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Ahsanullah University of science &


Course code: 704
Course Title: Accounting Information System
Year: 2015 Semester:
Date:01 /10/2015

Submitted By:
Projit kumar pal
ID : 14-01-51-041

Submitted To:
Mr. Mashiur Rahman
Asstt. Prof. SoB. AUST

What Is ERP?
ERP stands for Enterprise Resource Planning. ERP is an enterprise-wide information system
that facilitates the flow of information and coordinates all resources and activities within the
business organization. Functions typically supported by the system include manufacturing,
inventory, shipping, logistics, distribution, invoicing, and accounting. Some solutions now
embed customer relationship management functionality. A wide variety of business activities
including sales, marketing, billing, production, inventory management, human resource
management, and quality control depend on these systems. The ERP system assists in
managing the connections to outside stakeholders as well as enhancing performance
management. It uses a centralized database and usually relies on a common computing
platform. It provides the user a unified, consistent, uniform environment.
ERP solutions evolved from applications focused on materials requirements and resource
planning and computer integrated manufacturing. The Enterprise Resource Planning term
came about when software developers were searching for a name that would more aptly
describe these broader systems. These new solutions provided functionality that
encompassed other applications in addition to manufacturing.

The Benefits of ERP:

Full-Function ERP solutions share certain characteristics that some of the lower products do

They have more than a dozen integrated modules that address the breadth of the

organization's needs.

They can scale to grow with the organization.

They contain a toolset that allows for use customization.

They rely on a sophisticated, relational database with open


The vendor has a solid understanding of the market's wants and needs and is

committed to meeting them through its offerings.

One of the primary benefits of deploying a Full-Function ERP solution is the consolidation of
often-dispersed data. The consolidation of data resulting from ERP use creates many
organizational benefits:

No need to synchronize changes between systems.

Consolidates applications and brings more control to cross-functional

processes for manufacturing, finance, human resources, marketing, and sales.

Provides a real-time, enterprise-wide view of the business for faster and more

effective decision-making.

Shortens production lead times and delivery times.

Helps build a common vision throughout the enterprise.

Consolidates multiple permissions and security procedures into a single framework,

which reduces the risk of losing or exposing sensitive data.

The benefits of ERP have been proven by a number of studies. The Aberdeen Group found the
following quantifiable benefits from best-in-class ERP implementations:
22% reduction in operating costs,
20% reduction in administrative costs,
17% inventory reductions (for manufacturing and distributing),
19% improvements in complete and on-time delivery,
17% improvements in schedule compliance (for manufacturing and distributing).
The study also found that best-in-class implementations combined strategy, organizational
capabilities, and technology to:

Standardize and accelerate both back-office and customer-facing functions,

Offer real-time visibility throughout the quote to cash


Use exception reports to respond proactively to head-off potential problems.

Even the firms characterized as laggards realized significant benefits from their
ERP implementations. These less than stellar performers realized:

7% reduction in operating costs,

4% reduction in administrative costs,

9% reduction in inventory (for manufacturing and distributing),

11% improvement in internal schedule compliance (for manufacturing and


6% improvement in complete and on-time delivery.

As the study points out, single percentage savings might not sound all that impressive, but

for every million dollars in operating costs, a 7% savings amounts to $70,000.

The "hard," quantifiable benefits realized in reduced operating and administrative
inventory reductions, improved production and delivery schedules, and increased
margins make a compelling case for ERP in such an intensely competitive, global
The Fitrix "Full-Function" ERP Solution
Finally, there is an ERP solution that offers the functionality and flexibility of systems costing
thousands of dollars more per user. One that is aligned with both the needs - and the budgets
of the small to mid-size manufacturer. The Fitrix ERP solution combines robust functionality
with a flexible, scalable architecture to deliver "full-function" ERP value at a price point other
vendors can't approach. At last, leading small and mid-size manufacturers have a costeffective tool to help them gain and maintain a strategic advantage.

An accounting information system (AIS):

AIS Is a system of collection, storage and processing of financial and accounting data
that is used by decision makers. An accounting information system is generally a
computer-based method for tracking accounting activity in conjunction with information
technology resources. The resulting statistical reports can be used internally by
management or externally by other interested parties including investors, creditors and
tax authorities. It includes education in the latest database management techniques and
system modeling approaches, and provides the Internet implementation experience
necessary to practice systems development in today's technological environment.

Accounting Information System









Sales Return

Purchase Return

Resource Management


Cash Disbursement


General Ledger

Cash Collection


1. Revenue:
Revenue process includes
a) Sales process

Sales (account open/give loan)

Sales Return(Return Money)
Cash Collection

Purchase order

Price Verification

Sales order

Credit Limit

Inventory & sales


Prepare shipment

Update accounts
Update General
Purchase order
A purchase order (PO) is a commercial document issued by a buyer to a seller, indicating
types, quantities, and agreed prices for products or services. Bangladeshi mans wear
brand Cats eye company ltd submits a purchase order of 500 pcs of shirt to Micro Fiber
Company Limited.
Price Verification:

Micro fiber company ltd (seller) submit a price quotation of Tk 650 per pcs to Cats eye
(buyer). Buyer verifies the price and confirm the final price at Tk 600 per pcs.
Sales order
A sales order records the customer's originating purchase order which is an external
document. The customer's PO is the originating documents which trigger the creation of
the sales order. In a manufacturing environment, a sales order can be converted into a
work order.
Credit Limit
As a regular customer, The Cats eye company ltd gets a credit facility of Tk 7,00,000
from Micro Fiber company ltd. After receive the PO, the company immediately verify the
buyers credit limit for future operations.
Inventory & sales preparation
After checking the credit limit, the seller checks the availability of the product in
warehouse. If the product is available and matches with the buyers sample, then the
seller prepares the goods for shipment as per the buyers requirement.
Prepare shipment documents
Seller sends the goods to the buyer after preparing the invoice and packing list. After that
seller update the sales record accordingly.
Update accounts receivables & General Ledger
Seller updates the accounts receivable as per the sales record and prepare monthly
statement and general ledger accounts.

b) Sales return process

Receive goods from

Warehouse &

Update sales record

Update account

Update General

Receive goods from customer

Buyer (Cats eye company ltd) returns 50pcs of defective goods (shirt) to the seller (Micro
Fiber Company Ltd). The billing departments of seller match the return goods with the
original sales invoice while receive.
Warehouse & Inventory
Warehouse checks the condition of the returned goods. If it is in repairable condition then
repair it and send to the buyer or update the inventory and COGS. If it is not in repairable
condition, it consider as scrap.
Update sales record

After receiving the sales return, seller update the sales return record and prepare a credit
memo and send it to customer.
Update account receivable
After the sales return, seller updates the account receivable accounts, cash record and
general ledger.
C) Cash collection process

Cash receive from


Update account
Cash receive
Seller receives cash/cheque payment from buyer and prepare a cash receipt journal while
it match with the original sales invoice.

Update account receivable

After receiving the cash payment, seller updates the accounts receivable accounts and
general ledger.

2. Expenditure:
Expenditure process includes
d) Purchase
e) Purchase Return
f) Cash Disbursement
g) Payroll

d) Purchase:
What is purchase?
Purchase defined as the acquisition of needed goods and services at the optimum cost
from competent, reliable sources in a timely manner.. Though there are several
organizations that attempt to set standards in the purchasing process and the process can
vary between organizations to organization.
The Golden Rule of Purchasing:
Purchasing must acquire needed goods and services:
Of the right quality
In the right quantity
At the right price
At the right time

Purchase process
Where information technology is not heavily ingrained - Traditional Purchasing processes
tend to be characterized by high levels of bureaucracy, encumbered with manual
authorization (often requiring multiple signatures independent of the order value.), slow
communications and a focus on unit price rather than long term commodity
The diagram below provides an example of a traditional purchasing process.

Authorized purchase


Select vendor

Prepare purchase
order and send to
Receive goods (if
match) and
prepare receiving
Receive invoice
from vendor and
Update inventory
Update account
Purchase return
(if need)
Update inventory
Update account
record (after
Purchase requisition & Authorized purchase requisition

Update general

A purchase requisition provides authorization for the Procurement Department to initiate

a purchasing transaction. The requisition form is available from the Procurement
Department, and contains a complete list of information that is required to complete a
purchasing transaction.

Vendor selection
The vendor selection process can be a very complicated
Purchase order
A completed purchase requisition will be reviewed and approved in the Procurement
Department according to the organizations policy for requisition approval. Once the
requisition has been approved, it will be used to create a Purchase Order (PO).
Receive goods
Vendor prepares to supply the goods and service to the buyer after receives the PO. Buyer
prepare a receiving record after receive the goods.
Update inventory record
Buyer receive invoice from seller (supplier) and update the inventory records.
Update accounts payables
Buyer updates the accounts payable after the new purchase record.
Sales return & update accounts payables (if need)
Buyer updates the accounts payable if any purchase return occur.
Update General Ledger
Buyer updates the general ledger as per the purchase records.
e) Purchase return process
A purchase return occurs when a buyer returns merchandise that it has purchased from a

Rejected goods
from customer

Authorization to
return goods

Document Match

Prepare debit
memo & send to

Receive credit/
cash from vendor &
update account

Update inventory

Update General
Rejected goods return from customer
Goods can be return to vendor for various reasons with a authorization of return.
Return goods with a debit memo

Return goods after match with the purchase invoice and send a debit memo to the vendor.
Update account payable, inventory record & general ledger
Update account payable and inventory record after receiving refund or credit memo from
vendor against return.
f) Cash Disbursement process
Cash disbursement means the payment of money against purchase.

Identify the invoice

of due payments

Prepare for

Cheque sign after

document check

Payment to vendor

Update cash record

Update accounts
payable record
Update General

Identify the due invoices

Identify the vendors invoices which payment is still due and prepare for payment.
Payment to vendor and update the cash record
Payment of the vendor against the due payments after cheque sign and update the cash
Update account payable and general ledger
Account payable and general ledger accounts will upgrade after payment to vendor.

g) Payroll process
The payroll is the amount of money that a company pays its employees at any given time.
Sometimes every two weeks, or sometimes once every month

Time sheet submit

by the employee

Working hour
correction and
approve the time

Prepare payroll

Prepare payroll

Transfer fund to
payroll bank

Update general

Time sheet submission & checking

Employee submits there time sheet where there working time was recorded. Authority
will approve that after checking/correction the working hours.
Prepare payroll register & voucher
The payroll register will prepare as per the corrected working hours.
Payroll voucher and transfer fund in payroll bank
Payroll voucher will create as per the payroll register. The fund will transfer to the payroll
bank and update general ledger.
3. Conversion:
Conversion process includes
h) Planning
i) Resource Management
j) Logistics
h) Planning
Business planning is a process that involves the creation of a mission or goal for a
company. The process of business planning can be very broad, encompassing each aspect
of the operation.
i) Resource Management
The process of using a company's resources in the most efficient way possible is
considered as resource management. These resources can tangible resources such as
goods and equipment, financial resources, and labor resources such as employees.
Resource management can include ideas such as making sure one has enough physical
resources for one's business.
j) Logistics
Logistics is defined as a business planning framework for the management of material,
service, information and capital flows.

4. Administration:
Administration process includes
k) Capital
l) Investment
m) General Ledger

K) Capital:
Capital is the money that is going to be invested in a business. Some of the money will
come out of from personal investment. Some of the money may come from another
source of financing, such as a bank or a small business center loan. Thats the capital for
starting a business. Knowing how much capital needs to start a business will be a
deciding factor on the type of business might be start.
Here we consider tk 50 lac as our capital, where tk 25 lac from personal investment and
tk 25 lac from bank loan.
l) Investment:
Investment encompasses a wide variety of funding options. While funding for capital
investment is generally in the form of common or preferred equity issuance, it may also
be through straight or convertible debt. Funds invested in a firm or enterprise for the
purposes of furthering its business objectives. Capital investment may also refer to a
firm's acquisition of capital assets or fixed assets such as manufacturing plants and
machinery that is expected to be productive over many years.

m) General Ledger:
The general ledger is a collection of the group of accounts that supports the value items
shown in the major financial statements. It is built up by posting transactions recorded in
the sales daybook, purchases daybook, cash book and general journals daybook. The
general ledger can be supported by one or more subsidiary ledgers that provide details for
accounts in the general ledger. For instance, an accounts receivable subsidiary ledger
would contain a separate account for each credit customer, tracking that customer's
balance separately. This subsidiary ledger would then be totaled and compared with its
controlling account (in this case, Accounts Receivable) to ensure accuracy as part of the
process of preparing a trial balance.