Accounting Information System Flow Cost Accounting

Question: Describe about the Accounting Information System for Flow Cost Accounting. Answer: Accounting Information System Accounting Information System can be said as a structure which business uses to collect, store, retrieve and manage to convert data into useful information (Christ and Burritt, 2015). This information is used by accountants, management, chief financial officers (CFO) and auditors. It assists in taking decisions and judgements by internal and external consumer of data. Its main functions are: Efficient and effective collection and storage of data which is related to financial activities of an organisation. Supplying information which is necessary for taking decisions including the managerial To make sure that controls are present to record and process data appropriately. Role of Accounting Information System in the value chain of manufacturing organisation Manufacturing organisations work with the motive of providing valuable products to its customers having no defect. According to Christopher, (2016) the entities consider profit in case the value created by them is higher than the cost applied. Efficient utilisation of the available resources and to fulfil the need of customer in best manner is one of the main objectives of manufacturing organisation. AIS assist in obtaining the above-specified objectives in the following manner: Appropriate internal control is developed by making information data reliable and safe so that the objectives of the management can be satisfied. It increases the value to entities by providing timely accurate information. Processes the data of entity in effective and efficient manner. It is able to provide performance reports, budgets and status of inventory through which activities are effectively managed. As per the study of Collier, (2015) it plays an important role in material management activities which includes planning, production scheduling, allocation and related activities. It provides real-time vendor development and just in time inventory management. In a nutshell, it can be said that the value is added in following activities: A collection of market researchers Optimum pricing information. Budgetary control information. Product planning, evaluation and development. Figure 1 Managing AIS (Source: Accounting Information System,2014) Impact of AIS in decision making in contemporary manufacturing organisation Management is the another name of making a decision. It can be said as two sides of one coin. According to Collier, (2015) decision-making is done after evaluating all the available alternatives. Information system plays a critical role in making decisions related to the organisation. It varies according to the nature of the entity. AIS affect the following decision of manufacturing organisations: Make or buy decision Every business organisation has faced this decision very often. Every time a company identifies the need to alter its product mix, this decision is to be made. The accuracy of this decision is very essential as for make or buy decision affect the profitability of the business in the long run (Kaplan and Atkinson, 2015). The production and procurement cost of buying or making some or all parts are compared to arrive at a decision. AIS provide all these information which helps the management to take these decisions very reliably. Formulating future decisions through selecting appropriate decision from various alternative Planning and preparing for future is a task which every organisation does. This requires a substantial record of historical financial statements data, analysis of current trends and estimated figures for the reliable forecast (Moghadam and et.al.2013). All such information is provided by AIS. The future course of action is decided by selecting the best course from various viable options. Various tools and applications which come with AIS simplify the work of management to a great extent. Budgetary decisions Business entities require huge funds for their operational activities. For this, it is required by them to obtain funds from feasible sources at minimum cost. AIS provided information on various sources available. Budgets are prepared to plan the employment of all the available sources to maximise income. The most optimum source is selected which can strengthen the financial position of the firm. AIS assist in making a comparative study for the same. AIS consist of various inherent tools which guide the management to raise funds and implement investment. Utilisation of value chain for providing competitive advantage in a manufacturing organisation The concept of the value chain is influenced by Porter. The concept is directly linked with the advantages for business firms. Manufacturing organisations have to make decisions which may directly impact the firms competitive position in the market (Rainer, Cegielski and Sanchez-Rodriguez, 2013). According to Porter, value chain analysis can be used to develop effectual schemes which achieve competitive advantage. The objective of value-chain analysis is to offer products to customers who are- Better than what the opponents are providing in terms of additional features or better quality. Different from others in some or the other form which serves the consumers in a better way. Unique in features not found in any other alternative. Lower in terms of cost than what the opponent firm is offering a quite similar or better product. There are two broad advantages offered by value chain analysis as described below- Cost Advantage: Reducing the cost of individual activities or by reconfiguration, manufacturing organisation can attain cost advantage. Cost analysis can be done in this aspect. Controlling the following factors can result in cost advantage: Geographical location Optimum utilisation of capacity Timing of market entry Institutional factors Moreover, structural modifications can be made in the value chain in this context as it will improve the process of production and develop new channels of distribution ((Pearlson, Saunders and Galletta, 2016). Differentiation: This can be attained through any part of value chain activity. Making available the products to customers who are unique and different; by using inputs which are not utilised by any other organisation of the same business line ((Soudani, 2012)). This approach will draw new customers and keep hold of the active ones. Figure 2 Value Chain Model (Source: Singh, 2013) On the foundation of present study, we can conclude that AIS plays a significant role in the functioning of a manufacturing organisation. Better decisions can be taken through the valuable information furnished by AIS which can result in the growth of business. It also improves performance by putting into practice low-cost and product demarcation strategies. It builds up improved strategic position to generate synergy. Such systems have become indispensable for businesses which aim for higher growth prospects. Therefore these systems must be inherited in the organisations and must be used to their full capacities. References Christ, K. L. and Burritt, R. L., 2015. Material flow cost accounting: a review and agenda for future research. Journal of Cleaner Production, 108, 1378-1389. Christopher, M., 2016.Logistics supply chain management. Pearson Higher Ed. Collier, P.M. 2015.Accounting for managers: Interpreting accounting information for decision making. John Wiley Sons. Hall. J.A., 2012. Accounting information systems. Cengage Learning. Kaplan, R. S.and Atkinson, A. A., 2015. Advanced management accounting. PHI Learning. Moghadam. H.M. and et.al.2013. Effect of investment in information technology system on providing desired services of accounting information system. Elixir International Journal A. 55.Pp.13268-13273. Pearson, K.E., Saunders, C.S. and Galletta, D.F., 2016. Managing and Using Information Systems, Binder Ready Version: A Strategic Approach. John Wiley Sons. Rainer, R.K., Cegielski, C.G. and Sanchez-Rodriguez, C.2013.Introduction to information systems: Supporting and transforming business. John Wiley Sons. Soudani. S.N., 2012. The usefulness of an accounting information system for effective organisational performance. International Journal of Economics and Finance. 4(5).P.136.