Independent University, Bangladesh
SCHOOL OF BUSINESS & ENTREPRENEURSHIP
Course Title: Accounting Information System
Code: ACN441
Section: 1
Tanjir Ahmed Emon
Student ID: - 1620688
Instructor: Mr. Naveed Adnan
INDEPENDENT UNIVERSITY, BANGLADESH
SCHOOL OF BUSINESS & ENTREPRENEURSHIP
Date of Submission: 28th
April 2021
Attestation
This is to certify that the report on “ Walton Group’s Accounting
Information System with a focus on the Expenditure Cycle & Revenue
Cycle ” was completed by Tanjir Ahmed Emon (1620688) and submitted for
the requirement of ACN441 Course. It has been completed under the
guidance of Mr. Naveed Adnan (Instructor). I also certify that all my work
is original and has not been submitted earlier to this university or any other
institution. All the source of information used in this Report has been duly
acknowledged in it.
Tanjir Ahmed Emon
1620688
Date: 28/4/2021
Acknowledgement
I am using this opportunity to express my gratitude to everyone who
supported me throughout the course. I am thankful for their aspiring
guidance, invaluably constructive criticism, and friendly advice. I am
sincerely grateful to them for sharing their truthful and illuminating views on
a number of issues related to the course.
I am grateful to Independent University, Bangladesh (IUB) for offering me
this course and I express my thanks to my faculty Mr. Naveed Adnan for
his guidance support and direction that I needed for the fulfillment of my
report.
I also want to thank my parents for who have not only supported me
financially but have always believed in me and always motivated me to
accomplish the things that I achieved.
Letter OF Transmittal
28.04.2021
Mr. Naveed Adnan
SCHOOL OF BUSINESS & ENTREPRENEURSHIP
Independent University Bangladesh.
Subject: Submission of Report
Dear Sir,
It is a great pleasure for me to submit the report to you entitled by “ Walton Group’s
Accounting Information System with a focus on the Expenditure Cycle & Revenue
Cycle ”. I have tried to narrate my project works, achievements, and experiences in this
report. All the works presented here are done with utmost sincerity and honesty. This
report is done to find Expenditure Cycle, Revenue Cycle and how Accounting Information
System generates long term competitive advantage for Walton Group.
I have prepared a detailed report on Walton’s Group revenue cycle and expenditure cycle
where components of the subsystem of revenue cycle for the organization were discussed
such as Sales Order, Credit/Customer Service Department, Shipping and Billing
Department. In expenditure cycle, components were discussed such as how Walton’s
group manage and monitor their inventory, purchase order, inventory checks and
receiving goods. Moreover, the report also state that how accounting information system
helps Walton’s Group to generate competitive advantage.
I pray and hope this report will be quite interesting and fulfil your expectations. I have
tried my best to avoid my deficiencies and hope that my report will satisfy you. I also
would like to thank you again forgiving me the opportunity to submit this report.
Sincerely,
Tanjir Ahmed Emon
Id – 1620688
Table of Contents
1.
2.
3.
4.
5.
Executive summary
Introduction
Revenue Cycle
Expenditure cycle
Competitive advantage
Executive Summary
In most developing countries we have seen some company operating manual financial
records and transaction system which might arise data redundancy problems. Over the
years we have seen tremendous development of technology which transformed our daily
lives at its best. To compete with the modern business world every company should
automate their accounting activities which will help the company to achieve its goal. This
report has been assigned to analyze the Walton’s Group accounting information system
with a focus on its expenditure and revenue cycle. Walton Group is a leading industry in
Bangladesh that has been focused on the advancement of its’ electronic sector,
specializing in Multi-Stored Refrigerators, Freezers, Air Conditioners, LED/ LCD
televisions, Motorcycles, Smart Phones and Home Appliances; in order to modernize its’
consumers’ lifestyle to the maximum extent. Walton Group brought self-made different
types of quality products which meets customer demand as they are affordable. The
reasons behind this company accomplishment and success are that they automate their
accounting activities by introducing database management system to keep their financial
records and transactions according to their AIS model. Walton has earned both domestic
and international recognition throughout the years. The company has been one of the
highest taxpayers in Bangladesh and has a powerful impact on the country’s economy.
They follow the computer-based accounting system through the ERP software for keeping
their financial records which helps them to calculate the revenue collection and
expenditure as well. As a result, their information system is robust so they can easily
organize the data sources which includes External and Internal financial transactions.
Introduction
Accounting is an information system that identifies collects processes and communicates
economic information about a firm using a different type of technologies. It also helps to
captures and records the financial transaction of the organization [1]. An accounting
information system (AIS) model supports business organization to process, collect,
manage financial data. Since AIS model is a computer-based system, it deals with
accounting activity using information technologies.
This report has been assigned to analyze accounting information system of one of the
biggest leading tech company in Bangladesh. Walton Group introduces more products
with more advanced technology and impressive outlooks. Walton not only doing business
in Bangladesh but also, they are expanding their business in more than 25 countries. To
achieve business goals, they maintain best Production Department , Accounts and Finance
Department, HRM and Administration Department, Maintenance Department, Research
and Development Department, Information Technology Department , Supply Chain
Management and Transport System.
In this report uses of AIS by Walton’s group to calculate revenue and expenditure cycle
has been described. Furthermore, how AIS helps to manage this big industrial company
for keeping records huge amount of financial data. The company also plays impressive
marketing strategy for taking part in competitive advantage that allows to gain more profit
annually.
LITERATURE REVIEW
On 30 June 2016, the company generated net revenue of 26 billion making a gross profit
of 9 billion. After giving operating expenses and taxes, the company’s net profit was 6
billion. On 30 June 2017, Walton’s net revenue inclined to 31 billion making a gross profit
of 11 billion and a net profit of 7 billion. On 30 June 2018, the company’s revenue declined
to 27 billion making a gross profit of 8 billion and a net profit as low as 3 billion. Walton
holds cash and cash equivalents of approximately 1 billion, share holders’ equity of around
62 billion and total assets worth over 81 billion. Almost 25000 employees are currently
working now. The company posted significant growth in the 2018-19 financial year and
extended the trend into the following year according to the news publisher. According to
the company's financial statements, in the 2018-19 financial year, Walton suddenly
experienced 89 percent growth in revenue [2].
Revenue Cycle
The revenue cycle can be defined as the business activities and maintaining accounting
process deals with providing goods and service to customers and collecting cash in return
to generate revenue. In the revenue cycle the process contain Sales order, Credit/Customer
Service , Shipping and Billing service.
For example, if the customer places an order for raw materials, then the supplier will
prepare a Sales Order. A copy of the sales order would be transferred to the Customer
Service department or the credit department. The credit check will take place so the credit
department will check whether the customer is eligible to receive credit. Once the credit
or customer service department performs the credit check if everything is and customer is
eligible to receive credit then the product will be transferred to Shipping department . The
product will pick from the warehouse and it will be transferred to shipping and after that
the product will be transferred to Billing department. Once the product is shipped the
customer will be sent a bill. Again, the invoice that the seller has sent to the customer the
seller will recognize accounts receivable. Based on invoice that the seller has sent to the
customer and the customer will make the payment against the invoice . Once the customer
has made the payment the cash receipts or cash collection department will be handling
the payment that has been done by the customer.
For A Credit Transaction: Billing Department prepares a journal voucher so when there is a credit transaction
accounts receivable is debit and sales revenue is credit. Assets is going to increase so
accounts receivable is debit and revenue will increase.
Inventory control Dept. prepares a journal voucher against the sales that has been made
because once the product will be sold the level of inventory will decrease. So, inventory
is an asset so when assets decrease its credit. And cost of goods sold is an expense so it
will be debit.
Once the customer has made the payment cash receipts department will prepare a journal
voucher . Cash is an asset when its increases its debit and accounts receivable will decrease
because the customer already made the payment.
Revenue Cycle for Walton’s Group
Revenue represents amount received and receivable from customer for supply of goods.
The company distribution system of goods and services to customer is quite cost effective
and as well as robust.
The company uses third party logistics system to deliver the products . The third-party
logistics system buys the products from them as a customer and then they resell the
products to their sub-dealers as well as end users.
The above figure state that the distribution of products of Walton Group goes to three
types of consumer.
Sales Order Processing : The company buys raw materials from its suppliers both from local and foreign sources.
The raw materials that been purchased are being used for manufacturing goods. After
manufacturing the products are sent to the warehouse. So, if any customer order, then the
Financial Department will prepare a Sales Order .
The Sales order would be transferred to the Customer Service department. The credit
check will take place so the credit department will check whether the customer is eligible
to receive credit. Once the credit or customer service department performs the credit check
if everything is and customer is eligible to receive credit then the product will be
transferred to Shipping department. The product will pick from the warehouse by the
consumer, and it will be transferred to shipping and after that the product will be
transferred to Billing department.
Cash Receipts Processing: Once the customer has made the payment the cash receipts or invoice/delivery chalan will
be given to the customer.
Walton Group follows International Financial Reporting Standards (IFRS) and
International Accounting Standards (IAS) system for preparation of financial Statements.
The company applied new standard to its financial policy before collecting revenue from
the customers. The steps are shown below [3] : -
i.
ii.
iii.
iv.
v.
Identify the contracts with customers
Identify the separate performance obligations
Determine the transaction price of the contract
Allocate the transaction price to each of the separate performance obligations
Recognize the revenue as each performance obligation is satisfied
Walton has more than 13,000 point of sale (POS) system across the country and has a
strong distribution channel with a different strategy. The POS system is connected to an
inventory file, where the price and description are retrieved. Customers pick the inventory
from the store and take them to a cashier. The cashier scans the universal product code
and system computes the amount and payment is done either cash or by ATM card. At
last, the money and receipts in the drawer are reconciled to the internal cash register tape
or a printout from the computer’s database. [1] [3]
Walton have boosted their sales order process through electronic data interchange (EDI).
EDI technology was introduced for daily transactions between manufacturers and
wholesalers and between wholesalers and retailers. The customer’s computer is connected
directly to the seller’s computer via telephone lines. When the customer’s computer
detects the need to order inventory, it automatically transmits an order to the seller. The
seller’s system receives the order and processes it automatically. This system requires
little or no human involvement.
Revenue Cycle Database
The inventory master file that the inventories sold from company on 30 June 2020 is
shown below [3]: -
Figure 1 : - Goods sold by the Company
This figure shows the file that contains revenue and sales transactions of the company on
from year 2018 to 2020 is shown below [3]: -
Figure 2 : - Revenue & Sales Transaction File
The financial statements, accounts of Walton Group were audited in accordance with
International Standard which is related with the Company sales transaction, recording of
sales through to cash receipts and customer outstanding balance, inventory management
etc. [3]
Manual Task for account activities and financial transactions of Walton Group were
replaced by computer- based accounting system. Real-time input and output occur with
master files which is being updated using batches. These electronic files were prepared
and stored in the form of a hardcopy report. As a result, it reduces storage cost. The
employee of Walton Group is trained for becoming familiar with the automated revenue
cycle to make financial reports.
Expenditure Cycle of Walton Group
The expenditure cycle is defined as business activity where some portion of the money is
being spent to generate revenue. It is related with data processing operations like purchase
and payment for goods and services. In order to sell the goods or services the company
makes different types of expenditure. It may include Office building, Machineries, land,
paying salary, advertising expense.
So, if the organization requires raw materials or products to be purchased it will start with
the purchase Requisition. The purchase requisition will be used to generate the purchase
order. The purchase order will be placed with the vendor , the vendor will supply the
product which will have to receive by the Receiving Inspection Department. Inspection
Department recognize a liability in the form of accounts payable. From Accounts Payable
the cash payment will be made which is the cash Disbursements.
For a car manufacturing company, they need raw materials, so they provide Purchase
Requisition for seat covers, the purchase order will be placed with the vendor , the vendor
will supply the seat covers and the seat covers will be received by the inspection
department of the factory. The company will recognize accounts payable, and this is the
credit transaction. The payment has not been made with cash. So , once the company made
the payment then liability will decrease as a result accounts payable decrease and cash
will be credit. Hence account payable debit and cash will be credit.
For Walton group the expenditure cycle is discussed along with the components of the
sub-system of the cycle.
1. Purchasing : - The company need to purchase raw materials for manufacturing
products.
2. Purchase Requisition : - The company receives raw materials from its suppliers
both from local and foreign sources. So, the purchase requisition will be used to
generate the purchase order.
Also, Walton has different distribution channel to sell their products, so they
prepare the purchase order for their own outlets, dealers, and sub-dealers.
3. Receiving Inspection Department : - The raw materials received from the
supplier will be go for Inspection by the receiving inspection department.
4. Accounts Payable : - The company keep journal document with its accounting
software . So, when any purchase of raw materials is made it keeps the records.
5. Cash Disbursements : - The company Inspection Department will recognize a
liability in the form of accounts payable. From Accounts Payable the cash payment
will be made which is the cash Disbursements.
The below figure shows the financial records for buying the raw materials of Walton
Group : -
Computer generates purchase requisition which is automatically sent without manual
review. [3]
Accounting Information System generates long term competitive
advantage for the organization : Walton has strong modern R&D facilities with strong sales and distribution networks. Reengineering sales order processing using real-time technology will help Walton Group to
control better inventory management that can lead to generate long term competitive
advantage. Automating the Revenue Cycle will be competitive advantage for generating
revenue. Introducing real time input and output such as entry of customer order, inventory
file, sales order files.
In expenditure cycle computer-based purchase uses makes the company to identify
inventory requirements more easily. Also calculate the batch totals for general ledger
update. Validates the voucher records against valid vendor files. Using Real-time Data
input and output over batch processing eliminates much of the manual paper works and
reduces data entry correction procedures.
Reference
1. Hall, J. A. (2015). Accounting information systems. Cengage Learning.
2. https://www.tbsnews.net/companies/walton-posts-record-revenue-first-half-fy20103693
3. https://waltonhil.com/annual-report