Question

for several years as a regional manager for a national retailing organization , Scott Parry decided to open his own business . Susan Gonzalez , one of his district managers , had also wanted to go into business for herself . Together they formed S & S , Inc. , to sell appliances and consumer electronics devices . Scott and Susan decided to pursue a “ clicks and bricks " strategy . They began by renting a large and attractive building in a busy part of town , but planned to add an elec tronic storefront as well . Scott and Susan each contributed enough money to see them through the first six months of business . They estimated that they needed to hire 10 to 15 employ ees — 3 or 4 to stock the shelves , 3 or 4 customer sales representatives , and 4 to 6 checkout clerks . They plan to begin hiring these employees within the next two weeks . Scott and Susan plan to hold the grand opening of S & S in five weeks . As they review what remains to be done to meet that deadline , they realize that they have not yet made the following important decisions :

1 How should they organize their accounting records so that the financial statements their banker requires can be easily produced ?

2 How can they design a set of procedures to ensure that they meet all of their government obligations , such as remitting sales , income , and payroll CS

3 How should they price their products to be competitive yet earn a prof

4 Should they extend credit , and if so , on what terms ? How can they ac rately track what customers owe and have paid ?

5 How should they hire , train , and supervise their employees ? What c pensation and benefits packages should they offer , and how should process payroll ?

6. How can they track cash inflows and outflows so that S & S is not caught in a cash squeeze ?

7 What is the appropriate product mix and quantities to carry , given S & S's limited showroom space ?

8 What functionality should be provided on S & S's Web site ?

Although Scott and Susan could make many of these decisions on the basis of an educated guess or " gut feel , ” they know they will make better decisions if they obtain additional information . A well - designed accounting information system ( AIS ) can solve some of these issues . Moreover , if properly designed , the AIS can frovidemosnaf the information needed to make the remaining decisions

‏ They plan to begin hiring these employees within the next two weeks . Scott and Susan plan to hold the grand opening of S & S in five weeks . As they review what remains to be done to meet that deadline , they realize that they have not yet made the following important decisions : 1 How should they organize their accounting records so that the financial statements their banker requires can be easily produced ? 2 How can they design a set of procedures to ensure that they meet all of their government obligations , such as remitting sales , income , and payroll CS Scharested with GamScanner 3 How should they price their products to be competitive yet earn a profit ? 4 Should they extend credit , and if so , on what terms ? How can they accu rately track what customers owe and have paid ? 5 How should they , train , and supervise their employees ? What com pensation and benefits packages should they offer , and how should they process payroll ? 6 How can they track cash inflows and outflows

Answer 1

An information system is a formal process for collecting data, processing the data into information, and distributing that information to users. The purpose of an accounting information system (AIS) is to collect, store, and process financial and accounting data and produce informational reports that managers or other interested parties can use to make business decisions. Although an AIS can be a manual system, today most accounting information systems are computer-based.

Accounting information systems have three basic functions:

1. The first function of an AIS is the efficient and effective collection and storage of data concerning an organization’s financial activities, including getting the transaction data from source documents, recording the transactions in journals, and posting data from journals to ledgers.
2. The second function of an AIS is to supply information useful for making decisions, including producing managerial reports and financial statements.
3. The third function of an AIS is to make sure controls are in place to accurately record and process data.

In the given situation AIS can help S&S in taking the 8 mentioned decision in the following ways

Decision -1

AIS is a system which collects, stores and processes the accounting and financial data. This financial data is useful for users of accounting information system for preparing Financial statements with applicable reporting framework.

It records the financial data from transaction to journal and then journal ro ledger and from ledger it prepares financial statements which will be required by the banks.

Decision 2

For compliance with different tax laws, the AIS software can be changed according to the law. For example tax rates can be set at the AIS software so that it will automatically calculate the sales tax on the invoice amount. Also at month end net tax payable will be automatically calculated.

Decision 3

Cost Accounting Information System (CAIS) is an accounting information system which determines the costs of products manufactured or services provided and record these costs in the accounting records.

It is the key to management’s assessment of the company’s efforts to achieve profit and determine competitive price. Since it is so important, the CAIS must be carefully designed and properly maintained.

CAIS also helps in determining unnecessary cost so that cast can be reduced and an competitive price can be set.

Decision 4

AIS helps in maintaing record of receivable and payable from the debtors and to creditors. It helps in tracking each transactions with the debtor so as to check the outstanding balance and debtors ageing.

Based upon the frequency of receipt and debtor ageing credit period can be set automatically in AIS.

Decision 5

Payroll recording and payroll processing can easily be done in AIS payroll software. It also captures the data in relation to the effective and efficiency of the employees based upon which hiring, firing and supervision decision can be taken.

Using a computerized and integrated system so the company can reduce the human eror in recording, payroll and allowance counting, and take a short time to make a new document.Design a payroll report completely to help the management in making effective and efficient decision.

Decision 6

AIS captures the data regarding every cash transaction so as to chack cash balance and take timely decision.

Cash flow statement can be prepared by AIS software for the period for effective decision.

Also minimum threshold of cash limit can be set in AIS system which will inform the owner in case cash balance decrease below the limit set.

Decision 7

product wise profitable information can help the company to take appreciate decision about product mix.

Decision 8

AIS software can be linked to the wabsite so that it can collect the information regarding the function of the website and what other additional data can be put.