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OCP on Accounting Information System of Pedrollo NK Ltd. 1

Chapter 1Introduction


1.1 Introduction

The OCP program is an essential part of Masters of Business Administration (MBA). As a

student of MBA, it is required to work in a selected institution to enhance ones practical

knowledge and experiences. For the requirement of my course I was assigned to work on

Pedrollo nk Ltd. In this situation I was assigned to prepare report on “A study on the

Accounting Information System on Pedrollo nk Ltd”

For any Masters of Business Administration (MBA) student only curriculum activities is not

enough for handling the real life business situation. OCP program is the perfect blend of

the theoretical and the practical life experience. Whole the report has described the

different terms that is related to the AIS and the detail scenario of the different private

organizational performances.

1.2 Objectives of the study

The main objective of the study is to explore the accounting information system of Pedrollo nk Ltd.

To discuss about AIS & its importance in modern business.

To explore AIS of Pedrollo nk Ltd.

To identify whether Pedrollo nk Ltd. follows standard Accounting Practices.

1.3 Methodology of the study

Methods followed to perform a job or conducting activities to complete a task is called

methodology. In conducting this study the following methodology was adopted in

collecting data & information, preparation of reports etc. The methodology of report is

given below:

Primary sources of data:

For preparing this report, data was collected from different primary sources. Different

questions asked to IT officer and Accounts’ officer to collect the required data. Those data

are collected through face to conversation and observation.

Secondary sources of data:


Secondary sources of data are of two kinds:

Internal: Internal Reports of various records of the company, Other published

documents and Website.

External: Books, Articles and Website.

1.4 Scope of the study

The study has been conducted into two steps. In the first step, the concept, use, principles

etc. of AIS on Pedrollo nk Ltd. have been studied. In the second part the opinion of the

internal users has been collected.

1.5 Limitation

Since the personnel were very busy on their personal activities, they could not

provide enough time to me to discus my subject broadly.

Lack of opportunity to visit IT & Accounts department more than one time.

The website of Pedrollo are not that much rich with data.

The main constrain of the study was in sufficiency of information, which was

required for the study. There are various information the employee can’t provide

due to security and other corporate obligations.

Due to time limitation many of the aspects could not be discussed in the present

report.

Some information that are skipped by the respondent.

I have some error while analyzing the data and preparing the report.


2.1 Background of Pedrollo

Chapter 2Company Overview


Since 1969, Pedrollo nk Ltd. is working as a renowned Trading House under proprietorship

business to carry on import business & promoting quality products with competitive prices

in the local market.

The company started its journey with electric water pump marketing since 1985. After

formally incorporated in October 1987 it became the sole agent of world known Italian

'PEDROLLO' water pumps. During the last 30 years, PEDROLLO has become the symbol of

quality and market leader for the electric water pumps in all sectors through 14 showrooms,

190 dealers, 344 retailers and 43 service centers which made it possible to sell more than

1000000 pumps. Recently the company has planned to introduce a state of art water

management system in Bangladesh.

The company head office is located in Chittagong with regional offices in Dhaka & Bogra

with distribution facilities around the country and showrooms are located in big cities

supported by 260 employees. Beside the PEDROLLO it has the sole agency ship of Taiwanese

brand 'HCP' and Italian brand 'Rovatti' elctric pumps. From our inception, we believe in

serving people with

Longer product life

Energy efficiency

Minimum maintenance & countrywide service centers

Widest range of products – these four unique features made our products BEST

among our competitors.

Our motto is to “select the RIGHT pump as per user’s requirement” so that our customers

get most of their return from the product. Selection of the right product helped us greatly to

gain the confidence of our customers.

Being an Agro based economy with large population, our specially designed Irrigation

pumps & household pumps has been serving greatly to the users even in low voltage too.

Household pumps were in 1985. After huge success of these series, we introduced the

Irrigation series & Submersible series in 1988 & in 1991 respectively which also became

market leader within 1 year.


With our dedicated & competent employees supported by state of the art technology made

it possible to serve our valued customers at minimum time. This made us the Best water

pump supplier company of Bangladesh with more than 1 MILLION pumps in the market.

Our head office is located at Chittagong with another 2 offices in Dhaka & Bogra with

distribution facilities around the country & showrooms are located in the big cities.

Besides the brand PEDROLLO with more than 350 products under 8 different categories,

‘Pedrollo nk Limited’ is also exclusively serving its customer base with other world-renown

pump manufacturers with brands like HCP for drainage pumps, Rovatti for multi stage pump

too.

2.2 Vision and values

Vision

Vision serves as the framework for our Roadmap and guides every aspect of the business by

describing what we need to accomplish in order to continue achieving sustainable, quality

growth.

People: Be a great place to work where people are inspired to be the best they

can be.

Portfolio: Bring to the world a portfolio of quality pumps that anticipate and

satisfy people’s desires and needs.

Partners: Nurture a winning network of customers and suppliers, together we

create mutual, enduring value.

Planet: Be a responsible citizen that makes a difference by helping build and

support sustainable communities.

Profit: Maximize long-term return to shareowners while being mindful of our

overall responsibilities.

Values

Values serve as a compass for our actions and describe how we behave in the world.


Leadership: The courage to shape a better future

Collaboration: Leverage collective genius

Integrity: Be real

Accountability: If it is to be, it’s up to me

Passion: Committed in heart and mind

Diversity: As inclusive as our brands

2.3 Department of Human Resource

The human resource departments achieve the objectives of the organization as well as the

goal of department-

Recruitment, Selection & Placement of the employees.

Promotion, Transfer, Demotion & disciplinary action of the employees.

Leave of the Employees.

Ensure all festival & Incentive bonus.

Induction of newly appointed employees.

Identification of problems of employees.

Ensure Competency Assessment Report for all employees, yearly or Interim.

2.4 Products line


Application: Maximum liquid temperature +65 °C *Ambient temperature up to +40 °C *Burst pressure > 40 bar *Protection: IP 65 *VOLTAGE: 230 V - Frequency: 50/60 Hz *Max current: - 10 A EASYPRESS I - 16 A EASYPRESS II

Performance: Max flow rate: 200 l/min (12 m³/h) *Working pressure: 10 bar *Start-up pressure: 1.5 bar

Application: *Mano-metric suction lift up to 9 m (HS) *Liquid temperature between -10 °C and +40 °C *Ambient temperature between -10 °C and +40 °C *Max. Working pressure 10 bar *Continuous service S1

Performance: *Flow rate up to 160 l/min (9.6 m³/h) *Head up to 96 m

Application: Manometric suction lift up to 7 m *Liquid temperature between -10°C and +40°C *Ambient temperature up to +40°C *Max. working pressure 10 bar *Continuous service S1

Performance: Flow rate up to 180 l/min (10.8m³/h) * Head up to 103 m

Application: Manometric suction lift up to 7 m *Liquid temperature between -10°C and +90°C *Ambient temperature between -10°C and +40°C *Max. working pressure 10 bar (6 bar for 2CP25/130N) *Continuous service S1

Performance: Flow rate up to 450 l/min (27 m³/h) *Head up to 112 m


Application: Manometric suction lift up to 7 m Liquid temperature between -10 °C and +90 °C Ambient temperature between -10 °C and +40 °C Max. working pressure 10 bar Continuous service S1

Performance: *Flow rate up to 900 l/min (54 m³/h) *Head up to 74 m

Application: 1.5 m maximum immersion depth 2.Maximum liquid temperature +40°C 3.Passage of suspended solids up to Ø 10 mm 4.Suction down to 21 mm above ground level 5.180 mm minimum immersion depth for continuous service

Performance: 1.Flow rate up to 300 l/min (18 m³/h) 2.Head up to 14 m

Application: 1.10 m maximum immersion depth 2.Maximum liquid temperature +50 °C (Maximum liquid temperature +90 °C for a maximum of 3 minutes intermittent service) 3.Solids passage: - up to Ø 20 mm for RX 2/20, RX 3/20 - up to Ø 40 mm for RX 4/40, RX 5/40 4.Suction level: - 25 mm above ground level for RX 2/20, RX 3/20 - 50 mm above ground level for RX 4/40, RX 5/40 5. Continuous service S1

Performance: 1.Flow rate up to 380 l/min (22.8 m³/h) 2.Head up to 13 m

Application: 1.Maximum liquid temperature +35 °C 2.Maximum sand content 100 g/m³ 3.100 m immersion limit 4.Installation: - vertical - horizontal, with the following limits: up to 12 stagesor 11 kW 5.Starts/hour: 20 at regular intervals 6.Minimum flow rate for motor cooling 16 cm/s (0.5 m/s for 30 kW) 7.Continuous service S1

Performance: 1.Flow rate up to 1000 l/min (60 m³/h) 2.Head up to 390 m


3.1 Introduction

Chapter 3AIS in Modern

Business


“An accounting information system (AIS) is a system that collects, records, stores and

process data to produce information for decision makers” by Romney. 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.

AIS can be a very simple paper-and-pencil based manual system, a very complex system

using the very latest in computers and information technology, or somewhere these two

extremes. Regardless of the approach taken, the process is the same.

Characteristics of useful Information:

Relevant: Information is relevant if it reduces uncertainty decision maker’s ability

to make predictions, or confirms or corrects their prior expectations.

Reliable: Information is reliable if it is free from error or bias and accurately

represents the events or activities of the organizations.

Complete: Information is complete if it does not omit important aspects of the

underlying events or activities that it measures.

Timely: Information is timely if it is provided in time for decision makers to make

decisions.

Understandable: Information is understandable if it is presented in a useful and

intelligible format.

Verifiable: Information is verifiable if two knowledgeable people acting

independently would each produce the same information.

Accessible: Information is accessible if it is available to users when they need it and

in a format they can use.

3.2 Components of AIS

AIS can’t do anything’s without any its users. So the AIS and the people who use it must still

collect, enter, process, store, and report data and information. The paper and pencil or the

computer hardware and software are merely the tools used to produce the information.

Accounting information systems are composed of six main components:

People: users who operate the systems and perform various functions.


Procedures and instructions: both manual and automated, processes involved in

collecting, processing, managing and storing the data about the organization’s

activities.

Data: data that is related to the organization and its business processes

Software: application that processes the organization ‘s data

Information technology infrastructure: The actual physical devices(computer,

peripheral devices, and network communication devices)and systems that allows the

AIS to operate and perform its functions(to collect, store, process, and transmit data

and information)

Internal controls and security measures: That safeguards or secures the data in the

AIS.

3.3 How AIS can add value to an organization

As a support activity, the AIS adds value by providing accurate and timely information so

the five primary value chain activities can be performed more effectively and efficiently.

Well-designed AIS can do this by:

Improving the quality and reducing the cost of products or services.

Improving efficiency. Well-designed AIS can make operations more efficiently by

providing more timely information.

Sharing knowledge. A well designed AIS can make it easier to share knowledge

and expertise, perhaps thereby improving operations and even providing a

competitive advantage.

Improving the efficiency and effectiveness of its supply chain.

Improving the internal control structure. Security, control and privacy are

important issue in today’s world. AIS with the proper internal control structure

can protect systems from problems such as fraud, errors, equipment and

software failures and political disasters.

Improving decision making.


3.4 Principles of AIS

A sound accounting information system must be flexible and coat beneficial as these are

the principles of an effective AIS. Here in below those are described briefly.

Flexibility of Accounting Information System

Flexibility means that the system should be so much flexible that it can be changed when

necessary. Flexibility helps the organization to perform its task easily and quickly as they

want

Organizational Structure should flexible for improving their activities in different

situation.

Organizational Data structure should be very easy which will help the employee

to cope up with the system easily for the long run success.

Data Recovery system must be simple which will help the employee to recover

the lost data or previous data.

Cost effectiveness of Accounting Information System

Cost beneficial means the benefits of information must outweigh the cost of providing it.

Cost effectiveness indicates the minimizing process of cost which helps to maximize the

profit of an organization.

Data Documentation system is the process how data are maintained and stoke for

future.

Data Storing should be less costly because it reduces the level of profit.

Maintenance of Data Structure is the most costly activities in every organization so

they should maintain is chiefly.

Usefulness of Accounting Information System

Some time a success of a company depends on the usefulness of AIS. If AIS provides

more useful data or information with a proper way & also in time, than it will help the

organization to achieve the goal easily. Here in below I provide some information about

usefulness of AIS in Private company sector.

Relevant data means if data reduces uncertainty decision maker’s ability to make

predictions, or confirms or corrects their prior expectations as they demand.


Reliability of data means if it is free from error or bias and accurately represents

the events or activities of the organizations

Accuracy of data means if it is free from error or bias and misrepresentation

Timely data means if it collected and provided in time for decision makers to

make decisions and for user’s generating information.

3.5 Concepts of AIS among Private sector in Bangladesh

A proper structural Accounting Information System (AIS) is so important part of an

organization. All private organization maintain separate department for Accounting

Information System (AIS). The name of their department is FAD. For performing their

activities they need the help of Information Technology Department (IT). IT department

help them by providing computerized and technological support. FAD work centrally for

connecting all branches of organization. They maintain a distributed information system.

Every branch maintain separate server for updating information. FAD collects that

information via different software and manually generates information as they need. But

some information is collected through Fax, Phone and Letter because of lack of their

technological opportunity. On the other hand sometime a branch collects some

information from FAD by the same way but there are some restrictions for providing

information to the user.

After collecting the information they manually generate information. That information is

in printed copy. They prepared two copy of data and then one copy of data are send to

the Audit Committee and others are preserved for evidence. After auditing the data the

audit committee make information themselves and again sends it to the FAD division.

Then they analysis the information and publish or provide the information to the user. By

this way the FAD works and maintains all accounting rules & regulation with help of

information technology. In the view of that it is easy to say that Accounting Information

System is totally mixed with their system and tiring to speed up their system for

achieving the success. So it can be said that they maintain their AIS in a proper structural

way within a separate department.

Some information about FAD department is given below.


Name of the department: Financial Administration Division (FAD)

Activities of the Department:

Data collection

Data maintenance

Data management

Data control

Information generation

Strength of the Department:

Experienced employee

Stable structure

Good internal controlling syste

Maintain GAAP

Internal audit committee

Limitation of the Department:

It maintains distributed data structure which increases the risk of data

hacking and data lost.

It maintains both manually (printed) and computerized system that why it

is too costly for them.

Some time data are collected manually (through mail, messenger etc) so

false data can make error in report.

They process data manually (on hand calculative processing) that’s why it

needs much time for preparing report for user.

Future Plan: Give a new technological structure, more features and services in

organizational sector.


Relation of FAD with network:

Network connects all servers within a family. They maintain a distributed networking

system where every server is connected each other. FAD maintains a server which they

use for collecting data from several servers as they need for generating information or

preparing report for external or internal user.

Accounting to an old saying-‘measurement affects behavior’. This means that employees

tend to focus their effort primarily on those takes that are measured and evaluated.

Budgets are financial planning tools where performance reports should be developed on

the basis of responsibility accounting. We know that different companies used different

techniques for their internal or external reporting. Most of them used more than one

technique. In below I describe some activities of reporting system FAD use for them.

Internal reporting:

Daily: Most of the activities are performed as daily basis like cash transaction,

every day expanse(e.g. entertainment of client, fuel for generator), online

transaction}

Monthly: Salary sheet, equipment requisition,

Quarterly: They prepare quarterly financial report for internal audit body.

Yearly: They prepare yearly budget report, financial report.

Performance report: In every half of the fiscal year employees bound to provide

their performance report to HR department. And every department prepares a

half yearly performance report about their activities and provides it to governing

body.

External reporting

Yearly: They prepare tax report & financial report.

Others: Some time they prepare different types of report as on demand of client

and government.

3.6 Cost effectiveness of Accounting Information System

Cost beneficial means the benefits of information must outweigh the cost of providing it.

Cost effectiveness indicates the minimizing process of cost which helps to maximize the

profit of an organization. If AIS is more costly than it reduce profit ratio of an

organization but if it effective and efficient and need low cost to maintain than it help the


organization many way. Like it maximize the profit, reduce the time for handling the

client and generating information in low cost.

Data documentation: Private organization maintains the printed and

computerized data documentation control system in this regard they need to

store huge data for daily activities that are too costly for them.

Data storing: Private organization have many branches, every branch maintain

several server of computerized data storing and store house for printed

document storing.

Maintenance of data structure: Private organization maintains a fixed data

structure which is less costly and effective for them.


Chapter 4AIS Explore in

Pedrollo

Accounting Information System

Revenue

Sales

Sales Return

Cash Collection

Expenditure

Purchase

Purchase Return

Cash Disbursement

Payroll

Conversion

Planning

Resource Management

Logistic

Administration

Capital

Investment

General Ledger


4.1 Accounting information system

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. Pedrollo nk follow these

procedures of AIS are as follows:


4.1.1 Revenue

Revenue process includes:

Sales process

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 pumps manufacturing Pedrollo nk ltd. submits a purchase order of 500

pcs of casing to Micro Fiber Company Limited.

Price Verification: Micro fiber company ltd (seller) submit a price quotation of Tk

1000 per pcs to Pedrollo nk ltd. (buyer). Buyer verifies the price and confirm the final

price.

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 Pedrollo nk 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 buyer’s sample, then the seller prepares the goods for shipment as per the

buyer’s 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.

http://en.wikipedia.org/wiki/Purchase_order

http://en.wikipedia.org/wiki/Vendor_(supply_chain)

http://en.wikipedia.org/wiki/Buyer

http://en.wikipedia.org/wiki/Trade


Sales return process

Receive goods from customer: Buyer (Pedrollo nk ltd) returns 50pcs of defective

goods to the seller. 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. 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.

Cash collection process

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.

4.1.2 Expenditure

Expenditure process includes:

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 arrangements.

The diagram below provides an example of a traditional purchasing process.


Authorized purchase

requisition

Select vendor

Prepare purchase order and send to

vendor

Receive goods (if match) and

prepare receiving record

Update account payable

Update account payable

Update inventory record (after

return)

Update general ledger

Receive invoice from vendor and Update inventory

Purchase return (if need)


Purchase requisition & Authorized purchase requisition: 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 organization’s 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 and update the inventory

records.

Update accounts payables: Buyer updates the accounts payable after the new

purchase record.

Sales return & update accounts payables: Buyer updates the accounts payable if any

purchase return occur.

Update General Ledger: Buyer updates the general ledger as per the purchase

records.

Purchase return process

A purchase return occurs when a buyer returns merchandise that it has purchased from a

supplier.

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.

http://purchasing.dal.ca/Contact_Us/index.php

http://purchasing.dal.ca/Files/Example_of_Purchse_Req.pdf


Update account payable, inventory record & general ledger: Update account

payable and inventory record after receiving refund or credit memo from vendor

against return.

Cash disbursement process

Cash disbursement means the payment of money against purchase.

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 signs and updates the cash records.

Update account payable and general ledger: Account payable and general ledger

accounts will upgrade after payment to vendor.

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 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.


4.1.3 Conversion

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.

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.

Logistics: Logistics is defined as a business planning framework for the management

of material, service, information and capital flows.

3.1.4 Administration

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. That’s 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.

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.

http://www.businessdictionary.com/definition/business.html

http://www.businessdictionary.com/definition/maker.html

http://www.businessdictionary.com/definition/idea.html

http://www.businessdictionary.com/definition/employee.html

http://www.businessdictionary.com/definition/labor.html

http://www.businessdictionary.com/definition/financial-resources.html

http://www.businessdictionary.com/definition/equipment.html

http://www.businessdictionary.com/definition/goods.html

http://www.businessdictionary.com/definition/tangible.html

http://www.businessdictionary.com/definition/resource.html

http://www.businessdictionary.com/definition/company.html

http://www.businessdictionary.com/definition/user.html

http://www.businessdictionary.com/definition/process.html


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.

http://en.wikipedia.org/wiki/Trial_balance

http://en.wikipedia.org/wiki/Controlling_account

http://en.wikipedia.org/wiki/Controlling_account

http://en.wikipedia.org/wiki/Accounts_receivable

http://en.wikipedia.org/wiki/Subledger

http://en.wikipedia.org/wiki/General_journal


Chapter 5Standard

Accounting Practices


5.1 Introduction

In most organizations, the accounting function is the single largest user of IT. All systems

that process financial transactions impact the accounting function in some way. As end

users, accountants must provide a clear picture of their needs to the professionals who

design their systems. The principal cause of design errors that result in system failure is the

absence of user involvement. Standard accounting practical by Pedrollo nk ltd. are as

follows:

5.1.1 Journal record

In this part described about a company’s regular transactions. According to the all the most

common financial transactions are economic exchanges with external parties.

Pedrollo nk Ltd.

General Journal

Date Code Voucher No

Particulars Ref: Debit Credit

Jan. 1, 2014 A1000 D0F 101 Cash 1,500,000

A2000 Bank 500,000

S1000 Capital 2,000,000

(Starting business with cash & bank)

Jan. 3, 2014 I14000 D0F 105 Prepaid office rent 60,000

A1000 Cash 60,000

(Office rent paid in Advance)

Jan. 5, 2014 A9000 D0F 108 Machineries 300,000

A1000 Cash 200,000

L1000 A/C payable 100,000

(machine purchase with cash and credit)

Jan. 9, 2014 I3000 D0F 110 Raw materials 200,000


(raw materials purchase on credit)

Jan. 10, I8000 D0F 115 Advertisement 10,000


2014A1000 Cash 10,000

(advertisement paid by cash)

Jan. 11,

2014

A6000 D0F 117 Furniture 150,000

A1000 Cash 150,000

(furniture purchased by cash)

Jan. 15,

2014

I6000 D0F 127 Office supply 55,000

A2000 Bank 55,000

(office supply purchased with check)

Jan. 23,

2014

D0F 132 Insurance policy 100,000

A1000 Cash 50,000

A2000 Bank 50,000

(Insurance paid by cash & bank)

Jan. 31,

2014

I7000 D0F 139 Office rent 10,000

I14000 Prepaid office rent 10,000

(adjusting transaction)

Feb. 3, 2014 A4000 D0F 145 Inventory 30,000

A2000 Bank 30,000

(Inventory purchased by check)

Feb. 10,

2014

I5000 D0F 151 Salary 25,000

A1000 Cash 25,000

(Salary paid by cash)

Feb.15,

2014

A1000 D0F 159 Cash 200,000

A3000 A/C receivable 50,000

I1000 Sale 250,000


(sales by cash and account)

Feb.25,

2014

L1000 D0F 167 A/C payable 100,000

A1000 Cash 100,000

Adjusting transaction)

Feb.28,

2014

I4000 D0F 173 Wage 10,000

A1000 Cash 10,000

(wage paid by cash)

Feb.28,

2014




Mar. 10,

2014

I5000 D0F 188 Salary 25,000

A1000 Cash 25,000

(salary paid by cash)

Mar. 15,

2014

A7000 D0F 197 Computer 30,000

A1000 Cash 30,000

(computer purchased by cash)

Mar. 27,

2014

A1000 D0F 208 Cash 320,000


I1000 Sales 400,000

(sales by cash and account)

Mar. 31,

2014




Apr. 5, 2014 I6000 D0F 221 Office supply 15,000



(O/S purchased by credit)

Apr. 10,

2014

I5000 D0F 229 Salary 25,000

A1000 Cash 25,000


Apr. 25,

2014

L1000 D0F 236 A/C payable 100,000

A2000 Bank 100,000

Adjusting transaction)

Apr. 30,

2014




May. 1,

2014

A8000 D0F 249 Delivery truck 150,000


A1000 Cash 50,000

(truck purchased with cash & account)

May. 9,

2014

I5000 D0F 257 Salary 25,000

A1000 Cash 25,000


May. 31,

2014




June. 8,

2014

A1000 D0F 272 Cash 50,000


(adjustment entry)

June. 10,

2014

I5000 D0F 279 Salary 25,000


A1000 Cash 25,000


June. 30,

2014




July. 3, 2014 I14000 D0F 292 Prepaid office rent 60,000

A1000 Cash 60,000

(Office rent paid in Advance)

July. 9, 2014 I5000 D0F 305 Salary 35,000

A1000 Cash 35,000


July. 20,

2014

A3000 D0F 314 A/C receivable 300,000

I1000 Sale 300,000

(sales on account)

July. 31,

2014




Aug. 8,

2014

I5000 D0F 331 Salary 35,000

A1000 Cash 35,000


Aug. 25,

2014

S1000 D0F 339 Capital 50,000

A1000 Withdraw/ Cash 50,000

(withdraw from the capital)

Aug. 31,

2014





Sep. 5, 2014 I3000 D0F 356 Raw materials 100,000

A2000 Bank 100,000

(raw materials purchase with check)

Sep. 6, 2014 I9000 D0F 362 Transportation 10,000

A1000 Cash 10,000

(transportation cost paid by cash)

Sep. 10,

2014

I5000 D0F 369 Salary 35,000

A1000 Cash 35,000


Sep. 30,

2014




Oct. 2, 2014 I10000 D0F 389 Machinery maintenance 20,000

A2000 Bank 20,000

(machinery maintenance paid by check)

Oct. 10,

2014

A8000 DOF 395 Delivery truck 35,000

A1000 Cash 35,000


Oct. 31,

2014

I7000 DOF399 Office rent 10,000



Nov. 8,

2014

I5000 DOF 406 Salary 35,000

A1000 Cash 35,000


Nov. 21,

2014

A1000 DOF 409 Cash 200,000



I1000 Sale 350,000

(sales on account, bank & cash)

Nov. 30,

2014

I7000 DOF 414 Office rent 10,000



Dec. 1, 2014 I12000 DOF 423 Tax 80,000

A1000 Cash 80,000

(tax paid by cash)

Dec. 5, 2014 I5000 DOF 431 Salary 35,000

A1000 Cash 35,000


Dec. 20,

2014

I13000 DOF 447 Profit distribution 100,000

A1000 Cash 100,000

(profit distributed by cash)

Dec. 31,

2014

I7000 DOF 452 Office rent 10,000



Dec. 31,

2014

I5000 DOF 466 Salary 35,000


(salary is not paid yet)

Total 5,570,000 5,570,000

5.1.2 Cash book

Larger firms usually divide the cash book into two parts. The first part is the cash

disbursement journal that records all cash payments, such as accounts payable and


operating expenses. The second part is the cash receipts journal, which records all cash

receipts, such as accounts receivable and cash sales.

Pedrollo nk Ltd.

Cash book

For the year ending December 31,2014

Date Code Voucher No Particulars Credit

3-Jan I14000 D0F 105 prepaid office rent 60,000

5-Jan A9000 D0F 108 machinery 200,000

10-Jan I8000 D0F 115 Advertisement 10,000

11-Jan A6000 D0F 117 Furniture 150,000

23-Jan A5000 D0F 132 Insurance policy 50,000

10-Feb I5000 D0F 151 Salary 25,000

25-Feb L1000 D0F 167 A/C payable 100,000

28-Feb I4000 D0F 173 Wage 10,000

10-Mar I5000 D0F 188 Salary 25,000

15-Mar A7000 D0F 197 Computer 30,000

10-Apr I5000 D0F 229 Salary 25,000

1-May A8000 D0F 249 Delivery truck 50,000

9-May I5000 D0F 257 Salary 25,000

10-Jun I5000 D0F 279 Salary 25,000

3-Jul I14000 D0F 292 prepaid office rent 60,000

9-Jul I5000 D0F 305 Salary 35,000

8-Aug I5000 D0F 331 Salary 35,000

25-Aug S1000 D0F 339 Capital 50,000

6-Sep I9000 D0F 362 Transportation 10,000

10-Sep I5000 D0F 369 Salary 35,000

10-Oct I5000 DOF 395 Salary 35,000

8-Nov I5000 DOF 406 Salary 35,000

1-Dec I12000 DOF 423 Tax 80,000


5-Dec I5000 DOF 431 Salary 35,000

20-Dec I13000 DOF 447 Profit distribution 100,000

31-Dec C/B 975,000

Total 2,270,000

5.1.3 Trial Balance

Trial balance is the equal balance part for the accounting process. An accountant should

provide a balanced trial balance result to made a next step of preparing income statement

of an organization and as well as the balance sheet of an organization. Based on that all

revenue and expenditures are included for calculating this part. The source of information is

the relievable for all transactions collected from ledger that ready to disclose the financial

information for the both external and internal purposes. All tracked of transactions posted

into two different sides. One side is debit items and another side is called credit items side.

It actually prepared for monthly, quarterly and common in yearly.

Pedrollo nk Ltd.

Trial Balance

For the year ending December 31, 2014

Code Particulars Debit Credit

A1000 Cash 975,000 -

A2000 Bank 145,000 -

I1000 Revenues/sales - 1,300,000

A3000 Accounts receivable 530,000

A4000 Inventory 30,000 -

I3000 Raw materials 300,000 -

I6000 Office supply 70,000 -

I7000 Office rent 120,000 -

A5000 Insurance policy 100,000 -

I8000 Advertisement 10,000

A6000 Furniture 150,000 -


I4000 Wage 10,000 -

I5000 Salary 370,000 -

I9000 Transportation 10,000 -

I10000 Machinery maintenance 20,000 -

A7000 Computer 30,000 -

A8000 Delivery truck 150,000

A9000 Machinery 300,000

I12000 Tax 80,000

S1000 Capital Stock 1,950,000

L1000 Accounts Payable 250,000

I13000 Profit distribution 100,000

Total 3,500,000 3,500,000

5.1.4 Profit and loss accounts

Income Statement is the set of all incomes and expenditures. That means all revenues and

expenses these are incurred for maintaining the business operations are given in the income

statement to find out the excess of income over expenditure or excess of expenditure over

the income. It actually prepared for monthly, quarterly and common in yearly. The all period

it would be better that the balance of excess of income over expenditure for any company.

From this stage the only result forwarded the next stage the preparing of Balance Sheet.

Through this account this item going to next year or period. It shown in the Balance Sheet

under the retained earnings on stockholders equity.

Pedrollo nk Ltd.

Profit and loss accounting


Code Particular Amount Amount

I 1000 Revenue/sales 1300000


Total income 1300000

Expenditure (salary and benefits)

I 4000 Wages 10000

Salary 370000

I 7000 Office rent 120000

I 8000 Advertisement 10000

I 3000 Raw materials 300000

I 9000 Transportation 10000

I 10000 Machinery maintenance 20000

I 6000 Office supply 70000

I 12000 Tax 80000

I 13000 Profit distribution 100000

Total expenditure 1090000

Excess of income over expenditure 210000

5.1.5 Retained earnings

Retained earnings are the increasing balance part for the accounting process. An

accountant should provide a balanced Retained earnings result to made a next step of

preparing Balance Sheet of an organization and as well as the new Retained earnings of an

organization. Based on the result of income statement that account is included for

calculating this part.

Pedrollo nk Ltd.

Statement of Retain Earning


Code Particular Amount

S 2000 Beginning RE 310000


Net operating income 0

Dividend 0

Ending RE 100000

Retain earning 210000

5.1.6 Balance Sheet

Balance sheet is the financial feeling hart of an organization. This part is completed with

the two systems. Like one British process and or American process. Both processes have

two different sides. One is called assets side and another side is called liabilities and

owner’s equity/ stockholders equity. Companies are all current assets and as well as fixed

assets are recorded under the assets column, such as cash deposit, inventory, land,

buildings etc. On the other hand all the company’s liability and equity recorded under the

liabilities and owner’s equity/ stockholders equity column, such as accounts payable,

common stock, retained earnings etc.

Pedrollo nk Ltd.

Balance sheet

31, December 2014

Code Particular Amount Amount

Assets (current assets)

A 1000 Cash 957000

A 2000 Bank 145000

A 3000 A/C Receivable 530000

A 4000 Inventory 30000

A 5000 Insurance policy 100000

Total current assets 1780000

Fixed assets

A 6000 Furniture 150000

A 7000 Computer 30000

A 8000 Delivery truck 150000


A 9000 Machinery` 300000

Total fixed assets 630000

Total assets 2410000

Liability and owners equity (current liability)

L 1000 Accounts payable 250000

Shareholders’ equity

S1000 Capital stock 1950000

S 2000 Retain earning 210000

Total liability and owners equity 2410000


6.1 Major Findings

Major Findings:

This study has focused on the computerized accounting information system in Pedrollo nk

ltd. The main findings about the study are given in below.

Chapter 6Conclusionary

Aspects


They maintain separate department for Accounting Information System (AIS). The

name of their department is FAD. FAD has some problem like, distributed data

structure, manual data processing and risk of security. But it has also some

strength like, good internal controlling system, internal audit committee and

stable org. structure.

The Pedrollo nk maintain both manual and computerized system for performing

the daily operations of AIS.

The computerized transaction processing system is categorized into software and

web based system.

In Pedrollo nk, they use self developed software for performing transaction and

they also use local and foreign software for preparing report and it also helps to

performing other activities.

They use many different main software that use to performing transactional

activities and transferring data. It has some advantage like, decentralized system,

minimum risk of data lost and speedy transaction system. And the negative side is

it needs much time to collect information, risk of data hacking and it has no auto

data processing system.

They maintain website for their internal and external user for performing

transaction and providing lots of information to them.

The client’s data are processed in both batch and real time processing system.

Daily, monthly, quarterly, yearly and performance report are prepared for internal

and external reporting.

Pedrollo nk maintain a stable organizational structure, a complicated manual and

computerized file structure, easy data recovery system, costly data documentation

& storing system. Their AIS can also provide relevant and reliable data’s.

6.2 Recommendations

The following points are recommended after the study.

Pedrollo nk maintain a fixed organizational and data structure which can create

problem for new employee to cope up with the existing system.


They use decentralized web based transaction and data storing system, which

create problem for financial administration division (FAD) for collecting data, so

they should use centralized system for increasing the effectiveness of AIS.

The main software different customized operating software which is not effective

enough for generating report or information, so they should develop new software

for better performance.

They should give more emphasize on their manual (mail & fax) data transferring

system.

They should increase more safety for protecting data hacking, error and misuse of

data.

6.3 Conclusion

The accounting information system of Pedrollo nk ltd. is in the primitive stage. They have

separate AIS department. From the above analysis and discussions, it may conclude that

Pedrollo nk made their operation through combination of both manual and


computerized system. They use computerized system generally for operating, data

transferring and storing purposes. But the impact of computerized AIS is not significant.

Thought they maintain a web-site, but all the transactions are not web based. They

regularly prepare financial statements for evaluation of performance and for external

reporting and performance evaluation they prepared financial statements and published

annually. The users of AIS were satisfied about their AIS and internal control system.

They record and collected their source document through computer. They think their AIS

are cost beneficial and flexible. They use real time & batch processing for updating their

information. But their AIS were not so effective to provide information.

They should give more emphasis on internal control system, safeguarding assets and

information generation or reporting system. In case of external reporting and internal

reporting their actives have lots of gap.

References

Marshall B. Romney, Paul John Steinbasrt, “Accounting Information System” (10th Edition)

(February 2006), Pearson Prentice – Hill.


Paul Bocij, Andrew Greasley, Simon Hickie, “Business information system: technology,

development and management” (1st Edition),(2009), Pearson Education, Ltd.

BRIAN Williams, Stacey C. Sawyer, “Using Information Technology” (9 th Edition), (2010),

McGraw Hill.

Sumon Das, Shilpi Das, “Accounting & Auditing”, the Bangladesh Accountant, October-

December 2008.

Website of pedrollo

Website of wikipidea.

Documents

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