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CHAPTER 8: AIS and BUSINESS PROCESSES: PART II
Transcript of CHAPTER 8: AIS and BUSINESS PROCESSES: PART II
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.
THE RESOURCE MANAGEMENT PROCESS
Human Resource Management activity includes the personnel function, which is responsible for hiring or laying off employees.
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.
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.
Outputs of Fixed Asset Management Processing
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.
THE FINANCING PROCESS
It describes how a company acquires and uses financial resources such as cash, other liquid assets, and investments.
ELECTRONIC FUNDS TRANSFER (EFT)
MINIMIZING THE COST OF CAPITAL
EARN MAXIMUM RETURN ON INVESTMENT
PROJECT CASH FLOW
OUTPUTS OF FINANCING PROCESS
general ledger information
BUSINESS PROCESS IN SPECIAL INDUSTRIES
Vertical market – refers to markets or industries that are distinct in terms of the services they provide or the goods they produce
Professional Service Organizations
- are business establishments providing a special service to customers such as accounting, legal services, engineering, consulting, and architectural services
Several Unique Operating Characteristics of Professional Service Organizations
1. No merchandise inventory
2. Emphasis on professional employees
3. Difficulty in measuring the quantity and quality of output
4. Small size
time and billing information systems
- are similar to job order costing systems- they track hours and costs associated with each job and each employee
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
Two major output of time and billing system:
Not for Profit Organizations
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
Fund Accounting System
Shows the resources available for carrying out organization’s objective
Do we use profit measures in evaluating NPO’s?
NON MONETARY MEASURES
Are the not for profit organizations concerned with long range planning?
Health Care Organizations
Third party billing
HCO do not bill their customers directly, rather they bill the customers directly for services rendered
BUSINESS PROCESS REENGINEERING
- 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 .
- 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.
Why Reengineering Sometimes Fails
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.
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.
THE PRODUCTION PROCESS
SOMETIMES CALLED THE
Objective of a Manufacturing Organization’s Production Process
to convert raw materials into finished goods as efficiently as possible
*Accounting for the acquisition and use of production machinery:
to collect cost accounting data for operational managers for decision -making
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.
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.
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.
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.
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]
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
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.
INPUTS TO THE PRODUCTION PROCESS
When a production manager needs raw materials, he or she issues a
material from a storeroom or warehouse
where the raw materials are kept.
to acquire more
BILL OF MATERIALS
types and quantities of parts needed to make a single unit of product.
shows the quantities and the timing of goods needed to meet quantities required for anticipated sales.
MASTER PRODUCTION SCHEDULE
- authorizes the manufacture of goods and dictates the production schedule
JOB TIME CARD
This card shows the distribution of labor costs to specific jobs or production orders
OUTPUTS TO PRODUCTION PROCESS
MATERIALS PRICE LIST
-shows the price charged for raw materials
PERIODIC USAGE REPORTS
- show how various departments use raw materials
INVENTORY STATUS REPORT
This report allows purchasing and production managers to monitor inventory levels.
PRODUCTION COST REPORTS
Cost accountants use this to calculate budget variances
MANUFACTURING STATUS REPORTS
Provide the managers with information about the status of various jobs