Traditional accounting system: Strengths and weaknesses

1.

Explain traditional accounting system for recording transactions. Identify its strengths and weaknesses

Traditional accounting can also be considered as manual accounting. Traditional accounting was processed manually were all the transactions are recorded in a paper and kept binding it. The day-to-day transaction data are recorded in account books which is known as bookkeeping (Amahalu, Abiahu & Chinyere, 2017). The bookkeeper manually refers to the accounting charts that allocate the business transaction in correct amount. In traditional accounting system all the related documents like receipts, payments are store on the basis on month and put the date on every documents.  In this accounting system every single transaction and date of transaction are recorded. All financial transactions are stored on-line and transaction saved in separate directories according to date, month and financial year (Hendricks & Schoellman, 2017). It also keep backup on storage devices like external hard drive. If anyone needed past data than it is easily available and accessible. In every financial year a records have been kept for the bills and statement whose records are maintained in monthly basis. It is the basis of accounting and it is the cornerstone of record keeping. Traditional accounting system could provide useful and effective business transaction records. It require a greater understanding in the Traditional system to book keep manage the concept of double entry book keeping

Strength: the strength of the traditional accounting system are discusses below:

• It is cheaper than other type of accounting system.
• It does not need any kind of electricity or batteries
• The entries are very easy in the manual system and it is more accurate even.
• Chances of getting corrupted data is reduce.

• When there is any incident of fire, there is less chances of data getting loss as records has to be stored in a fire-proof environment (Mohamed, 2017).
• Similarity in duplicate copies in the records generally create problem which can be avoided.

• It remove data redundancy problems in the manual process and is not necessary to know about accounting software.
• There is flexibility in redefining the process of the business through which data can be collected with the implementation of control point

Weakness:

• Sometimes it provide inaccurate information so it create problems in take correct decisions.
• It used to control the purpose of fixing the selling prices.
• With large amount of transactions it is difficult to maintain and keep records.
• With the fast growing business it is becoming difficult to keep the pace of report keeping.
• Need much of the amount of time to maintain transactions of books and journal.
• There is a delay in the payment.
• Within the due date payment could not be receive from customer or they do not pay it.
• It is impossible for them to choose the overdue payment.
• It is hard to implement the disaster recovery plan.

What are various options that Smith Brothers have if they move from their current system?

Smith brothers want to switch from present traditional accounting system. In that case they can use computer base accounting system (Bachisse, 2017). It is very easy to store information. It is very secure from fire and theft. It keep backup of all the data. It is very easy to handle and less peoples are required. It automatically generates reports and check the amount through some functions that are provided in this system (Einkamerer & Maqbool, 2017). It helps in to store business transactions like expenses and profits. The electronic record keeping becomes easier by using accounting software system. For storing data it required less space. It is also less expensive. Smith Brother can record the business transaction to make the income and expenses complete. In the Smith Brother business the system cannot receive the payment in cash, however, there is an option to record the sale. This is the age of iPhone and Facebook for which the online accounting software is design (Machera & Machera, 2017). The Smith Brothers would find it easy to have a greater knowledge to keep control the finances. Use of dashboard is a good design for the use of online accounting software (Neovius & Duncan, 2017). The accounting software would be able to reduce most of the errors and pay expenses for a bookkeeper that enter the data. This system has all updated laws, rules and regulations. It easily provides invoices, payment records, taxation reports .It generates invoices reports very easily. There are some function provided to report and make the amount automatically tally. Now for Smith Brothers it is easier to provide invoice through email to the customer. It even provide BAS of the Australian Taxation Office and provide the suppliers with orders (Bishop, 2017). There are many software are available they fulfill legal and taxation requirements so smith brothers need to take advice from financial advisers before purchasing software. They can also check at taxation official website (Einkamerer & Maqbool, 2017).

Options available when moving away from traditional accounting systems

Two accounting software packages

Explain how it will solve their current problem

Explain the strengths and any weaknesses

Explain the cost to purchase and implement

The two most popular accounting software packages that are used are:

QuickBooks: The QuickBooks accounting software can be used by the Smith Brother to help them manage the finances of the businesses. It will complement the professional accountant services that provide a tools reliable bookkeeping (Rosdini & Ritchi, 2017). It will help is running the business in a more efficient way. The QuickBooks has attractive dashboard were key data are entered such as the income, expenses, profit and loss whenever the user log in. With the creation of account the process sent a code for verification into the user’s phone instead of depending on email (Aduamoah, 2017). The guided process of QuickBooks customize the invoices of the company and connect them with the accountant for other start-up activities. The menu bar contains a plus sign that gives access to two-click were documents of the business can be entered such as expenses, invoices and timesheets. It has the feature of instance view of the status of GST. QuickBooks could provide better benefits in comparison to other software programs of accounting. With QuickBooks the Smith Brothers could easily set up the profile of the company and the transactions are in place. Through a user friendly interface QuickBooks could offer a mode of interview that set up the businesses to follow a discrete steps (Marettini, 2017).

Xero: Xero is the most popular accounting software for Australian country. This software has been created so the business user can take the benefit of it. If the Smith Brothers business owner wish then it can also use Xero to reconcile the statement and to enter any invoice. The accountant will be able to surely get access to the information and with it a BAS is prepared annually. Smith Brother could reduce the current problem by implementing the Xero accounting software. The dashboard panel that the application has displays all the information through a number of invoice list. There is an activity with a front and center buttons though which a new invoice get created and the payment of the billing would be done. Also though it expenses can be claim. The robustness of Xero strengthen the accounting system with barcode and a RFID tracking. It has some physical features that can also be easily track. The accounting solution that it has are core accounting. However, the weaknesses that has found in Xero is the support is very poor for the account finding and the project. The cost to purchase would be $25 monthly and if more features added that it would cost $50 monthly.   

Explain if excel or any other spreadsheet or database based solutions can also be implemented?

If yes then why and how, if no then explain.

Spreadsheet: By incorporating spreadsheets into the everyday tasks supports through easy payment tracking. The bookkeeper could easily analyze the money through the use of Spreadsheets (Frownfelter-Lohrke, 2017). The amount can be split and can be receive through source and time period. The Smith Brothers could easily link worksheet together for cash flow and link the actual balance with the bank to provide better salary. Even budgeting becomes easier in the worksheet. The spreadsheet latest version has variety of tools which are helpful to make the spreadsheets appealing visually and the understanding of it is very easy. This is mostly helpful in financial data. Julia Ryan could easily review sales, financial, bank data and sales which can be receive from the third party tool. With this payment will be easier and will be paid before due date.

How accounting software packages solve the current problem

Excel:  Excel could provide the Smith Business with basic accounting. Excel is not suitable in complicated use of financial accounting (Einkamerer & Maqbool, 2017). For tight budget of the business, an attempt can be made for decent accounting in excel. With the use of Excel, Julia Ryan could generate incredible reports to enter data. She could get clear picture of the recurring cost of the cash as where it is spending. Thus the bookkeeper could implement the solution in this ways which will reduce her work load in maintaining the records.

2.

Summaries the Corporate Governance Policy

The Myer Holding Limited (Myer) Board has the highest standards of corporate governance. The concern of the Board is to manage the Myer so as to protect them and enhance the interest of the stakeholders. It operate the company, officers, employees, directors of the corporate governance. The framework of the corporate governance has adopted by the board with some principle that are consistent with the ASX Corporate Governance Council’s principle and Recommendations. The framework of Corporate Governance is designed to manage and assist the Board so that they can release the responsibilities of the corporate governance in substitute to Myer’s shareholders (Xu, How & Verhoeven, 2017). During the period of FY2017, ASX has set up some recommendations that was followed by the Myer. The Board has approved the Statement of the Corporate Governance on 10 October 2017 (Jackson et al., 2017). The ASX principle that the structure follow are as follow:

• Risk are recognize and manage
• In the corporate reporting safeguard the integrity
• It has a responsible and ethical act
• Add value to the Board Structure
• Solid foundations being laid by the oversight and the management
• Security holders right are being respected
• Disclosers are balanced and timely made

Why do you think that the IT governance policy is not of interest to shareholders?

As seen through the Communication Strategy, the reason that was found for shareholders not having any interest in IT governance policy is because Companies directly communicate the information to the shareholders through a range of publications and forums. The communication tools that the company use for the shareholders is through the website that is located at www.myer.com.au/investor. Shareholders can directly inquiries via email to the Company and at the same time receive communications from them.

Why do you think that the IT governance policy is not of interest to other stakeholders?

The stakeholders have no interest in IT governance policy because it analyze the corporate governance in the perspective of the stakeholder. Stakeholder do not require to keep interest in IT governance policy as the corporate itself is guarantees the interest of the stakeholders that extends the approach considered for shareholders. 

Should the IT governance policy be in the corporate governance statement?

Discussion: It would be a good idea IT governance policy being in the statement of corporate governance. The reason behind it is that based on the IT framework the structure of the organization would be better and the Board will be responsible in reviewing and to approve the Policy and manage the risk. Annually the framework will ensure the effectiveness that are relevant to the business of the Myer.

3.

What factors led to the failure of controls?

Discussion: The failure of Dick Smith Holdings Ltd, an Australian retailer is consistent during the dynamic economy. It was not only a corporate disaster but a personal disaster. The suppliers of Dick Smith’s has also face lose in their business. Around 3300 employees got sick of worrying. The grief of the particular incident had effected more than thousands ordinary people. The electronic change with large customer had turned into dust which was traced when Anchorage Capital had brought Dick Smith from Woolworths. Around $20 million upfront was paid to Anchorage Capital for the electronic retailer and later they promise them for $80 million. In the later year. It floated on $520 million stock exchange. The major failure behind this issues was that it failed to manage cash flow,

Inventories and debtors. The CEO Nick Abboud has failed to address the fact the there was no enough cash to operate the expenses.

Could the failure have been avoided? If so, how?

Discussion: In order to avoid such failure the inventory value should be written down. It is a pure accounting. This add a healthy dose for Dick Smith’s. Dick Smith could have limited their buying of new inventory. If Anchorage would not have brought Dick Smith inventories would not have fall till $300 million.  If they started to open new stores, extra sales growth be shown. If there were huge number of customers for Dick Smith and if the management could have been done differently than such disaster could have been avoided. 

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