Explanation of Traditional Accounting System
Discuss about the Explaination of traditional accounting system for recording transactions.
Discussion: In Traditional Accounting System, the paperwork, receipts and payments are sort and store in 12 separate months. All the original documents are kept and dated correspondingly. The traditional accounting system has payment amounts and date of transactions recorded. All the financial transaction is saved online by monthly and the transaction of the financial year are saved in the inbox that are kept in a separate folder of the hard drive. All the electronic records are kept backup on a storage device and external hard drive rather than keeping in the internal hard drive of the computer. Each month a financial record is reconcile requesting for a statement and bills that need to be sent on monthly basis.
- The expenses are less.
- With manual systems it is easier to make entries correctly.
- The risk of data getting corrupted is much less.
- The risk of losing data is less when records need to store in an environment that is fire-proof.
- It generally avoids the problems that comes with similar records having duplicate copies.
- The manual process is simplified as it is not necessary to know about calculating in accounting software for information.
- It includes flexibility and agility in redefining the business process, implementation of the control point for collection of data.
- An inaccurate costing information is provided which lead to a wrong decision.
- It used to control the purpose of fixing the selling prices.
- Number of transactions are getting delayed.
- With the fast growing business it is becoming difficult to keep the pace of report keeping.
- Need to spend considerable amount of time in maintaining the books and journal transaction.
- Payments are getting delayed.
- Unable to receive payment from customer by due date or either they do not make payment even.
- Not possible to chase the overdue payment.
Discussion: If the Smith Brothers want to move from their current traditional accounting system, then they can start with the computerized accounting system. This will make it easier to capture information. It also meets the tax, generate the reports and some legal requirements. With the use of accounting software system will simplify the electronic record keeping. It will help the Smith Brothers to record the transaction made in the business which include the income and the expenses done, payment done to the workers and get the details of the stocks and the assets. The storage space is less required and the ways to keep the financial records are efficient. The system has an option to record a sale for invoice but not for cash payment to receive. It easily generates the order, invoices, payment records of the employee, debtor reports, and inventory reports. It provides some functions of reporting and tallies the amount automatically. The system has the latest tax laws and rulings, and tax rates. The Smith Brothers can provide email invoice to the customer, orders to the suppliers or even returns BAS to the Taxation Office of Australian. It allows to keep the backup of the records and is safe from fire or theft. The Smith Brother Business need more than one software to meet the legal and taxation needs which is important. Thus, Smith Brothers has to take some advice from the financial adviser before they make any software purchase for keeping their records. They can also look into the Australian Taxation Official website to check through the accounting software tax compliant.
Xero: Xero has a massive market in Australia as it is an online based accounting software which has achieve greater popularity in the country. It is basically created for the business users. The business owner can use Xero for entering invoices and for statements reconcile. The information could be easily and securely access by the accountant and prepare the BAS to annually return the tax. The current problem of the Smith Brother could be reduce with the implementation of Xero. The application has a dashboard panel where the information will be displayed with a list of invoices. It has a center and front activity buttons that can create a new invoice, Bills payment can be done and claims an expense. The strength of Xero is that it has fixed a robust accounting system that has a barcode and a feature of RFID tracking. It even tracks the physical features. It has a core accounting solutions with wide range. The weakness of Xero is that it does not fully support the project and find accounting. The time required to implement the software in the business would be depend on the number of users and data that is needed to import. The user can implement itself without in need of training the other users. Staff can be involve in the implementation process. Xero will be introducing the feature of stock control into their packages. The monthly fee for it is at most $25. If the user requires more feature than it may reach at least $50/month.
Strengths and Weaknesses of Traditional Accounting System
MYOB: MYOB is the cloud based online accounting software technology which has the feature to control stock and the transactions of foreign exchange. Its security system is safer than other system. The Smith Brother can opt for the MYOB accounting software as the application is attractive and user-friendly. The dashboard is simple to understand for Money in and Money out. For a non-accountant like Julia Ryan such sort of description would be more helpful. It easily creates invoice, bill pays and more in a click. The application is also touchscreen friendly. The Essentials of MYOB stored documents that are scanned. The strength of MYOB is that the tax feature is inbuilt which could compute at once and provide an invoice and billing system. The weakness of MYOB is that it does not fully support project and fund accounting and assets that are fixed. The essentials of MYOB are purely online whose cost of accounting is $29/month and cashbook is $16/month. The basic of MYOB is $30/month, the standard version of MYOB is $43/month and the Plus version of MYOB is $80/month. Large business can use MYOB premium for inventory management and foreign exchange capabilities.
Discussion: Yes, excel can be used for basic accounting. With excel the user could keep tracking the business. However, it is not possible for complicated financial accounting. If the business is working on a tight budget, then it can make an attempt of decent accounting in Excel. If the business is set using the Excel for bookkeeping, then Julia Ryan would generate incredible reports for the accounting data. She could easily do day-to-day comparisons between months that can give anomalies in expenses. The recurring cost could be strip out which gives a clear picture where the cash is going. She could divide the customers into groups which would be completely based on their purchase, location or size. Later the groups would be compare to spend most in the business.
Another solution can be taken is the Spreadsheet as it has lot of functionalities which lets the bookkeeper to do her most of the work on the spreadsheets. The bookkeeper could be able to review financial, sales or bank data from the tool of third party. Julia could easily maintain the books and journal transactions by keeping the details through the spreadsheet. Timely payment by the customer will be easier with any delay in the payment would be receive by due date.
Options for Transitioning to Computerized Accounting System
Discussion: The policy of IT Governance is consistent with its principles. It has published some recommendations that were made available publicly on the website. The Board has decided to bring some changes to the IT Government Policies and Recommendations. The executive and the board of director are responsible for the IT governance. It consists of the structure of the organization, leadership and the process of enterprise’s IT sustains that extends the strategies and objectives of the originations. The IT governance has a good practices of enterprise IT support of the business objectives which enables them to take the full advantage of the information. These maximize the benefits, gain competitive advantage and capitalizing the opportunities. Control Objectives for Information and related Technology (COBIT) has a good practice and a process framework that presents the activities in a logical and manageable structure. COBIT strongly focus on the control rather than in execution. The control framework of COBIT thus contributes the need of making business requirement link, organizing the process model of the IT activities, leveraging the identified IT resources, and consider the objectives of the management control.
Discussion: To justify the reason of the shareholder not interacted in the IT governance policy is that it gives pressures to the shareholder regarding the protection of the confidential information, disaster recovery and the data retention and financial accountability of the organization. Most of the organization are in control of the shareholders that allows then to maintain the equity. Shareholder monitors the company and its management.
Discussion: The domestic investors increase their focus and engagement on the activities of government and corporate. The case is similar to the above statement. Even other shareholder is not interested in the IT governance policy for the protection of the confidential information, disaster recovery and the data retention and financial accountability of the organization. Other shareholders have concern about their status and implementation that are important for the role of improving the arrangements of the corporate governance.
Discussion: Yes, definitely IT governance policy provide a framework and a structure for the organization and it even ensure that the business objectives would be supported by the IT investment. The practice of corporate and IT government across the Australian organization has enactment with the laws and regulations that results is fallout from deception cases and the corporate fraud. With IT governance, a structure could be provided that could align the IT strategy with the strategy of the business. Measureable results could be produce with the framework of the organization. The needs of the industry comply with the regulations of the technological and financial accountability. Even a very small entity practices essential methods of IT governance.
Comparison of Xero and MYOB
Discussion: UBS was allegedly hit by trading incident and the internal controls failed. The investment bank posted unauthorized trading lose. It has a drop in the revenues. The analyst mainly focuses on the ratio of compensation for the staff. In the previous year the management defended the deferral of bonuses. In overall, the variable compensation set by the bank with SFr775m in third quarter, later being compare with the second quarter for SFr867m and the prior bonus deals was related to SFr467m. The finance director also admitted that some of the staff had to pay back some part of their bonuses. Since the bank was suspected to rogue trader, multiple staff had given resignations. Due to false accounting and fraud of four counts Kweku Adoboli was charged and arrested. Despite of the investment bank lose; the bank was intense to pay the bonuses. UBS admit that their internal controls were not so effective. There were two control deficiencies. The first is the confirmation require to control the trade counterparties within the equities business of the investment bank. The second is the controls for the relationship of different trading desks that are within the fixed income and the equities of the investment banks, commodities and currencies businesses that ensures the internal transactions which are recorded accurately in the records and books of UBS’s.
Discussion: Yes, definitely the failure could be avoided by taking some additional remedial measures that can prevent the loss of the investment bank. Strengthening the internal controls measure the effectiveness. The controls need to be properly designed and implemented to work effectively. Recommendations need to be made to improve the internal control. Even improving the communication process can strength the internal controls. There are major events occurring within the business units. This can lead to problem as there would be no opportunity to manage and fix something that are unaware and is broken.
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