Accounting Information System

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INTRODUCTION

The report is consist about accounting, system, data, information, value chain and decision making. In other word, the report is about accounting information system. The purpose of the report is able to enhance higher accounting knowledge as well as other internationally recognized professional qualification.

Accounting is refer to the process of identifying, summarizing, analyzing and recording of the financial transactions. While, system is a set of a standards or procedures and an arrangement of things or a group of related things that move in a direction of a common objective. Data are raw facts and figures that processed to produce information and information is data that has been organized and processed so that are meaningful and useful to users.

Moreover, an Accounting Information System (AIS) consist of people, procedures, data, software and information technology. AIS performs an important function in an organization by collects and stores data about transaction activities and processes the data into information that useful for decision making. Other than that, studying AIS is very important to understand how the accounting system function, what are strategies an organization can pursue, what are the role of AIS in the value chain and how does the AIS provide information for decision making.

Thus, this report would explained more details about strategies used by the organization, the role played by AIS in value chain and how it add value, why data and information are most valuable assets, AIS’s important role in strategic position and decision making process.

QUESTION 1

The two basic strategies suggested by Michael Porter are lower cost and differentiation. These two basic strategies lead to three generic strategies when it comes to the organization market objective whether for broad or narrow market. They are, cost leadership, differentiation, and focus.

Cost leadership strategy is simply means that an organization leading the low cost in the particular industry while at the same time still making reasonable profit. Differentiation strategy is where an organization is having a unique value that other competitors in that particular industry area do not have. Focus is ironically suitable for an organization that has a narrow market objective. Focus is divided into two variants, cost focus and differentiation focus. Cost focus is the minimization of cost within a focused target market, while differentiation focus is implementing the differentiation strategy within a focused target market.

A well-known company Wal-Mart Stores Inc. implemented successfully the Porter’s strategy model in a broad target market. Wal-Mart basically is a company running on the giant retail business. The founder is Sam Walton, who has an excellent brain in managing the products at a relatively low cost and big discounts whereby at the same time making high profit. The Wal-Mart simple mission as according to Ortega (1998) “Offer the lowest price. Cut costs to the bone, and keeps cutting so you can offer the lowest price” and its slogan “everyday low prices” gives a very clear and direct message that this company implementing the cost leadership strategies successfully.

Other than cutting the cost of goods, Wal-Mart also tries to reduce other cost by using the simple store layout, hiring reasonable numbers of workers and even in the executive position they try to reduce the allowance cost paid for example, for the managers when the managers need to travel to other branches to check the operation.

Wal-Mart for quite a long time has become one of the world top retailers. As we know, retail industry gives a huge competition. Therefore, other than cost leadership strategies, Wal-Mart also implemented differentiation strategies in order to set out barriers to other competitors from its standing position. It has been since the early of its beginning, Sam believed that the true leadership is willing to give great value and great service.

It was stated in the Wal-Mart official purpose before as said by Sam himself, “if we work together, we’ll lower the cost of living for everyone…we’ll give the world an opportunity to see what it’s like to save and have a better life”. Even the current purpose they use “saving people money so they can live better” is also derived from its basic purpose. This had shown the uniqueness of Wal-Mart, where this simple message indirectly gives the consumers believes that shopping at Wal-Mart will give them high satisfaction, feels appreciated, and most importantly, they manage to get all the goods they need or even they want with an affordable price.

QUESTION 2

Michael Porter used the term of ‘value chain’ in his book "Competitive Advantage: Creating and Sustaining superior Performance" (1985). It describes as activities that an organization performs and connected to the organization's competitive position.

Michael Porter distinguishes between primary activities and support activities. The primary activities are more on the delivery of a service or product. There are five primary activities such as inbound logistics, operations, outbound logistics, marketing and sales, and service. All of their main activities are connected with each other to improve their effectiveness and efficiency.

The first primary activities were inbound logistics. It is a process of receiving and storing externally sourced materials. The second was aberrations. It is the way in which inputs are converted to output (products). The third was outbound logistics. It is where all those activities involve after operations to get finish goods and services to the buyer. The fourth activities were marketing and sales. It is where all the information activities in the marketing department promote or giving information to the buyer and the consumer about the products or services. Last but not least is service. All those activities involve in maintaining product performance after the products had been sold. It could also be a feedback letter from customer to brush up service or upgrade their products in future.

Besides that, there are four support activities. There are, firm infrastructure, human resources management, technology development, and procurement. The first support activities were firm infrastructure. It is a process involved in planning, financing, quality control and general senior management. There are a few people involved, such as lawyers, accountants and administration. For example, accounting information system can be a part of company’s IT support system for managerial decisions. They may use the AIS to conduct analysis in order to make a good decision.

The second was human resources management. A human resource normally involves with recruiting, developing, motivating and rewarding the workforce of the company. For example, the organization may reduce the number of employees hired to work in the store. This would lead the company to a better future, since the company has less employees they still could do work effectively and efficiently. Not only to the store, but also to all those departments such as management, suppliers and also for the customer.

The third was technology development. Technology is an activity to improve the products or services. It is where information processing of Research and Development (R&D) or website development. For example, if a pharmaceutical company, this Research and Development is important to create new drugs or to modify an old one. It is also one way, to get the approval from the government before selling those drugs(medicine) to consumers.

Last activities are on procurement. It involves in how resources are acquired for a business to punctual date and specific material to be ordered. Procurement is a stage involving by gathering information about suppliers contacts, negotiations, fulfillment of delivery, consumption, maintenance, disposal on the actual delivery and renewal (continuing relationship with the supplier if good)

An organization AIS fits into the value chain. This is because, every part of the transaction is related to one another.

The value can be added to an organization by improving the decision making capabilities, by increase the sharing of knowledge and also improve in efficiency. Value added means making the value of the finished component greater than the sum of its parts. It means that, by adding those values, you can get things done faster, providing better service or advice (customer service), providing something limited (rare gems or masterpiece art) or by customizing it to the customer needs.

A business will be profitable if the value it creates is greater than the cost of producing its products or services. By providing accurate and timely information, the value could be added to make it perform more effective and efficient. This is to improve the quality and reduce the cost of products and services.

QUESTION 3

The definition of data and information are data is raw or unrecognized fact that need to be processed and something simple that can be used in the organization. When data has been processed, organized, structured and so to make it useful it is called information. For example, about data and information, when a student’s has scored in an exam (data) and how many classes averages scored is the information that can be concluded from given data (information).

Why the data and information is the most valuable asset? It is because the data and the information are carried the important resources to the company. For example, the information about their employee , the profit and losses of the company, and the information that they can use to improve their performance of the company.

Data and information are called the most valuable asset because nowadays the company do not value their data as a top of the business asset. They focus on a how they can keep this data in a secured way. This is because, people nowadays they have a very good skill in technology. They know how to hack the system even the system have a strong security network that prevent from any viruses and hackers. Most of the companies have spent a million of Ringgit for the technology that they use to protect the data and their information rather than to let the bare the risk happened in a company.

The benefit of the information is reduction uncertainty. For example, when the company has a lot of information, they are much easier to define the good information and to predict what will happen and confirm what already has happened, second improved decision making. Besides that, when the company receives an idea or information in an organization so decision can be made to choose the best information that they can use to implement to the company to improve company performance.

Lastly is to improve the ability to plan and reschedule activities. For example, every company have their mission and vision for achieving their target of the company in short-term or long-term. Thus, the information and the data that they have from the past, they might could use it to improve and replant their mission and vision of the company to make it better for achieving the target in the future.

In conclusion, the data and information must be the most important things to the company. If they lost the data, it means they lost everything about the company. This is because, every particular detail is stored in the data itself. Why the data are important because they produce the report on the information and to increase the knowledge of decision making. The manager needs to understand the high volume of the data to make the necessary decisions. It is not easy to make an analysis on the data, but it helps to read it easy to decide it. The data and information must be kept in secured for others and no need to worried about how to spend money for this technology because it’s the most valuable asset of the company.

QUESTION 4

Strategic position is where all levels of position in an organization, from top management down to the clerk have been given a clear message on how to play their respective roles and are able to communicate to each other effectively in order to achieve a common goal. Michael Porter suggested several strategies in developing strategic position.

Porter first came out with a basic concept of product differentiation strategy and low cost strategy. The idea of these two basic strategies brings the same concept as mentioned earlier in question 1. Where product differentiation strategy is that a unique value that an organization have and other organization do not have, while low cost strategy is simply means offering a cheaper price than other competitor in the same area of business.

Porter also suggested another three strategies in applying strategic position concept. There are, variety based, needs based, and access based. Variety based strategic position involves offering a subset of the industry products or services, whereas needs based strategic position is an organization serves the needs of particular group of customers in a target market, and access based strategic position is to serve a group of customers who differ from others in terms of a particular factors.

AIS in an organization is vital as it can support the organization in developing and maintaining strategic position. Enterprise Resource Planning (ERP) systems with SAP integrate all aspects of a company’s operations with AIS. ERP system basically is a business software that involves an integration process of different financial and non-financial operating data and sources gathered from different department of an organization under one unit. While AIS is a computerized system that gathers and stores all data and it being processed into information that will be used by managers, creditors, investors, and other users. Therefore, the merged of AIS and ERP will make especially, the accounting and other activities in an organization quicker and more reliable to both management of the company and external users.

QUESTION 5

Information is data that have been organized and processed so that are meaningful and useful to users. Other than that, information is the term data refers to any and all of the facts that are collected, stored and processed by an information system. While decision maker is a person who take action and make the process of selecting a logical choice from the available options. There are some steps in the decision making process to provide more information to get better decision maker.

The first step in the decision making process is identify the problem. Clearly, there would be no need to make a decision without having a problem. So, the first thing is to identify and state the underlying problem. When identify the problem, there will be some question should be asked. There are What is the exact problem?, Why the problem should be solved?, Who are affected causing of the problem?, and Before when the problem should be solved?. By answering these questions, can get a clear picture of the problem. This is a good approach to begin for the decision maker, because starting with a clear picture of the problem would help to find alternatives or ways.

Secondly, select a method to solve the problem. The situation of making a decision arises because there are many methods or alternatives available for solving the problem. Thus, the following step after state the main problem would be listed out possible methods or alternatives. For this step, generate several possible methods or alternatives that related to the problem and solve the problem. Moreover, need to use creative skills when come out with methods or alternatives and need to do some researches on the problem of find best methods or alternatives.

Thirdly, collect data needed to execute the decision model. Before starting on the process of making a decision, all relevant data need to be gathered. So that, it will be a help for the decision maker to make a good decision or choose a best method to solve the problem. The data that collected should be up-to-date, reliable, relevant, complete, accurate and understandable. So, it will be easy and help to make a decision in a perfect time or before the deadline.

The next step in the decision making process to provide more information to get better decision maker is evaluating the merits of each alternative. This is the most important stage in decision making procedure. In this stage, need to analyze each method or alternatives that list out. Other than that, need to identify advantages and disadvantages of each alternative. Then, filter out the alternatives that impossible and do not serve for the problem. Arrange the alternatives according to the advantages of each alternative.

Lastly, choose and execute the preferred solution. In the last step, choose the best method or alternative to solve the problem or make a decision and execute the alternative.

Before executing the alternative, put a plan to implement the decision and make sure that all related parties accept and support the decision. Then, evaluate the outcomes of the decision for seeing whether that anything should learn and then correct in future decision making.

CONCLUSION

Throughout this report, there are a lot of knowledge we gained other than basic theory that has been learned in the class. We are able to understand more on the specific topic such as the Michael Porter’s strategy since here we are discussing on a real application of the theory we learned in the class.

Other than that, we also learned in detail about the value chain activities. Through this report, we are able to describe on how AIS fits into an organization and the value added that applies to it. Next, through this study, we are able to see why data and information are said to be the most valuable assets in an organization, how AIS plays an important role in maintaining a strategic position in an organization, and also how to provide more information in the right way in order to get better decision maker.

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