Accounting Information System 5

American Journal of Scientific Research ISSN 1450-223X Issue 4 (2009), pp36-44 EuroJournals Publishing, Inc. 2009 http//www. eurojournals. com/ajsr. htm write up learning constitutions (AIS) and Knowledge trouble A Case Study Zulkarnain Muhamad Sori Department of accountancy and Finance, Faculty of Economics and Management Universiti Putra Malaysia Abstract This study seeks to examine the use of Accounting development Systems (AIS) by ZBMS Sdn. Bhd. , and its contribution to the companionship management and strategical intent of the governance. ZBMS is a bon ton that registered in Kuala Lumpur and operate in aspect industry.The company utilize automated AIS know as Contract Plus fiscal & be sick Accounting package commerci altogethery authentic by a private company (ZYXW). Wide vicissitude of sight that involve in the companys operating theater at heart and emergeside the organisation uses accounting information generated by this governance for decisionmaking. Based on input provided by operational level managers, the Contract Plus bundle produces monthly projects income masterys, balance sheets and statement of changes in monetary position for the strategic and tactical managers to plan, control and make decision on the resources allocation.The role- compete by AIS enhanced the organisations accounting functions, and add information look on. The automated AIS speed up the surgery to generate fiscal statements and overcome human weaknesses in data processing. The arrangement of rules enhances management of resources and the process of monitoring, control and prediction of ZBMS business for better incoming. With the advent of AIS, the offset of tacit and intelligible acquaintance could be seen from the intensive training of personnel at the early stage of system performance to the development and use of companys get manual in training of new staff and assisting the job of existing staff.Given the benefit of AIS to ZBMS, this story recommended that the source of data should be fully automated, and the existing system should be upgraded through computerise the pre-tendering and post-tendering of projects to enable AIS integration. Key address Accounting breeding Systems, Knowledge Management, Accounting Functions, Information Value, Financial Statements 1. Introduction Accounting Information System (AIS) is merry to all organisations (Borthick and Clark, 1990 Curtis, 1995 Rahman et al. , 1988 Wilkinson, 1993 Wilkinson et al. 2000) and perhaps, ein truth organisations either profit or non profit-oriented need to maintain the AISs (Wilkinson, 2000 3-4). To better understand the term Accounting Information System, the three talking to constitute AIS would be elaborate separately. Firstly, literature documented that accounting could be identified into three components, namely information system, language of business and source of financial information (Wilkinson, 1993 6-7). Secondly, information is a valua ble data processing that provides a basis for making decisions, taking action and fulfilling legal obligation.Finally, system is an integrated entity, Accounting Information Systems (AIS) and Knowledge Management A Case Study 37 where the framework is focused on a set of objectives. The combination of the three words Accounting Information System signify an integrated framework within an entity (such as a business firm) that employs physical resources (i. e. , materials, supplies, personnel, equipment, funds) to transform economic data into financial information for (1) conducting the firms operations and activities, and (2) providing information concerning the entity to a variety of interested users.Indeed, the combination or interaction between human, technology and techniques would permit an organisation to administer its knowledge effectively (Bhatt, 2001 Thomas and Kleiner, 1995). authorizedly, the world and human life has been transformed from information age to a knowledge age (Syed-Ikhsan and Rowland, 2004 238 Thomas and Kleiner, 1995 22), and knowledge has been recognised as the most valuable asset. In fact, knowledge is not impersonal like money and does not reside in a book, a data bank or a softw ar program (Drucker, 1993).Drucker believed that knowledge is always embodied in a person, taught and learned by a person, used or misused by a person. As the world moving into knowledge era, this constitution will examine how ZBMS Sdn. Bhd. manages its knowledge in order to appease competitive amongst the construction industry. Probst, Raub & Romhardt (1999, p. 1) stressed that companies must learn to manage their intellectual assets (i. e. knowledge) in order to survive and compete in the knowledge society. Indeed, knowledge management is concerned with the exploitation and development of the knowledge assets (Davenport et al. , 1998).This paper seeks to examine the Accounting Information Systems (AIS) used by a Malaysian company named ZBMS Sdn. Bhd . The paper will highlight the users of the system and the way information adds value to the organisation. Also, the paper will investigate the way knowledge is managed through the process of creating, storing, disseminating and applying and how information system plays an important role through reveal the process and the AIS contribution in the organisations strategic role. The remainder of the paper is organised as follows. The following dent describes the background of ZBMS and the use of accounting information systems.The third section provides research findings on accounting information systems employed by ZBMS. The fourth section digest suggestions for future research. The final section concludes the paper and come inlines the limitations of the study. 2. The Use of Accounting Information Systems in ZBMS ZBMS is a private limited company registered in Kuala Lumpur, Malaysia that operate in construction industry, where the main activities ranging from construction of infrast ructure, building, power, waste water to property development as closely as engineering, procurement, construction and commissioning (EPCC) in the oil & bluster sector.The company used automated AIS known as Contract Plus Financial & exteriorise Accounting package in their Finance Department, which was commercially developed by a private company (ZYXW). Contract Plus is a fully integrated business solution designed specifically for companies in the engineering and construction industry. The software will generate financial data to be analysed by the accountants and subsequently used by top level of management for strategic decision making, thus, these managers could identify future opportunities and limitations face by the company and industry (McCarthy, Minichiello and Curran, 1987 243-244). . Findings As mentioned earlier in section 2, ZBMS is a company that operate in construction industry. The industry was identified as one of the most difficult to understand due to its comp lexity mixture of people, plant, materials, locations, technology, knowledge of the law as well as the design and valuation of work done, which are much subjectivity (Capon, 1990 1). However, these challenges are under control with the advent of technology such as software development that allows systematic data 38 Zulkarnain Muhamad Sori processing.Therefore, it is important to understand the information flow in ZBMS in order to appreciate the usage of information within the organisation as shown in move into 1-1 below. 3. 1. Users of AIS As shown in mental image 1-1, the finance personnel that reside at site project office (or called Project Accountants) and head office such as the Financial Accountants, Management Accountants and Finance Manager are the internal users of the system. Also, the management team that consists of Finance General Manager, promontory Operating partr, Managing Director and Board of Directors are among the internal users of the system.On the other han d, the external users consist of government agency (i. e. Inland revenue), external auditors and creditors. Indeed, wide variety of people within and outside the organisation uses accounting information for decision-making (Rahman and Halladay, 1988, Renau and Grabski, 1987). Figure 1. 1 Information Flow of ZBMS ZBMS HEAD OFFICE Management Team Inland Revenue ZBMS HEAD OFFICE External Auditors Finance Department Bankers Suppliers Site Office Design Team SubContractors Client 3. 2.Function of AIS The main function of AIS is to assign quantitative value of the past, present and future economics events. At ZBMS, AIS through its computerised accounting system (i. e. ZYXW-Contract Plus) produces the financial statements namely income statements, balance sheets and cash flow statement. The system will process the data and transform them into accounting information during input, processing and output stages that will be used by a wide variety of users such as internal and external users ( see for example Wilkinson, 2000 10-11).Wilkinson noted that an effective AIS performs several key functions throughout these three stages such as data collection, data maintenance, data Accounting Information Systems (AIS) and Knowledge Management A Case Study 39 management data control (including security) and information generation. Figure 1-2 summarised the transformation process of AIS. Figure 1. 2 Data Processing in Finance Department at ZBMS Input Progress Billing Certificate, Subcontractors Progress Certificate, Suppliers Invoices Processor ZYXW Accounting System takings Financial StatementHuman Element Finance Personnel 3. 3. Usage of Information Within AIS The construction projects undertaken by the company are divided according to the type of construction activities that comprised of five divisions, namely infrastructure, building, power, wastewater and oil and gas, where each project is treated as a separate company. The number of projects undertaken by each division depends on the contracts being awarded to the company. As indicated by Figure 1-2, the sources of data originated from external parties such as client, subcontractors and suppliers.The Project Accountants will work closely with the Quantity Surveyors to come out with the appropriate information as illustrated below Client The clients Quantity Surveyors (QSs) will evaluate work in progress (WIP) and come out with per centum of WIP to be agreed by both parties. Once agreed, Progress Billing Certificates (PBC) will be issued by Clients QSs, which a imitate of it will be sent to head office for data processing. Subcontractors The ZBMSs QSs will evaluate subcontractors WIP at site and come out with percentage of WIP to be agreed by both parties.Once agreed, Subcontractor Progress Certificate (SPC) will be issued by ZBMSs QSs and confirm by ZBMSs Project Manager, which a copy of it will be sent to head office for data processing. Suppliers QSs and Project Accountants will ensure th at the materials and machineries are delivered in good condition at construction site before delivery orders are accepted. The delivery orders will be attached to suppliers invoice and sent to Head Office for processing. 40 Figure 1. 3 Simplifies the AIS within ZBMS Zulkarnain Muhamad Sori CLIENTSUBCONTRACTORS SUPPLIERS Site Valuation by Client Site Valuation by ZBMS Materials & machineries delivered sensible by Client Certified by ZBMS Materials & machineries delivered PBC SPC Invoices Verified & KeyPunched by Project Accountants Projects Accounts Receivables HQ Database (ZYXW) Head Office Maintenance Projects Accounts Payable Projects Fixed Assets Projects Cash Book Project Ledger Projects mental testing Balance Projects Financial Statement Consolidated Consolidated General Ledger Consolidated Trial Balance Consolidated Financial StatementsThese documents will be verified and input into the system by Project Accountants. The projects data will be stored at Projects Account Recei vables, Account Payables, Fixed Assets accordingly. Projects cashbook will be updated automatically after the data being entered to the projects Account Receivables and Account Payables. Any expenses incurred at head office will be stored at HQ Maintenance master record by Financial Accountant. The Contract Plus Accounting System software will process the data and produce financial statements of individual companys projects onAccounting Information Systems (AIS) and Knowledge Management A Case Study 41 monthly basis, which subsequently consolidated at group level. The process flow is shown in Figure 13 preceding(prenominal). The automated AIS play an important role in the ZBMSs operational level. As indicated by Rahman and Halladay (1988 20), most modern organisations operational control of financial resources depends largely on automated support. This is due to the financial statements are generated by the Contract Plus.As shown in Figure 1-4, projects financial statements are ge nerated by the Project Accountants, while the Financial Accountant generates the consolidated financial statements. The Management Accountant uses the consolidated financial statements to prepare companys death penalty Report such as cash-flow forecasts and ratio analysis. Once the Finance Manager (operational level) approve the report, it will then be submitted to the Finance General Manager and question Operating Officer (tactical level) to assist them for planning, control and decision making.The Performance Report will provide the information regarding work in progress relevant information. Therefore, AIS plays very important role at operational and tactical level as the activities at these level depend heavily on the information generated by the AIS. Figure 1. 4 Type of Information in ZBMS Strategic Board of Director, Managing Director Tactical Chief Operating Officer, General Manager (Finance) Finance Manager, Management Accountant, Financial Accountant, Project Accountant O perational Transaction Processing ZYXW Accounting System . 4. Value Added of AIS The role played by accounting functions has been enhanced with the development of AIS, which in turn contribute to the professions value added to organisation. In fact automated AIS employed by ZBMS expedite the process to generate financial statement and reduce the human errors compared to non-automated AIS, which add the existing value of accountants. AIS also provide information on both actual and budget data of the organisation that helps companys management to plan and control business operation.Good management of resources and better control of cost, budgeting and forecasting enhance the well being of ZBMS to continually generated profits. The AIS also played a crucial role that contributes to ZBMSs value added by providing internally generated inputs from financial statements. Rahman and Halladay (1988 19) believed that viable strategic plan must have inputs based on history of organisation, the current assets and capabilities of the organisation, and the trends in operations of the organisation. 42 3. 5. Role of Knowledge Zulkarnain Muhamad SoriAt ZBMS, both tacit and explicit knowledge are used as shown by the extensive used of accounting information system to assist business decision-making. The ZBMS begins its computerised accounting system in 1997. During the transformation process from manual to computerised accounting system, all finance personnel were sent for comprehensive computer training. Table 1 Relationship of AIS at ZBMS and Knowledge Management System Knowledge Management System Creation of knowledge Creation of Knowledge Storing of Knowledge Disseminating of Knowledge Knowledge Conversion graphic to mute Explicit to Tacit Tacit to Explicit Tacit to ExplicitDevelopment of Automated AIS Training by hands-on experience ZYXW implemented, staffs learned from vendors manual Staffs gaining experience Problems and solution being recorded on paper Improvement on s ystem Internal manual that suits the ZBMS needs being produced Widely used in the department Assists learning process of new staffs Explicit to Tacit System constantly use in Finance Department to generate monthly financial statements Applying of Knowledge Explicit to Explicit As shown in Table 1, the staffs were given hands on experience on the ZYXW System.During the early stage of system implementation, finance personnel were given flexibility to explore the system due to limited experience on the software at that time, and most of the staffs depend largely on the manual provided by the vendor for trouble-shooting. At sign stage, two-way communications with the vendor were developed to solve problems arised. As the time going on, the personnel were encouraged to record the problems aroused. Problems that have been solved were recorded for future reference.Currently, the ZBMS Finance Department has its own ZYXW manual that suits with the department needs. The manual provides valua ble information to new employees as well as to the existing personnel at Finance Department. Indeed, AIS provide the systematic recording, processing and generating of accounting information, and in the absence of AIS, information would be scattered, random and hard to access, which would become a barrier to the growth of knowledge. 3. 6. Strategic Role and AIS To analyse the AIS strategy in ZBMS, McFarlan Strategic Grid will be utilised. The McFarlans strategic grid would locate ZBMS to the appropriate course of instruction with respect to its information system strategy (Curtis, 1995 61). Automated AIS is fundamental part of the strategic plan of ZBMS in 1997. It has been improved over the years of implementation and generates exact and timely accounting information that contributes to a good decision-making. Realising the benefit brought by the AIS, the source of data must be fully automated. The existing system should be upgraded through computerise the pre-tendering and post- tendering of projects in the primary stages of the construction activities.When the system is upgraded, the ZYXW Contract Plus will integrate the two modules of pre- and post-tendering with the currently automated Financial and Project Accounting. Therefore, the most suitable position to locate AIS at ZBMS on the McFarlan Grid is on Factory Grid as shown in Figure 1-5 below. Accounting Information Systems (AIS) and Knowledge Management A Case Study Figure 1. 5 ZBMS Location on McFarlans Strategic Grid 43 Low Current Dependence on AIS Support Turnaround High Factory AIS at ZBMS Strategic Low Future Importance of AIS High 4. Direction for Future ResearchHaving mentioned the above opportunities and challenges to the AIS, future research should investigate the AIS contribution on the organisations growth of knowledge. Though AIS would organise and structure the data input and knowledge, lack of reasonableness on the potential effect of human behaviour on the system such as human error, manipulation and work-style. In fact, Ponemon and Nagoda (1990) noted, the most difficult problems a great deal are caused, or are exacerbated, by those individuals who have erroneous expectations of the new system being implemented (p. 1).The study would be fruitful with the use of questionnaire and oppugn survey. Perhaps, the survey should concentrate on a sample of senior managers of the top hundred companies listed on the Bursa Malaysia (Malaysian Stock Exchange), banks and regulatory bodies. These groups could contribute significantly due to their role as a decision maker in their respective organisations. Secondly, future research should also investigate the possibility to expand the use of AIS to the other areas that lifelessness did not use the system such as non-profit organisation and society.Indeed, the current level of usage shows that the benefit outweighs the investment cost. The successful implementation of AIS could save shareholders money and time. Finally, fut ure research should explore issues on the information value generated by AIS to shareholders and stakeholders in making investment decisions. Case study preliminary on top companies would be appropriate methodology because the understanding on specific AIS model would be more valuable rather than using questionnaire and question approach that assumes AIS across sampled organisation is identical. 5. ConclusionThis paper examines the use of Accounting Information Systems (AIS) by ZBMS Sdn. Bhd. The wide varieties of people that involve in the companys operation get the benefits from the implementation of AIS and the use of Contract Plus software developed by ZYXW. The system assists the operational managers to come out with monthly reports for the top managerial level (i. e. tactical and strategic) plan, control and decide resources allocation. In addition, the paper showed that the AIS add value to information processed within the company. The automated AIS could speed up informati on process and overcome traditional human weaknesses.As a result, the system supports the resource management and help ZBMS pursue its projection of continuing business profit. The use of AIS indicate the growth of tacit and explicit knowledge, where personnel were trained intensively and experience and trouble shooting were 44 Zulkarnain Muhamad Sori recorded for future reference and training. Indeed, the successful implementation of an accounting information system can be described as a series of complex, interconnected activities necessitating participants to have technical and managerial skills to sort out prospective problems (Ponemon and Nagoda, 1990 1).Note To keep the identity of the respondent and its software developer anonymous, an imaginary name was used in this study i. e. ZBMS Sdn. Bhd. and ZYXW respectively. References 1 2 Bhatt, G. D. (2001). 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