ACCT341, Chapter 8 AIS and Business Processes: Part II Introduction The Resource Management Process The Production Process The Financing Process Business Processes In Special Industries Monitoring Business Processes

Introduction Many organizations need Focus of AISs typical AIS requirements and some specialized information also Focus of AISs formerly transaction processing presently capturing data around business processes Two important transaction processing cycles are the production and financing cycles.

The Resource Management Process Organizations use resources to produce goods, to provide services, and to generate revenues. An AIS must pay attention to the inventory, human resources, and fixed assets.

Human Resource Management An organization’s human resource management activity includes the personnel function hires employees, trains employees, and maintains personnel records maintains payroll records for employees

Human Resource Management the payroll function pays employees for their work maintains records of employees’ paychecks, complies with employee tax, reports on various deduction categories, and interacting with the personnel function

Human Resource Management Objectives Hiring, training, and employing workers Maintaining employee earnings records Complying with regulatory reporting requirements Reporting on payroll deductions Making timely and accurate payments to employees Providing an interface for personnel and payroll activities

Human Resource Management Inputs Personnel Action Forms document the hiring of new employees or changes in employee status Time Sheets used to track hours worked Payroll Deduction Authorizations authorize the payroll system to deduct certain amounts Tax Withholding Forms authorize payroll to reduce gross pay by the appropriate withholding tax (W-4).

Human Resource Management Outputs Financial Statement Information Employee Listings shows current employees and may contain address and other demographic information Paychecks the final documents in the process; subject to strict internal controls Check Registers used to make journal entries for salary and payroll tax expenses

Human Resource Management Outputs Deduction Reports contain summaries of deductions for employees as a group Tax (Regulatory) Reports reports the government requires for income tax, social security tax, and unemployment tax information Payroll Summaries used by management in analyzing expenses

Fixed Asset Management Fixed assets assets with usable lives of more than one year. A fixed-asset management system has to manage the assets in terms of their purchase, maintenance, valuation, and disposal.

Fixed Asset Management Function.

Fixed Asset Management Objectives Tracking the purchase, maintenance, valuation, and disposal of the fixed assets Calculating the depreciation for a company’s financial statements Tracking repair costs, distinguishing between revenue and capital expenditures Calculating the gain or loss upon disposal of individual fixed assets.

Fixed Asset Management Inputs Purchase Requisition requiring approval by one or more managers Receiving Report upon receipt of a fixed asset Supplier Invoice when it ships the asset

Fixed Asset Management Inputs Construction Work Orders if the company builds the asset Repairs and Maintenance Reports update of expense accounts for repairs and maintenance Fixed Asset Change Forms basis for transferring fixed assets from one location to another, retiring, selling or trading-in fixed assets

Fixed Asset Management Outputs Financial Statement Information gives the details of the valuation of the fixed assets Fixed Asset Register lists identification numbers and location for each fixed asset Depreciation Register shows depreciation expense and accumulated depreciation

Fixed Asset Management Outputs Repair and Maintenance Reports show the repair and maintenance expenses and history Retired Assets Report shows all assets disposed of during the accounting period

The Production Process begins with a request for raw material and ends with the transfer of finished goods to warehouses This cycle, associated with producing goods concerns the capture of data and the reporting of information

The Production Process

Production Process - Objectives Track purchases and sales of inventories Monitor and control manufacturing costs Control and coordinate the production process Control inventory Provide input for budgets

Cost Accounting Subsystem The cost accounting subsystem is an important part of the production process provides important control information for the budget can vary depending upon the type of business manufacturing can have a job costing system process costing system activity-based costing system

Just-in-Time (JIT) Inventory Systems A Just-in-Time (JIT) Inventory System is a make-to-order inventory system ensures that the production cycle processes inventory transactions appropriately attempts to minimize inventory carrying costs.

Just-in-Time (JIT) Inventory Systems JIT depends upon AIS: to help minimize inventory costs to ensure that the manufacturing processes have the raw materials to keep a continuous work flow. or, to be proactive and reengineer the process.

Lean Production/ Manufacturing Concept Eliminate waste throughout the organization Focus on reduction of non-value-added waste Lean Accounting Necessary in order to have lean accounting Data collection Evaluate performance measures

Lean Manufacturing Waste

Production Process - Inputs Material Requisition Form directs stores to issue materials or parts to designated work centers or authorized persons Bill of Materials shows the types and quantities of parts needed to make a single unit of product Master Production Schedule shows the quantities of goods needed to meet sales demands

Production Process - Inputs Production order shows prices charged for raw materials. incorporates data from sales orders or forecasts, operates lists and bills of materials in order to authorize the production of an order or batch Job Time Card shows the distribution of labor costs to specific jobs or production orders

PRODUCTION PROCESSES—TECHNOLOGICAL ASSISSTANCE ERP Barcode scanners Radio frequency technology (RFID) Advanced electronic tags

Production Process - Outputs Financial Statement Information gives details of the costs and pricing Materials Price List shows prices charged for raw materials Periodic Usage Report provides managerial information on use of raw materials Inventory Reconciliation Report reconciles physical inventory with perpetual records

Production Process - Outputs Inventory Status Report allows purchasing and production managers to monitor inventory levels Production Cost Report details the actual costs for each production operation, each cost element, and/or each separate job Manufacturing Status Report provides managers with information about the status of various jobs

The Financing Process The financing process is where a company acquires and uses financial resources cash other liquid assets investments includes the activities of; borrowing cash selling ownership shares.

The Financing Process

Financing Process - Objectives Effective cash management making use of lockbox systems and electronic funds transfer (EFT). Minimizing cost of capital reducing the cost of obtaining financial resources

Financing Process - Objectives Maximizing return on investments using financial planning models Project cash flows Consists of a cash receipts forecast and a cash disbursements forecast.

Financing Process - Inputs Remittance Advices accompanies a customer’s payment Deposit Slips banks provide to document account deposits Checks companies receive and issue checks

Financing Process - Inputs Bank Statements used to reconcile the cash balance in the company’s ledger against the cash balance in the bank account Stock Market Data Interest Data Financial Institution Profiles

Financing Process - Outputs Financial Statement Information Cash Budget Investment Reports Debt and Interest Reports Financial Ratios Financial Planning Model Reports

Business Processes in Special Industries Vertical market refers to markets or industries services they provide or the goods they produce. These organizations may require more information than is typically output from a traditional AIS. Examples of specialized information needs include time and billing systems, activity based costing systems, and point-of-sale systems.

Industries with Specialized AISs Professional service organizations have several unique operating characteristics: No merchandise inventory Professional employees Difficulty in measuring output Small size Not-for-profit Professional employees and volunteers Usually not affected by the market Sometimes have a political environment

Professional Service Organization Bill

INDUSTRIES WITH SPECIALIZED AISs Health care Share many of the professional and not-for-profit organizations’ special AIS needs Special accounting needs because of third-party billing (private and government)

Mini-based Hospital System

Business Process Reengineering AISs were concerned with accounting transactions earlier are more concerned with business events now Business events include important activities that affect the business are not captured by the financial accounting system Business process reengineering (BPR) concerns redesigning business processes from scratch