REPLACING AIS APPLICATION

Assignment 4: Replacing a Legacy AIS Application Case Study



Assignment 4: Replacing a Legacy AIS Application Case Study

Introduction

Historically, accounting information has been captured in ledgers and journals. Information about credit sales, for instance, would be recorded in a sales journal. Each month, accountants would create financial statements such as income statements and balance sheets from the information in the ledgers (Salehi, Vahab & Abdolkarim 2010). If a manager needed information about the firm's activities in the middle of the month, that manager had to wait until the books were closed at the end of the next month to obtain that information. In this paper, I present the implications of AIS application replacement.

Changing to a new system: potential benefits and risks

The introduction of modern information technology into the accounting profession has produced advances in the industry and in the design of accounting information systems. All but gone are the days of spiral bound ledgers and adding machines. Accounting applications running on computer systems with two-gigahertz processors and gigabytes worth of memory perform accounting tasks in modern organizations (Romney and Paul 2009).

The information generated by modern accounting information systems from the data gathered by the input terminals within the system, informs managers about the situation in every functional area of the firm. The real-time consolidation of this information into one convenient access point empowers managers with the ability to make decisions based on information as it is gathered and processed (Romney and Paul 2009). The companies who can quickly process raw data and display the information managers require gain a competitive advantage over companies that lack to ability to move data efficiently through the organization.

Faster access to pertinent information equates to quicker and more effective responses in the face of changing conditions. The technology implemented in the infrastructure of a modern accounting information system includes a variety of devices. According to Bagranoff, Simkin, and Norman (2008) “In summary, it is convenient to conceptualize an accounting information system as a set of components that collect accounting data, store it for future uses, and process it for end users” (Bagranoff et al., 2008, p. 8).

Advantages and disadvantages of purchasign the AIS from Oracle

In the past, accountants based overhead cost calculations on direct labor hours, but modern accounting information systems have brought about changes in the cost accounting process with activity-based costing (ABC) systems. Automation has decreased direct labor costs blurring the relationship between labor and indirect operating expenses (Bagranoff, Simkin, & Norman, 2008). According to Bagranoff, Simkin, and Norman (2008) “Managers in a variety of manufacturing and service industries now identify specific activities involved in a manufacturing or service task, and then assign overhead costs based on the resources directly consumed by each activity” (Bagranoff et al., 2008, p. 16).

Detailed accounting of the cost associated with each value-adding step of the production process provides managers with the information they need to aid in cutting the cost of production. Cutting cost is key to business success and ABC systems, Bagranoff, Simkin, and ...