CHAPTER 8: AIS & BUSINESS PROCESSES: PART II
THE FINANCING PROCESS
It describes how a company acquires and uses financial resources such as cash, other liquid assets, and investments.
MINIMIZING THE COST OF CAPITAL
EARN MAXIMUM RETURN ON INVESTMENT
LOCK-BOX TRANSFER
PROJECT CASH FLOW
ELECTRONIC FUNDS TRANSFER (EFT)
LEAN ACCOUNTING
- Lean manufacturing requires that many leaders be empowered as decision makers, which means they also need timely information to be effective.
- Lean Accounting means measuring and evaluating results by VALUE STREAM MANAGEMENT rather than by traditional department.
PRODUCTION ORDER
JOB TIME CARD
- authorizes the manufacture of goods and dictates the production schedule
This card shows the distribution of labor costs to specific jobs or production orders
MASTER PRODUCTION SCHEDULE
BILL OF MATERIALS
When a production manager needs raw materials, he or she issues a
shows the quantities and the timing of goods needed to meet quantities required for anticipated sales.
MATERIALS
REQUISITION FORM
types and quantities of parts needed to make a single unit of product.
INPUTS TO THE PRODUCTION PROCESS
material from a storeroom or warehouse
where the raw materials are kept.
MANUFACTURING STATUS REPORTS
- Provide the managers with information about the status of various jobs
OUTPUTS TO PRODUCTION PROCESS
PRODUCTION COST REPORTS
- Cost accountants use this to calculate budget variances
INVENTORY STATUS REPORT
This report allows purchasing and production managers to monitor inventory levels.
PERIODIC USAGE REPORTS
- show how various departments use raw materials
MATERIALS PRICE LIST
-shows the price charged for raw materials
OUTPUTS OF FINANCING PROCESS
Vertical market – refers to markets or industries that are distinct in terms of the services they provide or the goods they produce
BUSINESS PROCESS IN SPECIAL INDUSTRIES
Professional Service Organizations
- are business establishments providing a special service to customers such as accounting, legal services, engineering, consulting, and architectural services
time and billing information systems
- are similar to job order costing systems- they track hours and costs associated with each job and each employee
Two major output of time and billing system:
Several Unique Operating Characteristics of Professional Service Organizations
1. Client bill – may detail the number of hours worked by every professional staff member and the rate charged by each
2. The professional staff members’ record of billable hours
1. No merchandise inventory
2. Emphasis on professional employees
3. Difficulty in measuring the quantity and quality of output
4. Small size
- general ledger information
- cash budget
THE PRODUCTION PROCESS
SOMETIMES CALLED THE
CONVERSION PROCESS
*Accounting for the acquisition and use of production machinery: FAM Process
Objective of a Manufacturing Organization’s Production Process
CAD TECHNOLOGY
- to collect cost accounting data for operational managers for decision -making
- to convert raw materials into finished goods as efficiently as possible
Cost Accounting Subsystem of an AIS
- Provides important control information and varies with the size of the company and the types of product produced.
Example: Variance reports reflecting differences between actual and standard production costs.
JUST-IN-TIME (JIT) SYSTEMS
Some manager refer to as a “make-to-order” inventory system. [Indicates that the organization produces goods to fill an order rather than to fill inventory]
OBJECTIVE
LEAN PRODUCTION/MANUFACTURING
- To minimize inventories at all levels.
A JIT System requires reliable and high-quality AIS: timely and accurate
- From Materials – to maintain constant workflow
- To Finished Goods – to suffice demands and avoid lost sales
- involves making the commitment to eliminate waste throughout the manufacturing process
- focuses on elimination or reduction of Non-value added waste
(1) to improve overall customer value
(2) to increase the profitability of the products or services
TYPES OF NON-VALUE ADDED WASTES
- PROCESSING
- TRANSPORTATION
- WAITING
- OVERPRODUCTION
- HUMAN POTENTIAL
- DEFECTS
- MOTION
- INVENTORY
ROBOTICS
THE RESOURCE MANAGEMENT PROCESS
Commonly:
JOB COSTING Information System
- keeps track of the specific costs for raw materials, labor and overhead with each product or group of products, called “job”.
- appropriate for manufacturers of large-scale or custom products.
Human Resource Management activity includes the personnel function, which is responsible for hiring or laying off employees.
Activity Based Costing Systems
- help managers describe processes, identify cost drivers of each process and then determine the unit costs of products created in each process.
PROCESS COSTING Information System
- process costing systems use averages to calculate the costs associated with goods in process and finished goods produced.
- Manufacturers of homogeneous products that are produced on a regular and continuous basis.
BUSINESS PROCESS REENGINEERING
Why Reengineering Sometimes Fails
Redesign
- There are several reasons for these failures, including unrealistic expectations, employee resistance, and lack of top management support.
- Successful BPR projects can result in increased profit and more satisfied customers, but often not to the extent envisioned.
- Successful BPR efforts also need top managers who are good communicators and are willing to give employees both good and bad news.
- Managers should consider the professional help of change management consultants to facilitate this complex process and overcome potential negative reactions.
- Means a customer knows who to talk to when an order is late and the customer is not passed around from one person to another when problem occur.
- Is about redesigning business processes that are no longer efficient.
- Continuous process that involves the analysis of an existing process to find areas for improvement .
AIS AT WORK
Reengineering Health Care Systems
Improving the collection, organization, accuracy, and accessibility of information should lead to improved health care and reduced costs.
Because manual payroll processing can be tedious, repetitive, and error-prone, the payroll function was one of the first accounting activities to be computerized in many organizations.
Fixed Asset Management
The objective of the fixed asset management (FAM) function is to manage the purchase, maintenance, valuation, and disposal of an organization’s fixed assets (also called ‘‘long-term assets’’ because they last more than one year).
- Must record each of these fixed assets on its books when it purchases the asset.
- In addition, the company must maintain depreciation schedules for its fixed assets.
- Prepare separate depreciation schedules for income
- AIS should also track repair costs, and distinguish between revenue expenditures and capital expenditures.
- AIS calculate the amount of gain or loss upon disposal of individual fixed assets.
Introduction
Not for Profit Organizations
Outputs of Fixed Asset Management Processing
NPO’s
- Usually staffed by volunteers as well as professional employees.
- Do not emphasize maximizing net income
- Usually not affected by market forces as are for profit organizations
- Have political emphasis
NPO’s have special accounting information needs
- Religious Organizations
- Schools
- Federal Government
Fund Accounting System
Do we use profit measures in evaluating NPO’s?
Shows the resources available for carrying out organization’s objective
PROCESS MEASURES
Are the not for profit organizations concerned with long range planning?
Health Care Organizations
Third party billing
Standard codes
Claim Forms
HCO do not bill their customers directly, rather they bill the customers directly for services rendered
- fixed asset register lists the identification number of all fixed assets held by a company and each asset’s location.
- depreciation register shows depreciation expense and accumulated depreciation for each fixed asset
- Repair and maintenance reports show the current period’s repair and maintenance expenses, as well as each fixed asset’s repair and maintenance history.
In the previous chapter we identified two processes that are common to most organizations: the sales process and the purchasing process. This chapter continues the discussion of business processes by exploring three additional processes: resource management, production, and financing.
Inputs to Fixed Asset Management Processing
- Fixed asset processing begins with a request for a fixed asset purchase. The individual making the request enters the appropriate information on a purchase requisition form (typically an e-form).
- . Other documents associated with fixed asset purchases are receiving reports, supplier invoices, and repair and maintenance records.
- Those responsible for a particular fixed asset should complete a fixed asset changeform when transferring fixed assets from one location to another.
- Fixed asset management requires maintaining repair and maintenance records for each asset individually or for categories of fixed assets. The department performing this service should record these activities on a repair and maintenance form. This form notifies the AIS to update expense or asset accounts.