Name : Luh Ayu Miswa Kartikayanti
NIM
: 120211431
Class : Accounting IC
Summary Journal
The journal to be reviewed is The Accounting Information Systems of Converssion
Cycle (Raw Materials, Labor and Overhead) Special in The Pharmaceutical Industry, with the
authors Shannon An Suci Azzahra, Arini, and Iskandar Muda. This paper was published in
Journal of Pharmaceutical Negative Result, Vol. 13 (7), 2022. The purpose of this paper is to
discuss one of the four transaction cycles in the accounting information system to record
business activities especially in pharmaceutical industry.
The journal claims that the business environment has undergone quick changes and
fierce competition in the information and globalization era. As a consequence, in order to
continue operating, businesses must do so effectively and efficiently. For this reason,
knowledge is a crucial tool for decision-making by managers. The goals of accounting
information systems differ due to the various ways that businesses operate. The transactions
that actually take place when inputs are transformed into goods or services are included in the
conversion cycle.
The conversion cycle, according to the authors, is a cycle that transforms raw materials and
supplies into finished products (goods or services) that are prepared for sale, based on the
literature that has been gathered. One economic event (transaction), that is, the use of raw
materials, labor, and overhead to create goods or render services that can be sold, is recorded
by the accounting system during the conversion cycle. This cycle is made up of a cost
accounting system, an inventory system, and a payroll system in manufacturing companies.
There are four systems that are involved in the conversion cycle:
1. Product design, planning and scheduling, production tasks, and cost accounting are all
tasks that can be carried out in the production system.
2. An inventory system keeps track of stock levels and alerts managers when specific
goods need to be restocked.
3. Job-order costing systems and process costing systems are the two types of cost
accounting systems that are typically used by businesses. Control reports and reports
on the cost of production are the two main types of reports produced by the cost
accounting system.
4. In order to effectively manage a company's employees, a human resource management
system (payroll) is a collection of business operations and related data processing
operations. The organization's external parties as well as other subsystems are closely
connected to the payroll system.
The research method that authors used in this research is a qualitative method with a
descriptive type. Data collection uses primary and secondary sources. Primary sources are data
sources that directly provide data to data collectors, and secondary sources are sources that
indirectly provide data to data collectors, for example through documents. The results of this
research found that there are several basic activities of the production cycle.
1. Product Design.
The objective of this activity is to create a product that will satisfy consumer demand in terms
of quality, functionality, and durability while keeping production costs to a minimum.
Therefore, a list of raw materials and a list of operations are the two main documents that will
be produced by the product design activities. Product design can involve accountants.
Accountants can offer data illustrating how different designs impact production costs and profit
margins. The accountant can make sure that the AIS is built to gather and provide data on
machine setup and material handling costs related to different product design options.
Designing better products may benefit from information on warranty and repair costs for
existing products.
2. Production Planning and Scheduling
This step involves creating a production schedule that is effective enough to fulfill current
orders and anticipate immediate demand without building up excess finished goods inventory.
By ensuring that the AIS collects and reports costs in a way that is consistent with the business'
production planning methods, accountants can participate in planning and scheduling.
Accountants can also assist businesses in determining whether MRP-II or JIT is better for their
production planning and scheduling needs.
3. Production Operation
In various businesses, this activity is carried out in very different ways. Robots and other
computer-controlled machines are used in computer-integrated manufacturing (CIM), a type
of information technology, to lower production costs. Each business requires information on
the following four aspects of its production processes: the raw materials used, the labor hours
used, the machine operations performed, as well as any additional production overhead costs
incurred.
4. Cost Accounting
The conversion system's cost accounting activity keeps track of the various economic
consequences of physical events that take place during production. Upon receiving the final
batch of transfer sheets, a production process will be declared complete, and products will be
transferred from work-in-progress (WIP) inventory to finished goods inventory. A cost
accounting system's objective is to deliver data for organizing, managing, and assessing the
effectiveness of production operations. to deliver accurate cost information on products for use
in determining pricing and product mix.
Physical activity (the production system) and information activity are the two
subsystems that make up the conversion cycle (the cost accounting system). The company will
employ one of the following production techniques: batch processing, multiple orders per
order, or continuous processing, depending on the kind of product to be produced. While
multiple orders involve manufacturing a variety of different products to meet customer
specifications, continuous processing involves ongoing standard procedures. Different batches
are produced by batch processing, and each batch needs the same inputs and processes. This
process is initiated by the requirement to keep finished goods inventory levels in line with
anticipated sales requirements. ⁠
Production schedules, lists of raw material requirements, work process sheets, work
orders, transfer sheets, and raw material demands are just a few of the documents used in batch
processing systems. The specification of raw material needs, production operations and
scheduling, and raw material and operational requirements are all included in the production
activity. The transfer sheet documents the work completed at each job site and permits the
transfer of a batch to the following job site. Operational requirements include installation
and/or production activities, and raw material requirements for a batch are reviewed.
Production The various batches are coordinated by scheduling; raw materials are delivered to
the workplace and warehouse; inventory status reports are provided by the inventory controller;
and finished goods are recorded in finished goods inventory records. The goal of inventory
control is to reduce the total cost of inventory while ensuring sufficient inventory to meet
current demand.
As a result, the authors claim that a system is a collection of components that cooperate
to accomplish objectives. Information is processed data that is useful for decision-making. A
conversion cycle is a collection of routine business tasks and information processing
procedures related to the conversion of input resources. Planning, scheduling, and controlling
physical products are all part of production systems. The conversion cycle is a collection of
routine business activities and information processing procedures related to transforming raw
materials into finished products or services for sale. It comes in two varieties: production
systems and cost accounting systems, both of which involve scheduling, planning, and
managing the production of tangible goods. The flow of information on production-related
costs is tracked by the cost accounting system. Although this journal still does not emphasize
the conversion cycle in the pharmaceutical industry, as the title suggests, the contents of this
journal can be used as a reference for the role of the accounting information system in the
conversion cycle