences Department, Al Balqa Applied University, Jordan, AqabaE-mail: [email protected]

Ali Mahmoud Abdallah Alrabei

Research scholar, Dept of Accounting, J.N.V.U

E-mail: [email protected]


6/29

6 | P a g e

So with regard to analyzing the impact of AIS on performance measures in Bangladesh,

AIS are a tool which integrated into the field of information and technology

systems(IT), to help in the management and control of topics related to firms economic

and financial area. But the stunning advance in technology has opened up the

possibility of generating and using accounting information from a strategic perspective.

Since this is important for all firms, it is more important even for medium-sized and

small ones which need this information to deal with a higher degree of uncertainty in

the competitive mark

INTRODUCTIONSmall and Medium Enterprises (SME) occupy a leading position in any economy of

world. SME activities cover all areas of business including manufacturing, mining,

wholesaling, retailing, service oriented company etc. This sector is an integral part of an

economy and considered as an active engine of economic growth. Small and medium

enterprises, including the tiny and micro enterprises comprise virtually all (about

99.85%) of all business enterprises outside agriculture in Bangladesh (Rahman, 2009).Small and Medium Enterprises play an important role in economy through generation

of employment, contributing to the growth of GDP, embarking on innovation and

stimulating other economic activities. SMEs including micro enterprises account for

some 81.2%, while only 0.15% of all business enterprises employ a full 18.8% of the

employment of all business enterprises outside agriculture (Rahman, 2009).

The definition of Small and Medium Enterprise (SME) is not fixed rather it varies

countries to countries. According the Ministry of Industry, in case of manufacturing, an

enterprise would be treated as small if, in todays market prices, the replacement cost of

plant, machinery, structures, and other parts/components, fixtures, support utility, and


7/29

7 | P a g e

associated technical services (such as turn-key consultancy), i.e. Tk. 50,000 to 1.5 crore

An enterprise would be treated as medium if, in todays market prices, the replacement

cost of plant, machinery, building, structures, and other parts/components, fixtures,

support utility, and associated technical services (such as turn-key consultancy), i.e. Tk

1.5 crore to Tk20 crore, In both cases, land and building is exclude.

In case non-manufacturing, this definition is slightly different. According to Ministry of

Industry, Bangladesh, An enterprise would be treated as small if the fixed capital is Tk.

50,000 to Tk.50, 00000 (0.05 million to Tk. 5million and / or workforce not more than 25.

An enterprise would be treated as medium if the fixed capital is Tk.50, 00000 to Tk. 10,

00, 00000 (5 million to Tk. 100 million and / or workforce not more than 50. In cases,land and building is excluded.

Accounting Information Systems (AIS) are a tool which, when incorporated into the

field of Information and Technology systems (IT), were designed to help in the

management and control of topics related to firms economic-financial area. But the

stunning advance in technology has opened up the possibility of generating and using

accounting information from a strategic viewpoint. Since this is important for all firms,

it is more important even for medium-sized and small ones which need this information

to deal with a higher degree of uncertainty in the competitive market (El Louadi, 1998).

AIS are also important for certain decision and management control in the organization.

This research report is all about the impact of AIS on performance measures based on

the Bangladesh SMEs .that means how AIS help the small and medium sized enterprise

to improve its performance, productivity and management prowess. This world is now

depending on the technology. You have to know how to use this things.AIS is such

software where the organization high performance standards are determined. This

research report tries to show how to use AIS into the SMEs in Bangladesh.


8/29

8 | P a g e

Objectives of the study

This research study focuses on the current scenario of SMEs and its performances and

the impact of accounting information system into its performance measures in

Bangladesh. The specific objectives of the study are following-

I) Examine the role of SMEs in the economy of Bangladesh;II) Analyze the current status of SMEs in Bangladesh;III) Acknowledge the extent of applying accounting Information systems in small

and medium sized enterprises (SMEs) into Bangladesh.

IV) Review the situation regarding their IT experience in SMEs;V) Determined the major financing constraints to SMEs development in

Bangladesh.

VI) Put forward some specific recommendations for future growth of SMEs inBangladesh.

VII) Identify the impact of accounting information Systems to improve theperformance of SMEs.

VIII) To find there is relationship between Accounting Information System andDecision Making control into organization.

IX) Make recommendations and suggestions to help in improving theperformance of SMEs and identify the problems behind it with strengthening

the role of accounting information systems.


9/29

9 | P a g e

Methodology of the Study

The focus of this study is on AIS effectiveness in SMEs. We further restricted the study

Context to manufacturing firms because the manufacturing sector can provide a range

of levels of AIS superiority.

Data Collection

The study is mainly based on secondary data. Data have been collected from different

published materials like the journal publications of SMEs current situation in

Bangladesh, importance of AIS into SMEs, Ministry of Finance, several website and

relevant writings of some scholars. The collected data have been processed manually

and paper in the present form has been prepared in order to make the study more

informative, analytical and useful for the users. Graphic representations are made in MS

Word and MS Excel.

Data Analysis

In this research, the Statistical graph was used for data entry as well as for examining

the data later. Data collection was the initial step, which aimed to convert raw data into

a more structured format that is more appropriate for analysis. Tasks in this stage

included data editing, data coding and data entry.

Importance of accounting information system in organization

A big advantage of computer-based accounting information systems is that they

automate and streamline reporting. If I will open a manufacturing based company

which will produce the mango juice, so how can AIS help with my organization by

providing the importance of accounting information system.

An accounting information system (AIS) is a system that first collects and stores data

and then processes it into information used by investors, creditors, and managers. An

accounting information system provides accurate and timely financial information for


10/29

10 | P a g e

internal management purposes which is beneficial for both investor and users in the

organization.

An Accounting Information Systems are composed of 6 main components:

1. Software: application that processes the data.

2. Internal controls and security measures: what is implemented to safeguard the data?.

3. Data: data that is related to the organization and its business processes.

4. People: users who operate on the systems.

5. Information technology infrastructure: the actual physical devices and systems that

allows the AIS to operate and perform its functions.6. Procedures and instructions: processes involved in collecting, managing and storing

the data.

When AIS is implemented, an organization sometimes makes the mistake of not

considering each of these six components and treating them equally in the

implementation process.

Advantages of Accounting Information System (AIS) in my

company

1. A big advantage of accounting information system is that they automate the

reporting of my company. Reporting is an important tool for any companies when the

executives want to see accurate summarized timely information which is used for

financial reporting.

2. The accounting information system retrieves data from the centralized database,

processes and transforms it and generates a summary of that data as information that


11/29

11 | P a g e

can now be easily used and analyzed by business analysts, supervisors or other decision

makers.

3. No need to make differently financial and cost profits, it will generate automatically.

4. The probability of error is less because recording takes place in one set of accounts.

5. No confusion arises from different types of order generated like customer order, sales

order etc.

6. Information generated on an integrated system is quicker, thus helping my

organization management in decision making.

7. Improving the flow of work in every department of my organization often gets

boosted by the implementation of an accounting information system.

8. depending upon the software, the AIS system require information for different parts

of the process are manually input into the system. This often determines the flow of

work of other departments in related processing financial data. It is very important for

organization fast track of work.

Many organizations don't spend the amount of time and money on the analysis, design,

documentation, and training, and move into software selection and implementation. It

is a proven fact that if a detailed requirements analysis is performed with proper time

being spent on the analysis, that the implementation and ongoing support will be

minimal. An organization that skips the steps necessary to ensure that the system meets

the needs of the organization are often left with low profits, frustrated end users, costly

support and information that is not correct.


12/29

12 | P a g e

AIS subsystems

There are five types of subsystem I can use into accounting information systems

already decided that I will produce a mango juice company, so it is a manufacturing

based company so AIS subsystem will be divided into five categories:

The revenue cycle The expenditure cycle The human resources and payroll cycle The production cycle The financing cycle

These subsystems are uses in my organization and it is intenerated with each

other. That means you cant ignore any of them. All the items are interrelated.

The revenue cycle

The revenue cycleis the set of activities in a business which brings about the exchangeof goods or services with customers for cash. That means I will supply the finished

goods to customer and they provide me the revenue. There are some functional

departments involved in revenue cycle activities and its need to trace the flow of

revenue transactions through the organization.


13/29

13 | P a g e

The expenditure cycle

This cycle performs Deals with transactions involved in purchasing goods and services,

its also manages charges of goods and materials purchased. This cycle provides all

Cash and credit payments needed in the organization. There are some main functions of

expenditure cycle, these Ares-

requests for purchases ordering goods to be purchased receiving delivery of goods purchased storekeeping dealing with goods to be returned payment of purchased goods and services

The human resources and payroll cycle

The human resources management (HRM)/payroll cycle is recurring set of business

activities and related data processing operations associated with effectively managing

the employee work force. Some of the more important activities include the following

tasks:

Recruitment and hiring Training Assignment of job responsibilities

Compensating for services provided Evaluation of employee performance Discharge


14/29

14 | P a g e

The production cycle

The production cycle is a recurring set of business activities and related data processing

operations associated with the manufacture of products. There are some works that

production cycle performs-

Produce product decision Pricing decision Resource allocation Manage cost and performance evaluation

The four basic activities in the production cycle are:

Product design Planning and scheduling Production operations Cost accounting

The financing cycle

The financing life cycle involves activities of obtaining necessary funds to run the

organization, repay creditors, and distribute profits to investors. It is one of the most

important parts of AIS subsystems. It is connected with other parts of the systems.

Revenue cycle

As I am planning to establish manufacturing based company which will be

produce mango juice in Bangladesh. So we need the revenue to operate the company.

How can we operate the revenue cycle in my organization thats what I am showing-

Two subsystems perform the processing steps within the revenue cycle:


15/29

15 | P a g e

The Sales Processing System The Cash Receipts Processing System

DFD of Sales Order Processing System in my organization

Sales order processing system starts with when customer give their order in my

company. After receiving the order I have to check customer previous records. If the

customer is creditworthy then I will approve the sales order, if not reject the sales order.

Then I have to entry the customer order file and pick the customer demanded goods. If

there is shortened for quantity then back the order to the customer for the

inconvenience. After recording the stock of product and quantity with shipped date and


16/29

16 | P a g e

back order status, ship the goods to the customers. After shipping the order sends the

bill to the customer with previous due (if any).then updates the account receivable

record, sales journal, update inventory record with general journal general ledger

records.

Highlights of revenue cycle

Source document function

Sales order Take customer order

Delivery order Deliver order

Remittance advice Receive cash

Deposit slip Deposit cash receipts

Credit memo Adjust customer accounts


17/29

17 | P a g e

DFD of Cash Receipts Procedure in my organization

The cash receipts process starts with remittance advice from the customers. The

prepare remittance advice, check and remittance list and analyzing records and deposit

checks to the bank. Banks return the deposit slip into the company cash accounts. If

there is not available fund then bank cancel the checks and send it to the customer. The

update the AR records with several entry into the systems with the cash receipts

journal.


18/29

18 | P a g e

Expenditure cycle

How I will spend expense for my company for purchasing raw material, employee

salary, transportation and other cost.

Categories of activities in the expenditure cycle:

1. Requesting purchases2. Placing orders with suppliers3. Receiving goods4. Storekeeping5. Processing supplier invoices6. Cash disbursements


19/29

19 | P a g e

Flowchart for purchasing function

The process starts with purchasing function with material requisition. What material

needed for my productions am producing here mango juice for my company, so the

raw material will be super purified water UV (Ultra Violet), Natural Mango Pulm,

Citric Acid, Refined Sugar etc. after identifying material requisition I need to enquiry

for vendors who will supply the raw materials, have to decide supplier based on the

long term benefits with the vendors for future benefits and discounts. Then I have to

send the purchase order to my vendors. After receiving the materials I will match with

my purchase order. If everything is alright then I have to journal for this purchase in my


20/29

20 | P a g e

systems. Lastly along with all supporting documents I have to give payment to the

vendors. If there is previous balance then it would be added or subtract.

Flowchart for purchase returns function

The highlights of expenditure cycle are as follows-

Source document function

Purchase requisition Request items

Purchase order Order items

Receiving report Receive itemscheck Pay for the items


21/29

21 | P a g e

The human resources and payroll cycle

Human resource department is responsible for hiring personnel employees, in the

selection process, Facilitates location of people, also involved in personnel development

and performance and Employee discipline and terminations.

HRM activities includes

Determine rates of pay Maintain employee details Determine employee authorized deductions Develop and enforce appropriate human resource policies Provide advice and information on HR issues

Payroll cycle business activities

Gathering time and attendance data Calculation of gross amount of wages payable Tax computation Preparation of payroll records Disbursement of payroll Disbursement of PAYG, superannuation and deductions Issue payment summaries and pay advice


22/29

22 | P a g e

Payroll processing flow chart in organization

Production cycle

There are four basic activities in production cycle. These are

Product design Planning and scheduling Production operations Cost accounting


23/29

23 | P a g e

Product design

The first step in the production cycle is product design. The objective of this activity is

to design a product that meets customer requirements for quality, durability, and

functionality while simultaneously minimizing production costs.

Accountant involve in product design by showing how various design trade-offs affect

production costs and thereby profitability, by ensuring that the AIS is designed to

collect and provide information about the machine setup and materials handling costs

associated with alternative product designs, by providing data about repair and

warranty costs associated with existing products

Planning and scheduling

The second step in the production cycle is planning and scheduling. The objective of

this step is a production plan efficient enough to meet existing orders and anticipate

short-term demand without creating excess finished goods inventories.

There are two common methods of production planning.

Manufacturing resource planning (MRP-II) Just-in-time (JIT) manufacturing systems

accountants be involved in planning and scheduling by ensuring that the AIS collects

and reports costs in a manner consistent with the production planning techniques used

by the company, by helping to choose whether MRP-II or JIT is more appropriate

Production operations

The third step in the production cycle is the actual manufacture of products. The

manner in which this activity is accomplished varies greatly across companies.

Every firm needs to collect data about the following four facets of its production

operations:

Raw materials used


24/29

24 | P a g e

Labor-hours expended Machine operations performed Other manufacturing overhead costs incurred

Cost accounting

The final step in the production cycle is cost accounting. There are two types of cost

accounting systems.

Job-order costing- Job-order costing assigns costs to specific production batches or to

individual jobs.

Process costing- Process costing assigns costs to each process, and then calculates the

average cost for all units produced.

The production cycle in organization


25/29

25 | P a g e

The financing cycle

The functions of the financial cycle are grouped into three broad categories:

Raising capital

Acquiring and maintaining assets Financial reporting

Financial cycle in my organization

Raising capital-money can be come from

Shares Debentures Retained earnings Long-term loans loans from banking or other financing institutions trade creditors factoring of debtors


26/29

26 | P a g e

bank loansAcquiring and maintaining assets

Capital raised is invested in fixed assets Fixed assets are used to expand business operations or replace expended

assets

Maintenance of fixed assets is recognized as a cost of business operationsFinancial reporting

Used to make accounting entries and period-end adjustments, andproduce financial reports or statements.

Trial balance is the first step taken when preparing financial statements. Statement of financial performance Statement of financial position Statement of cash flows

Analyzing & findings

The accounting information systems help organization to develop its performance.

accounting information system(AIS) helps my business uses to collect, store, manage,

process, retrieve and report its financial data with both order placement and order

received from the vendors and customer so that it can be used by accountants,managers, and regulatory and tax agencies. In particular, specially trained accountants

work with AIS to ensure the highest level of accuracy in a company's financial

transactions and recordkeeping and to make financial data easily available to those who

legitimately need access to it, all while keeping data intact and secure. That means its


27/29

27 | P a g e

effectively increase the level of performance both financially and technologically. The

AIS subsystems help the organization by its periodically process step wisely to

implement its activities.

Suggestion & conclusion

The changes that occurred in business environment have led to an increasing number of

information to be processed, generated and delivered. Thus, the critical part is the

quality of information produced by the business itself which will be used in making

business decisions (Mukherji, 2002). Accounting systems provide a source of

information to owners and managers of SMEs operating in any industry

For use in the measurement of financial performance. In any sense, profit can

Be viewed as the life-blood of a business and hence the accounting bases,

Concepts and principles adopted ought to capture and report all the relevant

accounting information to ensure reliability in its measurement. Reported profits reflect

changes in wealth of owners and this can explain why major economic decisions in

Businesses are centered on financial performance as measured by profitability

(Maseko&Manyani, 2011).

This study found that the level of awareness on the importance of AIS in small and

medium firms. I will suggest that Most of the managers do not aware the importance of

keeping a good accounting records and about the information systems, so they need to

develop it and realize its importance

This record must be in an orderly manner and complete with all the important dataregarding their business transactions. Armed with complete data, the managers will

produce a good quality and reliable financial records that will assist and equip them

with accurate accounting information. Thus, this will guide them to make a quick and

Precise decision.


28/29

28 | P a g e

We've already determined how well-designed AIS allow a business to run smoothly on

a day-to-day basis or hamper its operation if the system is poorly designed. The

components of an AIS all work together to help key employees collect, store, manage,

process, retrieve, and report their financial data. Having a well-developed and

maintained accounting information system that is efficient and accurate is an

indispensable component of a successful business.

References

1. Factors Affect the Success of SME in Bangladesh: Evidence from Khulna CityMd Reaz Uddin & Tarun Kanti Bose; Business Administration Discipline, Khulna

University, Bangladesh

2. Small and Medium Enterprises Development in Bangladesh: Problems andProspects; author-A.K.M. Helal uz Zaman*Md. Jahirul Islam**ASA University

Review, Vol. 5 No. 1, JanuaryJune, 2011

3. The Impact of Accounting Information System in Planning, Controlling andDecision-Making Processes in Jodhpur Hotels; Author-Dr. Omar A.A. Jawabreh

Tourism and Hotels Sciences Department, Al Balqa Applied University, Jordan,

Aqaba

4. Accounting information & reporting systems by aseervatham andanandarajah.

5.

http://www.investopedia.com/articles/professionaleducation/11/accounting-information-systems.asp
http://www.investopedia.com/articles/professionaleducation/11/accounting-information-systems.asphttp://www.investopedia.com/articles/professionaleducation/11/accounting-information-systems.asphttp://www.investopedia.com/articles/professionaleducation/11/accounting-information-systems.asphttp://www.investopedia.com/articles/professionaleducation/11/accounting-information-systems.asphttp://www.investopedia.com/articles/professionaleducation/11/accounting-information-systems.asphttp://www.investopedia.com/articles/professionaleducation/11/accounting-information-systems.asphttp://www.investopedia.com/articles/professionaleducation/11/accounting-information-systems.asp


29/29

ais final smes

Documents