Full Fnal

CHAPTER ONE: INTRODUCTION OF THE STUDY
1.1
INTRODUCTION
Accounting Information Systems (AIS) combine the study and practice of accounting with
the design, implementation, and monitoring of information systems. Such systems use
modern information technology resources together with traditional accounting controls and
methods to provide users the financial information necessary to manage their organizations.
An organizations AIS plays important role in helping it to adopt and maintain a strategic
position. Effective AIS is essential to any organizations long-run success. Without a means
of monitoring the events that occur, there would be no way to determine how well the
organization is performing. The AIS can provide assistance in all phases of decision making.
Reports can help to identify potential problems. Different decision models and analytical
tools can be provided to users. Query languages can facilitate the gathering of relevant data
upon which to make the decision.
AIS consist of five components:
a) The people who operates the system and perform various functions;
b) The procedure, both manual and automated, involved in collecting, processing, and
storing data about the organizations activities;
c) The data about organizations business processes;
d) The software used to process the organizations data;
e) The information technology infrastructure, including computers, peripheral devices,
and network communication devices.
AIS can add value to an organization by providing accurate and timely information. Well
designed AIS can do this by- improving the quality and reducing the costs of products or
services, improving efficiency, improved decision making, sharing of knowledge. Achieving
a close fit among activities requires that data to be collected about each activity. It is also
important that the information system collect and integrate both financial and nonfinancial
data about the organizations activity.
Practices of Accounting Information Systems in Educational Institute: A Study on Leading University
1.2
OBJECTIVES OF THE REPORT
The report is prepared in such a way that it reflects the key learning about the accounting
information system of Leading University. The main objectives of the study are:
a) To identify the application of accounting information systems in Leading universities.
b) To know the functions & process of AIS.
c) To identify the problems of AIS.
1.3
METHODOLOGY OF THE STUDY
Descriptive research methodology has been followed to conduct the study. The relevant data
were explained in details with necessary tables, figures, and written information. All the
information used to prepare this report has been collected from both primary and secondary
sources. Certain methods and techniques were utilized to collect data for this report. The
present study is based on empirical as well as theoretical analysis. Collected data and
information were tabulated, processed and analyzed critically in order to make the report
informative. Both primary and secondary sources of data were chosen as effective means of
collecting data relevant for this report.
1.3.1 DATA COLLECTION METHOD

The report is based mainly on primary data. Some sort of secondary data are also used in this
context. These data are collected from various sources. Data collection sources are Primary Data: Face to face conversations with the employees, by personal interviewing
and interacting students.
Secondary Data: Year ending financial report, observing various ledger books maintain by
account office.
1.3.2 DATA PROCESSING

Data collected from secondary sources will be processed manually and qualitative
approach will be used through the study.
1.3.3 DATA PRESENTATION

The process of presenting data from various sources is gathered, reviewed, and then analyzed to form
some sort of finding or conclusion. To organize my study, I use MS Word to present my study.
1.4
SCOPE OF THE STUDY
The presentation of the accounting information system of Leading University provides the
scope of this study. The scope of this study is limited to the overall description of the
organization, its services, and its related accounting information system. The scope of the
study is limited to organizational setup, functions, and performances.
1.5
LIMITATIONS OF THE REPORT
There have a lot of limitations that I faced while I was doing my project report. The
limitations are:
a) The research only covers the accounting information systems of Leading University;
b) In many cases, up to date information is not published;
c) Sufficient books, publications, facts and figures are not available. These constraints
narrowed the scope of accurate analysis;
d) Large-scale research was not possible due to some restrictions posed by the
organization;
e) As an internee, I only experienced the work of accounts office, if I could work
rotation wise in all offices, then my work experience would more increased.
CHAPTER TWO: LITERATURE REVIEW
2.1
ACCOUNTING INFORMATION SYSTEM (AIS)
An accounting information system (AIS) is a system of collection, storage and processing of

financial and accounting data that is used by decision makers. Such systems use modern
information technology resources together with traditional accounting controls and methods
to provide users the financial information necessary to manage their organizations. An
organizations AIS plays important role in helping it to adopt and maintain a strategic
position. Effective AIS is essential to any organizations long-run success. Without a means
of monitoring the events that occur, there would be no way to determine how well the
organization is performing. The AIS can provide assistance in all phases of decision making.
Reports can help to identify potential problems. Different decision models and analytical
tools can be provided to users. Query languages can facilitate the gathering of relevant data
upon which to make the decision.
Accounting information systems are composed of six main components:
2.1.1
2.1.2
People: users who operate on the systems;

Procedures and instructions: processes involved in collecting, managing and storing
2.1.3
2.1.4
2.1.5
2.1.6
the data;
Data: data that is related to the organization and its business processes;
Software: application that processes the data;
Internal controls and security measures: what is implemented to safeguard the data;
Information technology infrastructure: the actual physical devices and systems that
allows the AIS to operate and perform its functions.
The six components of an AIS all work together to help key employees collect, store,
manage, process, retrieve, and report their financial data. Having a well-developed and
maintained accounting information system that is efficient and accurate is an indispensable
component of a successful business.
2.2
LITERATURE REVIEW
Accounting information system is considered as a subsystem of management information

system (MIS). To regard accounting as an information system, perhaps, is the latest definition
of accounting. For the first time in 1966, the American Institute of Certified Public
Accountants (AICPA) stated that, Accounting actually is information system and if we be
more precise, accounting is the practice of general theories of information in the field of
effective economic activities and consists of a major part of the information which is
presented in the quantitative form.
In the above definition, accounting is a part of general information system of an economic
entity. Ebert, R. J., & Griffin, R. W. (2005 Business Essentials, 5th edition. New Jersey:
Pearson Education) - defines accounting information systems as systems that operate
functions of data gathering, processing, categorizing and reporting financial events with the
aim of providing relevant information for the purpose of score keeping, attention directing
and decision-making.
Accounting information systems are considered as important organizational mechanisms that
are critical for effectiveness of decision management and control in organizations. Studies
have shown that successful implementation of accounting systems requires a fit between
three factors. A fit must be achieved with dominant view in the organization or perception of
the situation. Second, the accounting system must fit when problems are normally solved, i.e.
the technology of the organization. Finally, the accounting system must fit with the culture,
i.e. the norms and value system that characterize the organization. Systems will be useful
when information provided by them is used effectively in decision-making process by users.
Hoggett, J., Edwards, L., & Medlin, (2006 Accounting, 6th edition, John Wiley & Sons
Australia, Australia). - argues that Accounting Systems are important parts of the fabric of
organizational life and need to be evaluated in their wider managerial, organizational and
environmental context. Therefore, the effectiveness of accounting information systems not
only depends on the purposes of such systems but also depends on contingency factors of
each organization.
Romney, M., & Steinbart, P. (2006. Accounting Information Systems, 10th edition.
NewJersey): Pearson Education.- argues that, integration of accounting information systems
leads to coordination in organization which, in turn, increases the quality of the decisions.
Some researches in accounting show that the effectiveness of accounting information systems
depends upon the quality of the output of the information system that can satisfy the users'
needs.
Generally, accounting information systems; a) provide financial reports on a daily and weekly
basis and; b) provide useful information for monitoring decision-making process and
performance of the organization. Simon in his study used the first part of the above statement
as measure of control for management and the second part for evaluating the effectiveness of
the accounting information systems via continuous monitoring. By reviewing research studies
during 1987-1999, one finds out that 57 researches have been conducted on the issue of
accounting information systems and decision making the number of which shows the
importance of the research in this area. Accounting information systems provide primary data
for decision-making. Information technology has caused many changes in reporting
information. Thus, the characteristics of information currently prepared can help decisionmakers seek more alternatives to the solution of the problem in hand. Accessibility to
information related to the main transactions of an organization leads to a categorized detailed
information which facilitates decision making in any difficult situation.
Accounting information system is a computer-based system that Nicoloau - defines as a
system that increases the control and enhances the corporation inside the organization.
Management is engaged with different types of activities which require good quality and
reliable information. They also need non-financial information such as production statistics,
quality of production and so on. However, quality of information generated from AIS is very
important for management.
Kim argues that usage of AIS depends on the perception of the quality of information by the
users. Generally the quality of information depends on reliability, form of reporting,
timeliness and relevance to the decisions. Doll and Torkzadeh for studying the satisfaction of
users use some concepts to measure the effectiveness of the accounting information systems.
These concepts are information content, accuracy, format, ease of use and timeliness.
2.3
FUNCTIONS OF AIS
There have three basic functions performed by AIS:

2.3.1
To collect and store data about the organizations business activities and transactions
efficiently and effectively:
Capture transaction data on source documents.
Record transaction data in journals, which present a chronological record of

what occurred.
2.3.2
Post data from journals to ledgers, which sort data by account type.
To provide management with information useful for decision making:
In manual systems, this information is provided in the form of reports that fall
into two main categories:
a) Financial statements
b) Managerial reports
2.3.3
To provide adequate internal controls:
Ensure that the information produced by the system is reliable.
Ensure that business activities are performed efficiently and in accordance

with managements objectives.
Safeguard organizational assets.
The External Environment

The Information
System
Externa
l
Source
s of
Data
Data
Collectio
n
Database
managem
ent
Data
Processin
g
Interna
l
Source
s of
Data
Informati
on
Generatio
n
Externa
l End
Users
Interna
l End
Users
Feedback
The Business
Organization
Feedback
Figure 01: General Model for Accounting Information Systems

2.4 AIS TECHNOLOGY+
2.4.1
INPUT: The input devices commonly associated with AIS include: standard personal
computers or workstations running applications; scanning devices for standardized
data entry; electronic communication devices for electronic data interchange (EDI)
and e-commerce. In addition, many financial systems come "Web-enabled" to allow

2.4.2
devices to connect to the World Wide Web.

PROCESS: Basic processing is achieved through computer systems ranging from
individual personal computers to large-scale enterprise servers. However,
conceptually, the underlying processing model is still the "double-entry" accounting
2.4.3
system initially introduced in the fifteenth century.

OUTPUT: Output devices used include computer displays, impact and nonimpact
printers, and electronic communication devices for EDI and e-commerce. The
output content may encompass almost any type of financial reports from budgets
and tax reports to multinational financial statements.
Feedback
Input
Process
ing
Output
Control
Figure 02: AIS Technology

2.5
DEVELOPMENT OF AIS
The development of AIS includes five basic phases: planning, analysis, design,
implementation, and support. The time period associated with each of these phases can be as
short as a few weeks or as long as several years.
2.5.1
PLANNING: Project management objectives and techniques the first phase of systems
development is the planning of the project. This entails determination of the scope and
objectives of the project, the definition of project responsibilities, control

requirements, project phases, project budgets, and project deliverables.
2.5.2
ANALYSIS: The analysis phase is used to both determine and document the accounting
and business processes used by the organization. Such processes are redesigned to
take advantage of best practices or of the operating characteristics of modern system
solutions. Data analysis is a thorough review of the accounting information that is
currently being collected by an organization. Current data are then compared to the
data that the organization should be using for managerial purposes. This method is
used primarily when designing accounting transaction processing systems. Decision
analysis is a thorough review of the decisions a manager is responsible for making.
The primary decisions that managers are responsible for are identified on an
individual basis. Then models are created to support the manager in gathering
financial and related information to develop and design alternatives, and to make
actionable choices. This method is valuable when decision support is the system's
primary objective. Process analysis is a thorough review of the organization's business
processes. Organizational processes are identified and segmented into a series of
events that either add or change data. These processes can then be modified or
reengineered to improve the organization's operations in terms of lowering cost,
improving service, improving quality, or improving management information. This
method is appropriate when automation or reengineering is the system's primary
objective.
2.5.3
DESIGN: The design phase takes the conceptual results of the analysis phase and
develops detailed, specific designs that can be implemented in subsequent phases. It
involves the detailed design of all inputs, processing, storage, and outputs of the
proposed accounting system. Inputs may be defined using screen layout tools and
application generators. Processing can be shown through the use of flowcharts or
business process maps that define the system logic, operations, and work flow.
Logical data storage designs are identified by modeling the relationships among the
organization's resources, events, and agents through diagrams. Also, entity
relationship diagram (ERD) modeling is used to document large-scale database
relationships. Output designs are documented through the use of a variety of reporting
tools such as report writers, data extraction tools, query tools, and on-line analytical
processing tools. In addition, all aspects of the design phase can be performed with
software tool sets provided by specific software manufacturers. Reporting is the
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driving force behind an AIS development. Accounting systems make use of a variety
of scheduled and on-demand reports. The reports can be tabular, showing data in a
table or tables; graphic, using images to convey information in a picture format; or
matrices, to show complex relationships in multiple dimensions. Reports are of three
basic types: A filter report that separates select data from a database, such as a
monthly check register; a responsibility report to meet the needs of a specific user,
such as a weekly sales report for a regional sales manager; a comparative report to
show period differences, percentage breakdowns and variances between actual and
budgeted expenditures. An example would be the financial statement analytics
showing the expenses from the current year and prior year as a percentage of sales.
2.5.4
IMPLEMENTATION: The implementation phase consists of two primary parts:

construction and delivery. Construction includes the selection of hardware, software
and vendors for the implementation; building and testing the network communication
systems; building and testing the databases; writing and testing the new program
modifications; and installing and testing the total system from a technical standpoint.
Delivery is the process of conducting final system and user acceptance testing;
preparing the conversion plan; installing the production database; training the users;
and converting all operations to the new system. Testing is performed at four levels.
Stub or unit testing is used to insure the proper operation of individual modifications.
Program testing involves the interaction between the individual modification and the
program it enhances. System testing is used to determine that the program
modifications work within the AIS as a whole. Acceptance testing ensures that the
modifications meet user expectations and that the entire AIS perform as designed.
2.5.5
SUPPORT: The support phase has two objectives. The first is to update and maintain
the AIS. This includes fixing problems and updating the system for business and
environmental changes. For example, changes in generally accepted accounting
principles (GAAP) or tax laws might necessitate changes to conversion or reference
tables used for financial reporting. The second objective of support is to continue
development by continuously improving the business through adjustments to the AIS
caused by business and environmental changes. These changes might result in future
problems, new opportunities, or management or governmental directives requiring
additional system modifications.
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2.6
EFFECTIVENESS OF ACCOUNTING INFORMATION SYSTEM
Accounting information systems are said to be effective when the information provided by
them serves widely the requirements of the system users. Effective systems should
systematically provide information which has potential effects on decision-making process.
The effectiveness of accounting information systems has long been a subject of many
researches. Accounting information usually is categorized under two groups:
(a) Information that influences decision-making and mainly used for the purpose
controlling the organization and
(b) Information that facilitates decision making process and mostly used for
coordination within an organization.
Effectiveness of accounting information system also depends on the perception of decisionmakers on the usefulness of information generated by the system to satisfy informational
needs for operation processes, managerial reports, budgeting and control within organization.
Effectiveness of accounting information systems can be analyzed on three bases: i)
information scope, ii) timeliness and iii) aggregation. Information scope is considered as
financial and non-financial information, internal and external information that is useful in
prediction of future events. Timeliness quality is related to the ability of accounting
information system to satisfy information needs by providing systematic reports to the user.
Aggregation of information is considered as means of collecting and summarizing
information within a given time period.
2.7
AIS INFORMATION SYSTEMS IN CONTEXT
AISs cover all business functions from backbone accounting transaction processing systems
to sophisticated financial management planning and processing systems. Financial reporting
starts at the operational levels of the organization, where the transaction processing systems
capture important business events such as normal production, purchasing, and selling
activities. These events (transactions) are classified and summarized for internal decision
making and for external financial reporting.
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Management accounting systems are used to allow organizational planning, monitoring, and
control for a variety of activities. This allows managerial-level employees to have access to
advanced reporting and statistical analysis. The systems can be used to gather information, to
develop various scenarios, and to choose an optimal answer among alternative scenarios.
2.8
ADVANTAGES AND IMPLICATIONS OF AIS
A big advantage of computer-based accounting information systems is that they automate and
streamline reporting. Reporting is major tool for organizations to accurately see summarized,
timely information used for decision-making and financial reporting. The accounting
information system pulls data from the centralized database, processes and transforms it and
ultimately generates a summary of that data as information that can now be easily consumed
and analyzed by business analysts, managers or other decision makers. These systems must
ensure that the reports are timely so that decision-makers are not acting on old, irrelevant
information and, rather, able to act quickly and effectively based on report results.
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CHAPTER THREE: AIS OF LEADING UNIVERSITY
3.1 OVERVIEW OF LEADING UNIVERSITY

Leading University (LU) is the first government approved private university in Sylhet,
founded by renowned philanthropist Mr. Ragib Ali. On his proposal for establishing Leading
University to the Ministry of Education on 24th August. 1996, the Ministry issued permission
on 28th August 2001 to establish this university. The establishment of the leading university
at Sylhet, a holy place of the country, was exclusively a noble idea of a distinguished
personality Mr. Ragib Ali, who is well known for his philanthropic contributions to
educational institutions all over the country. He established a number of educational
institutions at different levels and of different kinds including a medical college- Jalalabad
Ragib-Rabeya Medical College and Hospital at Sylhet.
Mr. Ragib Ali is a pioneer in establishing the first private university in Bangladesh, NorthSouth University. He is the founder Vice-chairman of North-South University and the
chairman of Asia Pacific University. The Leading University was inaugurated on 4th March,
2002. It started its first semester that day. It had on its rolls 106 students in this first semester
in undergraduate programs. The large number of students in the initial semester itself was a
milestone and a source of inspiration to the organizers of the university. Now around 3500
students and 128 full time teachers and 70 part time teachers are in Leading University.
Mission: The mission of the Leading University is to educate generation of academic,

social, political, intellectual and business citizens of the world and to enhance the
advancement of scholarship in the arts and sciences in an international, multicultural and
plural environment.
Goal: The goal of the University is to provide an excellent broad based education with a
focus on professional development for students in order to equip them with the knowledge
and skill necessary for practical life.
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3.2. FACULTIES OF LEADING UNIVERSITY

There are three faculties in Leading University. They areFACULTY OF MODERN SCIENCE
The faculty of modern science consists of four departments. They areI.
CSE
II.
EEE
III.
Civil Engineering
IV.
Architecture
FACULTY OF BUSINESS
There is only one department in faculty of business. It isI.
Business Administration
FACULTY OF ARTS AND LANGUAGE

The faculty of arts and language has two departments. They areI.
English
II.
Law
3.3 ACCOUNTING INFORMATION SYSTEMS APPLICATIONS OF LEADING

UNIVERSITY
The application of accounting information system is useful to up-to-date reports to the
management to facilitate planning, controlling, and evaluating the performance of the
organizations business activities. Here it is described the basic business activities that are
performed, the threats to the effective and efficient performance of those processes and the
applicable control procedures for dealing with those threats, and the key decisions need to be
made and the information needed to support those decisions. The first is the Revenue Cycle,
15
which consists of all of the activities associated with the basic economic exchange of selling
services. Next the Expenditure Cycle, which involves the activities associated with acquiring
and paying for goods and services. The last one is Human Resources/ Payroll Cycle,
addressing issues associated with the effective development and management of an
organizations most valuable resources; its employees. And finally the General Ledger and
Reporting System, examining issues associated with providing management with timely and
accurate financial and nonfinancial information about the effectiveness and efficiency with
which the organization executes its various business activities.
3.3.1
THE REVENUE CYCLE
Revenue Cycle consists of all the activities associated with the basic economic exchange of
selling goods or services and collecting cash from customers for those goods and services. As
Leading University is an educational service providing organization the students are
considered as the customer of it. Management must monitor and evaluate the efficiency and
effectiveness of revenue cycle process. This requires easy access to detailed data about the
resources employed in the revenue cycle, the events that affect those resources, and the
agents who participate in those events. Moreover, to be useful relevant for decision making,
that data must be accurate, reliable, and timely.
3.3.1.1 REVENUE CYCLE BUSINESS ACTIVITIES OF LEADING UNIVERSITY

The basic activities performed in the revenue cycle are discussed below1. The revenue cycle starts with the issue of payment slips to the students by finance and
accounts section. Every student has to register different subjects according to the assigned
subjects of different semesters. The different subjects are assigned different credits. The
students pay their tuition fees according to the total number of credits he/she registered. Per
credit tuition fee varies from department to department and even from semester to semester of
same department. There is activity or lab fee also be included to the tuition fee. Students get
waiver of different percentage during the admission if they are eligible for that.
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2. After taking the payment slip from the finance and accounts section students deposit the
money to the bank. SouthEast Bank is assigned to collect money from the students. The bank
copy, a part of the payment slip is kept by the bank. After depositing money students give the
university copy, another part of the payment slip to the admission section along with their
Deposit
s
Studen
ts
Deposit
Slips
Payment
slips
Admissi
on
Section
Bank
Finance
and
Accounts
Stateme
nt
registration form.
General
Ledger and
Reporting
System
Section
Figure: The Context Diagram of the Revenue Cycle

of Leading University
3. In the third step the admission section gathers all the registration forms according to the
semesters and give to the finance and accounts section.
4. In the final step finance and accounts section posts the students deposit information to the
ledger. Here verification is made whether the students have paid the exact amount according
to their courses registration and their waiver as well.
3.3.2
THE EXPENDITURE CYCLE
The expenditure cycle is a recurring set of business activities and related data processing
operations associated with the purchase of payment for goods and services. In the expenditure
cycle, the primary external exchange of information is with suppliers (vendors). Within the
organization, information flows to the expenditure cycle from the various departments about
the need to purchase goods and materials. Once the goods and materials arrive, notification of
their receipt flows back to those sources from the expenditure cycle. Expense data also flow
from the expenditure cycle to the general reporting function for inclusion in financial
statements and various management reports. In addition, management must be able to
17
monitor and evaluate the efficiency and effectiveness of expenditure cycle processes. That
requires easy access to detailed data about the resources employed in the expenditure cycle,
the events that affect those resources, and the agents who participate in those events.
Moreover, to be useful and relevant for decision making, the data must be accurate, reliable,
and timely.
The three basic functions of the AIS in the expenditure cycle; capturing and processing data
about business activities, storing and organizing the data to support decision making, and
providing controls to ensure the reliability of data and the safeguarding of organizational
resources.
3.3.2.1 THE EXPENDITURE CYCLE BUSINESS ACTIVITIES OF LEADING UNIVERSITY
One function of the AIS is to support the effective performance of the organizations business
activities by efficiently processing transaction data. The three basic business activities in the
expenditure cycle area) Ordering goods, supplies, and services;
b) Receiving and storing goods, supplies, and services;
c) Paying for goods, supplies, and services.
A. Ordering goods, supplies, and services
The first major business activity in the expenditure cycle is ordering goods and supplies. The
key steps involve in this activity arei) Purchase request
The first step is to place a requisition for the required good to the registrar office. The
purchase requisition is a document, or electronic form, that identifies the requisitioner;
specifies the delivery location and data needed; identifies the item numbers, descriptions,
quantities, and price of each item requested; and may suggest a supplier. Various sections like
admission section, exam section, and different departments may place the requisition for the
required good.
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Work Order
VC Office
Approval
Vendors
Invoice
s
Paymen
ts
Registrar
Office
Finance
and
Accounts
Purchase
Needs
Various
Departme
nts
General
Ledger and
Reporting
System
Section
Approval
Receipts of
Goods
Figure: The context diagram of the expenditure

cycle
ii) Collection of approval
After getting the requisition the registrar office forwards it to the Vice-Chancellor office for
the collection of approval. The requisition can only be approved by Vice-Chancellor. After
being approved the requisition is sent back to the registrar office. If the required goods price
is estimated over 10,000/= then tender notice is placed on newspaper for that good. After
closing the tender time purchase committee verifies all the schedules and selects the lowest
price offered organization.
iii) Placing work order

After getting the approval from Vice-Chancellor the registrar office place a work order to the
selected organization for supplying good.
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Work Order
VC
Office
Tender
Purchase
Committ Approva
ee
l
Vendors
Registrar
Office
Purchase
Needs
Approva
l
Invoice
s
Paymen
ts
Finance
and
Accounts
Various
Departmen
ts
General
Ledger and
Reporting
System
Section
Approval
Receipts of
Goods
Figure: The context diagram of the expenditure

cycle
B. Receiving and storing goods, supplies, and services

The second major business activity in the expenditure cycle is the receipt and storage of
ordered items. When the vendor receives the work orders it supplies the ordered good or
service to the university. The good is received by the person who has placed the requisition of
the good. When a delivery arrives, a receiving person compares the purchase order number
referenced on the suppliers packing slip with the open purchase order file to verify that the
goods were ordered.
The receiving report is the primary document in the receiving subsystem of the expenditure
cycle; it documents details about each delivery, including the date received, supplier,
purchase order number etc. A receiving report is typically not used to document the receipts
of services, such as cleaning, internet etc. Instead, receipt of such services is usually
documented by supervisory approval of the suppliers invoice. In case of advertisement the
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newspaper or magazine where the advertisement is published that particular dated newspaper
is kept as document.
C. Paying for goods, supplies, and services
The third main activity in the expenditure cycle is approving vendor invoices for payment.
This involves two steps; one is finance and accounts section approves vendor invoices for
payment and the officer who reports to the treasurer, is responsible for making the payment.
The vendor places bill to the finance and accounts section. Finance and accounts section then
verifies whether the good is received by the requisitioner. Then a note sheet is prepared for
payment of that vendor. The note sheet is then sent to the Vice-Chancellor office for the
approval. After getting the approval of payment from Vice-Chancellor the finance and
accounts section prepare a pay order against that vendor. The pay order is given to the vendor
with taking an acknowledgement of receipt. And finally the transaction is recorded to ledger.
Petty cash fund

The finance and accounts section maintain petty cash of Tk. 10,000 which is used to pay the
bill of low amount. An assistant accounts officer manages petty cash. Usually some goods are
required in urgent basis or needs not the requisition; the payments for these goods are made
in cash from petty cash. In most of the cases petty cash is used for entertainment bill,
conveyance bill, and other miscellaneous expenses.
3.3.3
THE HUMAN RESOURCE MANAGEMENT/PAYROLL CYCLE
The Payroll Cycle is a recurring set of business activities and related data processing
operations associated with effectively managing the employee workforce. Following are the
more important tasks:
Recruiting and hiring new employees;
Training;
Job assignment;
Compensation (payroll);
Performance evaluation;
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Discharge employees, due to voluntary or involuntary termination;
Here the payroll system will be discussed, because it is one of the largest and most important
components of the AIS. The payroll system must be designed to meet government regulations
as well as managements information needs. Incomplete or erroneous payroll records result
impair decision making. Thus, the design of an efficient and effective payroll system is vital.
3.3.3.1 THE PAYROLL CYCLE BUSINESS ACTIVITIES OF LEADING UNIVERSITY

Cheques are the payroll systems principal output. Employees receive individual pay cheques
in compensation for their services. A payroll cheque is sent to the bank to transfer fund from
the companys regular accounts to its payroll account. The three basic functions the AIS
provides in the payroll cycle: processing transactional data about employee activities,
safeguarding the organizations assets, and providing information for decision making.
Payroll is one AIS application that continues to be continuous to be processed in batch mode;
because (1) pay cheques are prepared periodically (monthly) and (2) most employees are paid
at the same time. The seven basic activates performed in the payroll cycle of Leading
University are discussed below-
Update payroll master file

The first activity in the payroll cycle involves updating the payroll master file to reflect
various types of payroll changes: new hires, terminations, changes in pay rates or changes in
discretionary withholdings. It is important that all payroll changes are entered in a timely
manner and are properly reflected in the next pay period. Records of employees who quit
should not be deleted immediately, however, because some year-end reports require data
about all employees who worked for the organization at any time during the year.
Update tax rates and deductions

The second activity in the payroll cycle is updating information about tax rates and other
withholdings. The payroll department makes these changes, but the changes occur frequently.
22
They happen when the payroll department receives updates about changes in tax rates and
other payroll deductions from various government units and insurance companies. Usually
income tax and provident fund are deducted from the compensation.
Employees
Bank
Account
Credit
Bank
Cash
Payments
Employee
s
Cheques
issue
Cash
withdrawal
Tax
Deductio
n
Finance
And
Accounts
Section
Provident
Fund
Calculatio
n
General ledger
And reporting
systems
Figure: The context diagram of the payroll cycle

Validate attendance data
The third step in the payroll cycle is to validate each employees attendance data. This
information comes in various forms, depending on an employees pay scheme.
Prepare payroll
The fourth step in the payroll cycle is preparing payroll. The salary statement is made for
faculty members and other officers in different worksheets. The faculty members are sorted
by different department according to their designation. Those employees who do not have
any bank account a separate worksheet is prepared for them. They are paid in cash. All
payroll deductions are summed and the total is subtracted from the gross pay to obtain net
pay. Payroll deductions fall into two broad categories: payroll tax withholdings and voluntary
deductions. The former includes the income tax. Voluntary deductions include contribution to
the provident fund. Because income tax and provident fund have cutoffs, the organization
23
must know when to cease deductions for individual employees. This information is needed to
ensure that appropriate amounts of tax and other deductions are remitted to government
agencies. This information also must be included in the various reports filed with those
agencies.
Finally, the payroll register and employees paycheques are printed. The payroll register is a
report that lists each employees gross pay, payroll deductions, and net pay in a multi-column
format. It is often accompanied by a separate deduction register, which lists the miscellaneous
voluntary deductions for each employee.
The payroll register also is used to authorize the transfer of funds to the companys payroll
bank account. Employee paychecks also typically include an earnings statement, which lists
the amount of gross pay, deductions, and net pay for the current period.
Disburse payroll
The next step is actual disbursement of paychecks to employees. Most of the employees are
paid by direct deposit of the net pay amount into the personal bank account. Employees who
do not have any bank account like peon, cleaner, liftmen etc. are paid in cash. Once the pay
cheques have been prepared, it is reviewed and sent for the approval of the Vice-Chancellor.
A disbursement voucher is then prepared to authorize the transfer of funds from the
companys general chequing account to its payroll bank account.
The finance and accounts section maintains a series of payroll deposit files.
Calculate employer paid benefits and taxes

The employer pays some payroll tax and employee benefits directly. For example, employers
must pay income tax. The income tax is calculated on the basis of the government regulation,
where detailed instructions about an employers obligations for withholding and remitting
payroll taxes and for filing various reports. Here every employee gets the benefit of the
provident fund.
Disburse payroll taxes and miscellaneous deductions
24
The final activity in the payroll process is paying the payroll tax liabilities and the other
voluntary deductions of each employee. Generally, the financial period is considered from
current year July to the next year June. This organization pays the annual income tax
deducted from the employees monthly salary in total at the end of June.
GENERAL LEDGER AND REPORTING SYSTEM
Revenue
Cycle
Payroll Cycle
Cash
receipts
Cash
disbursements
General
Ledger
and
Reporting
System
Repor
ts
Expenditu
re Cycle
Wage and salary

expense
3.3.4
Treasurer
Figure: The context diagram of the general ledger

and reporting system
The information processing involved in updating the general ledger and processing reports
that summarize the results of an organizations activities. The general ledger and reporting
system plays an important role in an organizations AIS. One of its primary functions is to
collect and organize data from the following sources:
Each of the accounting cycle subsystems ( Revenue cycle, Expenditure cycle,
25
Payroll cycle );
The treasurer provides information about financing and investing activities;
This information must be organized and stored in a manner that facilitates meeting the varied
information needs of internal and external users. Consequently, the general ledger and
reporting system must be designed to produce regular periodic reports and to support realtime inquiry needs. For example, a teacher wants to know how much his contribution to
provident fund is made. Likewise, the treasurer must be able to closely monitor cash flows.
3.3.4.1 GENERAL LEDGER AND REPORTING SYSTEM OF LEADING UNIVERSITY

There are four basic activities in the general ledger and reporting system. They area) Update general ledger;
b) Post adjusting entries;
c) Prepare financial statements;
d) Produce managerial reports.
Update general ledger

The first activity in the general ledger system is updating the general ledger. Updating
consists of posting journal entries that originate from each of the accounting
subsystems (Revenue cycle, Expenditure cycle, Payroll cycle), creates a journal entry
to update the general ledger. The general ledger could be updated for each individual
transaction. In practice, however, the various accounting subsystems usually update
the general ledger by means of summary journal entries that represent the results of all
transactions that occurred a given period of time (day, week, or month). In Leading
University the day to day transactions are posted in the ledger. Journal entries to
update the general ledger are documented on a form called a journal voucher.
Post adjusting entries

The second activity in the general ledger system is posting various adjusting entries.
These adjusting entries originate after the initial trial balance has been prepared.
26
Usually, there are not any adjusting entries posted, as the adjustment does not require
in preparation of the financial statement of Leading University.
Prepare financial statement

The third activity in the general ledger and reporting system is preparing financial
statements. In Leading University, the balance sheet and the receipt & payment
statement are prepared. It is performed on the annual basis.
Produce managerial reports
The final activity in the general ledger and reporting system is producing various
managerial reports. As there is not any external user of Leading University, publishing
reports are so much required.
27
CHAPTER FOUR
FINDINGS & ANALYSIS
4.1. FINDINGS OF THE STUDY
The findings and analysis of the study includes problems, SWOT analysis and
recommendations to overcome those problems. Problems are discussed below-
In revenue cycle
There are some major threats in the revenue cycle. They arei) Error in calculation at the time of payment slips distribution to the students
When the course registration time comes the students are advised to deposit their tuition fees.
Students collect their payment slip from the finance and accounts section. When students
come to finance and accounts section they are asked in which department, semester they are
and how many courses they are going to register. Then the calculation is made and the
required amount is written in the payment slip. In calculation the officer may make mistake.
For example a student has told that he gets 20% waiver, but in calculation by mistake it is
calculated as 25%. Another mistake may take place that activity or lab fee which have to be
added with the tuition fee may not be added.
ii) Posting errors in updating students ledger
When the students ledgers are updated there may have some posting errors. For example a
student gets admitted by giving tk.5000 as admission money where the actual admission fee
is tk.10000. This causes tk.5000 due for that student. But during posting it may be, by
mistake, written as a payment of tk.10000 is made as admission fee showing no due for that
student. Another error may occur when a deposit slip is not posted.
iii) Incomplete payment slip placement

The payment slip may be placed unsigned. Unsigned payment slips are not collected by the
bank.
28
iv) Unconcern of students about tuition fees payment

Some students show unconcern about the tuition fees they are paying every semester. They
are not concerned about how much they need to pay for the semester. In some cases they pay
excess or in some cases they pay less. For example, a student filled up his registration form
showing 15.5 credits and has paid as the tuition fee comes for 15.5 credits. But later he has
realized that he actually has taken14.5 credits. Now it is a problem for him to adjust that one
credit advance payment. In some cases, students forget how much waiver they are getting. It
is time consuming to inform him about how much waiver he is getting from his ledger at
every registration time.
v) Miscalculation in monthly payment system by the students

Some students get the facility to pay the tuition fee at monthly basis. In monthly system the
whole course fee is converted to the monthly installments, taking a 8% extra from those who
pays semester basis. In some cases, students pay all of their payment at monthly basis but
when to pay for internship they pay it at per credit basis. Now it creates a problem as their
full payment was converted in the monthly basis, including the internship course fee.
There should have some control procedure so that the above listed threats can be overcome.
They may be Data entry edit controls;
Reconciliation of general ledger and accounts receivables.
29
In expenditure cycle
The major possible threats, may present in Leading University, and their control procedures
are described belowi) Payment without seal
Some vendors have not any seal of them. A seal, showing the name and other related
information, is required when the payment is made to the vendors. Some vendors like
carpenter, painter do not belong to any organizations. So they do not use any seal. But
according to bill payment role of Leading University a seal is required.
ii) Vendors having no bank account

Some vendors do not have any bank account. In case of payment made to them cash is the
only choice. But a large amount of cash payment is risky for both the Leading University and
the vendors.
iii) Requesting unnecessary items

Authority must be concerned that purchasing items that are not currently needed. Supervisors
should review and approve purchase requisitions that individual employees initiate. A related
problem is multiple purchases of the same item by different subunits of the organization.
To overcome this problem, the AIS must be designed in a manner that facilitates integrating
the database of various subunits.
iv) Purchasing goods of inferior quality

In their quest to obtain the lowest possible prices, the organization must beware of purchasing
inferior quality products or services. Moreover, the cost of rework often result in more
expenditure that may be fewer if more expensive goods had been initially purchased.
Through experience, buyers often learn which suppliers provide the best-quality goods at
competitive prices. Such informal knowledge should be incorporated into formal control
procedures so that it is not lost when a particular employee leaves the organization.
Establishing lists of approved suppliers known to provide goods of acceptable quality will
30
achieve this goal. Purchase orders should be reviewed to ensure that only these approved
suppliers are being used. In addition, supplier performance data should be collected and
periodically reviewed to maintain the accuracy of these approved supplier lists.
v) Receiving unordered goods

Accepting delivery of unordered goods results in costs associated with storing, and later
returning, those items. The best control procedure to mitigate this threat is to instruct the
receiving person to accept only deliveries for which there is an approved copy of the
purchase order.
vi) Failing to catch errors in vendor invoices

Vendor invoices may contain errors such as discrepancies between quoted and actual prices
charged or miscalculations of the total amount due. Consequently, the mathematical accuracy
of vendor invoices must be verified and the prices and quantities listed therein compared with
those indicated on the purchase order and receiving report. To avoid this kind of error it is
recommended that to check out all the invoices properly.
vii) Paying for goods not received

The best control to prevent paying for goods not received is to compare the quantities
indicated on the vendor invoice with the quantities recorded at receiving report or the person,
who received those goods.
viii) Failing to take available purchase discounts

Failure to take advantage of purchase discounts costs money. Proper filing can significantly
reduce the risk of that threat. Approved invoices should be filed by due date, and the system
should be designed to track invoice due dates and print a periodic list of all outstanding
invoices.
31
ix) Paying the same invoices twice

The same invoice can be submitted for payment more than once for a variety of reasons. It
may be a duplicate invoice that was sent after the companys cheque was already in the mail,
or it may have become separated from the other documents in the voucher package. Although
paying invoices a second time is usually detected by the supplier and results is a credit to the
organizations account, it can affect a companys cash flow needs. In addition, the financial
records will be incorrect, at least until the duplicate payment is detected.
Several control procedures can mitigate this threat. First, invoices should be approved for
payment only when accompanied by a complete voucher package. Second, only the original
copy of an invoice should be paid. Third, when the cheque to pay for an invoice is signed, the
invoice and the voucher package should be cancelled in a manner that would prevent their
resubmission.
x) Misappropriating cash, cheques, EFTs

Because cash is the easiest asset to steal access to cash and blank cheques should be
restricted. Cheques should be sequentially numbered and periodically accounted for by the
cashier. Electronic Fund Transfer (EFT) requires additional control procedures. Because EFT
involves the movement of funds, strict access controls are needed.
xi) Losing data

Data about pending cash disbursement obligations and open orders must be safeguarded from
loss or corruption. Both internal and external file labels should be used to reduce the
possibility of accidentally erasing important files and to ensure that the most recent version of
the master file is being updated. In addition, the purchases, receipts, master accounts payable,
and cash disbursements files should be backed up regularly.
32
In payroll cycle
The followings, in the payroll cycle, are some major threats and the applicable control
procedures for those threatsi) Unauthorized changes to the payroll master file
Unauthorized changes to the payroll master file can result in increased expenses if salaries, or
other base rates used to determine employee compensation are falsified.
Proper segregation of duties is the key control procedure for dealing with this threat. This
segregation of duties prevents someone with access to pay cheques from creating fictitious
employees or altering pay rates and then intercepting those fraudulent checks. Controlling
access to a payroll system is also important.
ii) Inaccurate processing of payroll

The complexity of payroll processing makes it susceptible to errors. Errors obviously can
heart employee morale, particularly if pay cheques are late. Three types of control procedures
address the threat of payroll errors:
iii) Theft or fraudulent distribution of pay cheques

Another major threat is the theft of pay cheques or the issuance of pay cheques to fictitious or
terminated employees. This can result in increased expenses and the loss of cash.
Proper segregation of duties relating to the preparation and disbursement of pay cheques can
reduce the risk of this threat. Someone who does not authorize or record payroll should
distribute pay cheques.
iv) Loss or unauthorized disclosure of data
The payroll database is a valuable resource that must be protected from loss or destruction.
Protecting the privacy of employee data also is important. For example, morale may suffer if
employees learn the salaries of other employees. In addition unauthorized disclosure of
performance evaluation data may subject the organization to lawsuits.
The best control procedure to reduce the risk of unauthorized disclosure of payroll data is
using passwords and physical security controls to restrict access to authorized person.
33
IN GENERAL LEDGER AND REPORTING SYSTEM

The major threats and exposures in the ledger and financial reporting system, along with
applicable control procedures for mitigating them are discussed below-
i) Errors in updating the general ledger

Errors made in updating the general ledger can lead to poor decision making based on
erroneous information in financial performance reports.
The control procedures foe dealing with this threat fall into three categories: input edit and
processing controls, reconciliations and control reports, and maintenance of an adequate audit
trail.
ii) Unauthorized access to the general ledger

Unauthorized access to the general ledger can result in confidential data leaks to competitions
or corruption of the general ledger. It can also provide a means for concealing the theft of
assets. Consequently, it is important to have adequate controls to prevent unauthorized access
to the general ledger.
iii) Loss or destruction of general ledger

The general ledger is a key component of the organizations accounting information system.
Therefore, it is important to provide adequate backup and disaster recovery procedures to
protect this asset.
34
4.1.1 Limitations of AIS of Leading University

Accounting information systems have many benefits; however, there are also some
disadvantages to them.
Learning the System
Learning an accounting information system can often be difficult and time-consuming.

Individuals must be trained on a system, and this can cause a disadvantage to companies in
terms of time and manpower. An accounting information system is made up of many different
components, and almost all systems are computerized. Because of their complexity, some
people may find them hard to use. It can take weeks or months for a person to understand an
accounting system, and usually the individual still does not understand completely what the
system is capable of. If the employee quits working at the organization, it can take weeks or
months, once again, to train another employee.
Loss of Information
Accounting information systems are usually computerized. Because of this, there is always a
risk of losing information through power outages or system crashes. Companies take
precautions for this problem by backing up their files regularly and performing standard
maintenance on all computer systems. They also install anti-virus software as another
precaution. Still, none of these steps eliminates the potential problem that may occur.
Accounting information systems store a company's financial information for years. If a
system crash occurs, it causes a major disadvantage to the company.
Re-evaluation
An accounting information system is difficult to set up because every company is unique in

its own way. In order to keep up with changes, accounting information systems must be reevaluated often. Changes often need to be made in a system in order to process information
efficiently. This can be a disadvantage to companies because it takes time for the reevaluation, and it costs money.
35
CHAPTER FIVE
CONCLUSION AND RECOMMENDATIONS
5.1 Recommendations
Some recommendations for overcoming the problems are discussed below1. Students awareness should be increased;
2. Computerized AIS can give much better opportunity to easy handle all the
business activities involved in the AIS subsystems;
3. Bill payment should be made through vendors bank account;
4. Updating ledger should take special care and attention;
5. Communication between students and related departments should be increased;
6.
Information transfer inert departments should be smoothen;
7. The books which are maintained are too much lengthy and time consuming,
should concern about it.
8. Software is mostly essential for accounts office because to maintain manual
accounts many mistakes occur.
9. Management should engage those that are computer literate and highly
experienced, they should also be trained with latest information technology
ascertained competitive effectiveness of the organization.
10. Increasing AIS investment will be the leverage for achieving a stronger, more
flexible corporate culture to face persistent changes in the environment.
36
5.2 CONCLUSION
Accounting Information system combines the methodologies, controls and accounting
techniques with the technology of the IT industry to track transactions provide internal
reporting data, external reporting data, financial statements, and trend analysis capabilities to
affect on organizational performance
On the basis of the findings, it could be concluded that accounting information systems has a
significant effect on organizational effectiveness. The study found that good accounting
information enhance administrative effectiveness. This study is made to learn about the
various cycles in AIS. It is learned that accounting information systems have three main
objectives: (1) to process transactions for accountability purposes, (2) to maintain adequate
controls to ensure the integrity of the organizations data and the safeguarding of its assets,
and (3) to provide information to support decision making. Effectively participating in
decisions concerning technology, however, requires accountants to not only keep abreast of
current accounting developments, but also to stay informed about advances in IT. The
disciplines of accounting and information systems have much in common and should be
closely integrated. It can be said AIS can and should be the primary information system of an
organization and it will provide users with the information they need to perform their job.
37
References
[1]
Accounting Information Systems: Information on Collection, Storage and Processing

of Financial and Accounting Data, Retrieved 7 December 2012.
[2]
Ebert, R. J., & Griffin, R. W. (2005). Business Essentials, 5th edition. New Jersey:
Pearson Education.
[3]
Hoggett, J., Edwards, L., & Medlin, J. (2006). Accounting, 6th edition, John
Wiley & Sons Australia, Australia.
[4]
Romney, M., & Steinbart, P. (2006). Accounting Information Systems, 10th

edition. NewJersey: Pearson Education.
[5]
Romney, Marshall B., and Paul John. Steinbart. Accounting Information

Systems. Upper Saddle River, NJ: Ninth Edition; Pearson Prentice Hall,
2009.
[6]
http://en.wikipedia.org/wiki/Accounting_information_system
[7]
http://en.wikipedia.org/wiki/Leading_University
[8]
http://www.accountinginformationsystems.org/
[9]
http://www.allbusiness.com/accounting/3504565-1.html
[10]
http://www.lus.ac.bd/index.php
[11]
http://www.investopedia.com/terms/a/accounting-information-system-
ais.asp
38

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CHAPTER ONE: INTRODUCTION OF THE STUDY

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University

OBJECTIVES OF THE REPORT

METHODOLOGY OF THE STUDY

1.3.1 DATA COLLECTION METHOD

1.3.2 DATA PROCESSING

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University

1.3.3 DATA PRESENTATION

SCOPE OF THE STUDY

LIMITATIONS OF THE REPORT

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University

CHAPTER TWO: LITERATURE REVIEW

ACCOUNTING INFORMATION SYSTEM (AIS)

An accounting information system (AIS) is a system of collection, storage and processing of

People: users who operate on the systems;

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University

Accounting information system is considered as a subsystem of management information

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University

There have three basic functions performed by AIS:

Capture transaction data on source documents.

Record transaction data in journals, which present a chronological record of

To provide management with information useful for decision making:

To provide adequate internal controls:

Ensure that the information produced by the system is reliable.

Ensure that business activities are performed efficiently and in accordance

Safeguard organizational assets.

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University

The External Environment

Figure 01: General Model for Accounting Information Systems

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University

and e-commerce. In addition, many financial systems come "Web-enabled" to allow

devices to connect to the World Wide Web.

system initially introduced in the fifteenth century.

Figure 02: AIS Technology

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University

objectives of the project, the definition of project responsibilities, control

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University

IMPLEMENTATION: The implementation phase consists of two primary parts:

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University

EFFECTIVENESS OF ACCOUNTING INFORMATION SYSTEM

AIS INFORMATION SYSTEMS IN CONTEXT

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University

ADVANTAGES AND IMPLICATIONS OF AIS

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University

CHAPTER THREE: AIS OF LEADING UNIVERSITY

3.1 OVERVIEW OF LEADING UNIVERSITY

Mission: The mission of the Leading University is to educate generation of academic,

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University

3.2. FACULTIES OF LEADING UNIVERSITY

FACULTY OF ARTS AND LANGUAGE

3.3 ACCOUNTING INFORMATION SYSTEMS APPLICATIONS OF LEADING

THE REVENUE CYCLE

3.3.1.1 REVENUE CYCLE BUSINESS ACTIVITIES OF LEADING UNIVERSITY

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University

Figure: The Context Diagram of the Revenue Cycle

THE EXPENDITURE CYCLE

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University

3.3.2.1 THE EXPENDITURE CYCLE BUSINESS ACTIVITIES OF LEADING UNIVERSITY

Figure: The context diagram of the expenditure

iii) Placing work order

Practices of Accounting Information Systems in Educational Institute: A Study on Leading University