Accounting Systems analysis
CONTENTS
Introduction .................................................................................................................................................. 2
Accounting Policies ....................................................................................................................................... 3
Accounting system software ......................................................................................................................... 4
Literature review of papers on accounting policies...................................................................................... 5
Case study: Emirates NDB ............................................................................................................................. 6
Emirates NBD Balance sheet as of 30 June 2019 ...................................................................................... 7
Emirates NBD cash flow statement as of 30 June 2019............................................................................ 8
Conclusion ................................................................................................................................................... 10
References .................................................................................................................................................. 11
Appendix A .................................................................................................................................................. 12
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Accounting Systems analysis
INTRODUCTION
Accounting is basically a method for recording, analyzing, summarizing and reporting the financial
condition of a company. For a company to function correctly, it needs to know its profits, losses, debts
and assets. The accounts department report, examine and predict the outcome of day to day trading
activities.
Accounting data is highly essential for the organization's management or decision-making body. The
management cannot take any good choice in favor of the organization without a rational information.
Here are a few reasons why the accounting is important:
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It generates profiles of all your expenditure. i.e. the cost of running the business. For e.g. office
rent, employee salaries, admin expenses etc.
It enables us to quantify our earnings within the current period and predict revenue for upcoming
years.
By analyzing the accounts, we can distinguish the activities that bring the company financial loss.
These activities can either be stopped completely or further scrutinized to reduce expenses.
The shareholder's and manager's profits and retention are also an outcome of the accounting
systems
Accounting data is helps us price our products based on cost and competition in markets.
The accounting data can be used for managerial decisions such as investment, appraisal for stocks
and identifying growth limiting factors.
Good financial stability and growth can be used to encourage stockholders to invest in your company. The
entire share/investment markets are based on transparent accounting. For accounting systems to be
standard and across all platform, there are rules set forth that are internationally acceptable. The
International Financial reporting standards (IFRS) is the most common policy used by companies (Ifrs.org,
2019). Initially all accounts were hand written in ledger books. Now a days advanced accounting software
are implemented by all companies.
In this assignment we are analyzing the basics of accounting systems such as accounting policies and
software. This is followed by literature review of modern accounting and budgeting techniques. Then a
case study of EMIRATES NBD bank to understand their accounting system. The findings from the case
study will be compared with the international standards and outcomes will be discussed.
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Accounting Systems analysis
ACCOUNTING POLICIES
There are several different accounting policies that are present all over the world. These provide
the outlined framework within which the financial data can be correctly organized and reported.
Accounting strategies are the principles and procedures that a business needs to manage its accounts.
Accounting policy include techniques, measurement tools, and processes for displaying financial
statements data. They are very essential for adequate comprehension of the economic reports and data.
International Standards for Financial Reporting or in short IFRS are the global provider of the accounting
structure for economic data. It was started on the declarations of the International Accounting Standards
Board (IASB). In more than 120 nations, it is presently the necessary accounting structure. IFRS requires
companies to report their financial results and financial position using a certain format that is standard
for all.
The financial reporting of all companies using IFRS is considerably uniform, making it easier to directly
compare their financial results. The information within the economic report will be considered as the
financial position of the company in the absence of any fraudulent manipulation ([2] Bragg, 2019).
Generally accepted accounting principles or in short GAAP. GAAP has been created over many years as a
set of accounting standards and general business practice. Organizations use it to properly arrange their
economic statements into billing documents, to summarize billing documents into accounts and publish
supplementary data ([3] Bragg, 2019).
The companies in the United States use GAAP as the standard for recording their Financial outcomes. All
companies dealing in the US market are also required to use GAAP as their reporting standard. IFRS is
more popular among countries other than the US. IFRS is less regulatory than the GAAP. IFRS is more
focused on overall values than GAAP, making the efforts required for IFRS much lower, clearer and easier
to comprehend than GAAP.
The business organization should clearly state the accounting standard when planning the accounts. It is
essential to disclose accounting policies because many regulations enable different arrangements for the
same task. Financial accounts users will not be prepared to associate current data with other organizations
unless the accounting policies are in place.
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Accounting Systems analysis
ACCOUNTING SYSTEM SOFTWARE
Accounting software is a class of computer programs that allow you to handle economic
operations for your business. Such programs can differ extensively, with programs intended only for easy
accounting purposes and programs intended to handle the entire economic affairs of big companies.
Advantages of using an accounting software such as:
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There is improved accuracy of recording data. All the mathematical calculations are made
automatically and side by side. This improves the processing speed of the final result.
Automation can be added to certain parts of accounting hence removing the human error factor.
The accounting software is able to handle numerous amounts of data and accounts at the same
time. This increase productivity and reduces the fatigue of human resources.
Taxes can be automatically complied and filed.
Lot of data can be archived safely without the risk of damages.
Over all account reporting is improved.
These accounting software are highly customizable and are available in various formats. The companies
can choose to adapt to an existing software as is or build their own version. Some of the common and
most popular are as follows:
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S/4HANA by SAP accounting
Tally Accounting
Oracle Financial ERP
Sage Business cloud accounting
FACT accounting software
Most of the accounting software are paid with an annual fee with limited number of users. However, free
software is available online that can be used by small business owners. The bigger the company the deeper
and more complex its accounting software.
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Accounting Systems analysis
LITERATURE REVIEW OF PAPERS ON ACCOUNTING POLICIES
The companies usually decide on which accounting policy they wish to employ within their
company. It is usually an outcome of the prevailing law or the target/interaction market of the company.
For example, companies dealing within the US market almost always use GAAP accounting, companies
dealing in the European markets use IFRS rules, etc.
There is a research paper written in 2017 by Ali, M. J., & Ahmed, K., that took data form 369 listed
companies from south east Asia and determined which of the three major International Accounting
Systems do they employ as well as the determining factor behind that decision. The paper concluded that
size of firm, available investments, market share and percentage of public shares are significant
determinants of accounting policy choice in South Asian countries (Ali and Ahmed, 2017).
In recent years, International Accounting Standards (IASs)/ International Financial Reporting
Standards (IFRS) has been popularly adopted by many emerging economies such as that of Bangladesh,
India, Pakistan etc. with hope to improving business reporting standards and encouraging international
investments with through transparent accounting (Ali and Ahmed, 2017).A similar study by Astami and
Tower (2006) was conducted for the Asia-pacific countries of Singapore, Indonesia, Malaysia etc. which
also came to similar conclusions.
As per law in India set by Institute of Chartered accounting (ICAI), any company listed within the
countries National Securities Exchange or the Bombay Stock Exchange Sensex, entities whose shares are
listed overseas and companies having a net worth of more than Indian rupees 1000 crore should follow
the IFRS when preparing and presenting their financial statements (Iasplus.com, 2012).
The accounting reports are all summarized into balance sheet, cash flow statement and income
statement. The role of managerial accounting is to analyze it to determine the next course of the company.
The management accountants utilize the reported data using analytics techniques to answer the
questions like: what has happened (descriptive analytics), what will happen (predictive analytics), and
what is the optimized solution (prescriptive analytics). Now with technological advancements there are a
lot of tools available at the disposal of the managerial accountants to make better decision. One such tool
is Enterprise Resource Planning (ERP) which are organization-wide and integrated information systems
which can manage and coordinate all the resources, information, and functions of a business from shared
data store usually cloud based storage. (Kallunki et al., 2011)
A paper published by Deniz Appelbaum, Alexander Kogan, Miklos Vasarhelyi, Zhaokai Yan of the
Rutgers University, United states discuses about "Impact of business analytics and enterprise systems on
managerial accounting" describes that the nature of managerial accounting with the advancement of
Enterprise resource planning. They proposed a new framework called the "Managerial Accounting Data
Analytics (MADA)" framework based on the balanced scorecard theory.
This research found that, the managerial accounting has hardly been affected by the
advancements of informatic tools such as ERP, big data and data analytic tools. This is because the
standard rules and regulations of the accounting systems in a company are not effected by the
technological advancements rather the tools are formed to support the policies only. These tools are
merely used as calculators to give value to the decisions. While the decisions are all based on traditional
accounting techniques.
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Accounting Systems analysis
CASE STUDY: EMIRATES NDB
When NBD merged with Emirates Bank International (EBI) on 06 March 2007, to form Emirates
NBD. On 16 October 2007, the shares of Emirates NBD were officially listed on the Dubai Financial Market
(DFM). Emirates NBD became a regional consolidation blueprint for the banking and finance sector as it
combined the second and fourth largest banks in the UAE.
As of June 30, 2019, complete investments amounting to approx. USD 146 billion. With over 90
percent of the economic transactions and demands made outside of its branches, the Group has an
important retail banking franchise in the UAE and a main player in the worldwide digital banking industry.
Currently, Emirates NBD has more than 9,000 employees, representing 70 nationalities, making it
one of the most important and cultural diversity companies in the UAE.
ENBD being a registered as a public entity, its registered with the Dubai financial markets under
the name EMIRATES NBD BANK PJSC. The group condensed consolidated interim financial statements for
the six months period ended 30 june 2019 has been published on the DFM website for anyone to view.
The complete report has been attached in the appendix of this assignment. It has been reviewed
and verified by Deloitte & Touche (M.E). (Dfm.ae, 2019) The report includes the following:
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Group condensed consolidated interim statement of financial position
Group condensed consolidated interim income statement
Group condensed consolidated interim statement of comprehensive income
Group condensed consolidated interim statement of cash flows
Group condensed consolidated interim statement of changes in equity
This report also includes audited figures from 31st December, 2018 as a means to compare and contrast
the companies current standing. Emirates NBD has all of its accounting and financial data based on the
IAS 34.
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Accounting Systems analysis
EMIRATES NBD BALANCE SHEET AS OF 30 JUNE 2019
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Accounting Systems analysis
The conclusions from the analysis of the balance sheet are as follows:
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The bank has increased its deposits with the central bank by a small amount.
The receivables from other banks as well as loan receivables have increase significantly
The amount of investment properties, property and equipment has increased significantly
The customer deposits has seen a big hike over the 6 months
There is significant increase in assets, liabilities and Equity since December 2018. This show that the bank
has had a steady growth in all sectors. It has increased its customer base and has been able to capitalize
on loans from other banks.
EMIRATES NBD CASH FLOW STATEMENT AS OF 30 JUNE 2019
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Accounting Systems analysis
The conclusions from the analysis of the cash flow statement are as follows:
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There is an overall decrease of cash flow from operating activities. However, there is increase in
assets and decrease in liabilities which is a good economic indicator
There is increased cash flow from investing activities as the bank has recently sold of a stake in a
jointly controlled entity as well as received a higher dividend income
There is a significant increase in cash flow from financing activities which shows that the bank
has seen a higher return from issuance of debt.
However, overall the net cash flow shows that there is a significant increase of cash flow for the bank.
As of December 2018, it has a net cash flow of (29,184,316) and after six month (892,398). These vales
are negative which means that the bank has given out more cash than it has received.
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Accounting Systems analysis
CONCLUSION
Accounts are the corporate lifeblood because they provide businesses with the finest data on the
internal functioning of their businesses. Management requires precise economic data for a number of
purposes including scheduling, decision-making and reporting on profitability.
In this report we have established basic rules for the accounting and studied the various standard
available across the globe. Different types of accounting software were also studied The research papers
on accounting policies were reviewed and compared with the actual findings from the case study of the
ENBD bank
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Accounting Systems analysis
REFERENCES
1. Ali, M. and Ahmed, K. (2017). Determinants of accounting policy choices under international
2.
3.
4.
5.
accounting standards. Accounting Research Journal, 30(4), pp.430-446.
Bragg, S. (2019). What is IFRS? — AccountingTools. [online] AccountingTools. Available at:
https://www.accountingtools.com/articles/what-is-ifrs.html [Accessed 21 Aug. 2019].
Bragg, S. (2019). What is GAAP? — AccountingTools. [online] AccountingTools. Available at:
https://www.accountingtools.com/articles/what-is-gaap.html [Accessed 24 Aug. 2019].
Dfm.ae. (2019). Financial Report Details. [online] Available at: http://www.dfm.ae/issuers/listedsecurities/securities/financial-report-details [Accessed 28 Aug. 2019].
Iasplus.com. (2019). IAS Plus — IFRS, global financial reporting and accounting resources.
[online] Available at: http://www.iasplus.com/ [Accessed 28 Aug. 2019].
6. Ifrs.org. (2019). IFRS. [online] Available at: https://www.ifrs.org/about-us [Accessed 17 Aug.
2019].
7. Kallunki, J., Laitinen, E.K., Silvola, H., 2011. Impact of enterprise resource planning systems on
management control systems and firm performance. Int. J. Account. Inf. Syst. 12 (1), 20–39t
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Accounting Systems analysis
APPENDIX A
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