Accounting Information Systems and Business Processes - Part II Chapter 11

Chapter 11: Accounting Information Systems and Business Processes - Part II Introduction The Resource Management Process The Production Process The Financing Process Business Processes In Special Industries Business Processes Reengineering

Introduction Business Processes Information Needs Sales and Purchasing Resource Management, Production, and Financing Information Needs Typical AIS requirements Specialized information

Human Resource Management Personnel function Hire, train, and employ appropriately qualified employees Business Process Management Software Packages Automate the core processes Payroll Processing Information Systems Process payroll activities and reporting

Human Resource Management Objectives Hiring, training, and employing workers Maintaining employee earnings records Complying with regulatory reporting requirements Reporting on payroll deductions Making timely and accurate payments to employees Providing an interface for personnel and payroll activities

Personnel Function Flowchart

Payroll Function Flowchart

Human Resource Management Inputs Personnel Action Forms Documents hiring or changes in employee status Time Sheets Tracks hours worked Payroll Deduction Authorizations Authorization to deduct certain amounts Tax Withholding Forms Authorization to withhold appropriate tax amounts

Human Resource Management Outputs Financial Statement Information Employee Listings Current employees May contain employee-specific information Paychecks Final documents; subject to strict internal controls Check Registers Used to make journal entries for salary and payroll tax expenses

Human Resource Management Outputs Deduction Reports Summaries of deductions for employees as a group Payroll Summaries Used to analyze expenses Tax Reports Government required information Income tax, social security tax, unemployment tax

Human Resource Management Summary

Study Break #1 All of the following activities are common to the Human Resource Management function except: Hiring, training, and employing workers Reporting on payroll deductions Maintaining employee earnings records Certified financial planning for employees

Fixed Asset Management Fixed Asset Management Function Long-term Assets Purchase, maintenance, valuation, disposal Enterprise Asset Management System Automate management of assets

Fixed Asset Management Objectives Tracking purchases of fixed assets Recording fixed asset maintenance Valuing fixed assets Allocating fixed asset costs (recording depreciation) Tracking disposal of fixed assets

Fixed Asset Management Function Flowchart

Fixed Asset Management Inputs Purchase Requisition Requires approval by management Receiving Report Identifies receipt of fixed asset Supplier Invoice Sent when asset is shipped

Fixed Asset Management Inputs Construction Work Order If asset is built by company Fixed Asset Change Form Transfer of fixed asset Locations, sale, trade, or retirement Repair and Maintenance Form Notification to update expense and asset accounts

Fixed Asset Management Outputs Financial Statement Information Fixed Asset Register Identification numbers Location Depreciation Register Depreciation Expense Accumulated Depreciation

Fixed Asset Management Outputs Repair and Maintenance Reports Current period expenses Historical expenses Report on Retired Assets Disposal of fixed assets

Fixed Asset Management Summary

Study Break #2 What is the objective of the fixed asset management function? To track purchases of fixed assets To manage the purchase, management, valuation, and disposal of an organization’s fixed assets To record maintenance and depreciation of fixed assets To keep a current listing of approved vendors

Study Break #3 Why do companies use BPM solutions for the fixed asset management function? Decrease machine downtime and maintenance costs Reduce inventory Integrate data and coordinate logistics All of the above

The Production Process Begins with request for raw materials Ends with transfer of finished goods to warehouses Primary Objectives Converting raw materials to finished goods efficiently Collecting and reporting of information

Production Process Flowchart

Production Process Objectives Track purchases and sales of inventories Monitor and control manufacturing costs Control inventory Control and coordinate the production process Provide input for budgets

Cost Accounting Subsystem Job Costing Information System Tracks costs for specific “jobs” Raw materials, labor, and overhead Process Costing Information System Used for manufacturers of homogeneous products Produced on a regular and continuous basis Activity-based Costing Systems Emphasis on cost drivers of business processes

Just-in-Time Inventory Systems A make-to-order inventory system Attempts to minimize inventory at all levels Dependent upon AIS Timely and accurate processing of information Ensure continuous work flow by providing adequate raw materials

Lean Production/ Manufacturing Concept Eliminate waste throughout the organization Focus on reduction of non-value-added waste Lean Accounting Necessary in order to have lean manufacturing Data collection

Non-Value-Added Waste

Production Process Inputs Material Requisition Form Request to acquire materials from storeroom or warehouse Bill of Materials Identifies types and quantities of parts needed Master Production Schedule Displays quantities of goods needed to meet sales demands

Production Process Inputs Production Order Authorizes the manufacture of goods Incorporates data from sales projections and inventory levels Dictates the production schedule Job Time Card Identifies the distribution of labor costs to specific jobs or production orders

Production Process Outputs Financial Statement Information Details of the costs and pricing Materials Price List Prices charged for raw materials Periodic Usage Report Provides information on use of raw materials Inventory Reconciliation Report Reconciles physical inventory with book balances

Production Process Outputs Inventory Status Report Allows managers to monitor inventory levels Production Cost Report Details the actual costs for production items Production operation, cost element, and/or separate jobs Manufacturing Status Report Provides information about the status of various jobs

Production Process Summary

Study Break #4 Which of the following automated systems help minimize inventory costs? JIT systems ABC systems Job order costing systems Process costing systems

Study Break #5 Lean accounting is: An AIS that is generally considered low cost (i.e., an entry- level system) Designed to support traditional financial performance measures New performance measures that support decision-making by managers and operational improvement leaders None of these

The Financing Process Process Acquisition How a company acquires and uses financial resources Cash, other liquid assets, investments Acquisition Sales of goods and services Borrowing cash or selling ownership shares

The Financing Process

Financing Process Objectives Effective cash management Lockbox systems and electronic funds transfer Cost of capital optimization Earn maximum return on investments Project cash flows

Benefits of a Lockbox System

Financing Process Inputs Remittance Advices Accompanies a customer’s payment on account Deposit Slips Documents account deposits Bank Statements Used to reconcile company balance with bank balance

Financing Process Outputs Financial Statement Information Cash Budget Investment Reports Debt and Interest Reports Financial Ratios Financial Planning Model Reports

Financing Process Summary

Business Processes in Special Industries Professional Service Organizations Accounting, Law, Engineering, Consulting Utilize time and billing information systems Tracks billable hours and creates client bill Not-for-Profit Organizations Provide services for the betterment of society Emphasize fund accounting systems Utilize budgetary AIS for evaluation measures

Professional Service Organization Bill

Business Processes in Special Industries Health Care Organizations Provide health care to patients Emphasize third-party billing Standardized codes provide efficiency in billing Rely on AIS to maintain patient information

Mini-based Hospital System

Business Process Reengineering Purpose Inefficient or ineffective processes exist Redesign to improve efficiency and effectiveness Potential Failure of Reengineering Unrealistic expectations Employee resistance to change Lack of top management support