Topic A05: ICT Applications in Accounting Topic Overview P.1
BAFS Learning and Teaching Example As at April 2009
Learning Objectives: 1. To understand the advantages and disadvantages of using computerised accounting
systems; 2. To understand possible solutions to minimise the disadvantages; 3. To understand the impacts on different implementation methods of computerised
accounting systems; and 4. To understand how Accounting Information System (AIS) assists management
decision-making. Overview of Contents: Lesson 1 Advantages and Disadvantages of AIS - Part 1 Lesson 2 Advantages and Disadvantages of AIS - Part 2 Lesson 3 How AIS Assists Management Decision-making? Resources:
Topic Overview, Teaching Plan and Answers to Student Worksheet PowerPoint Presentation Student Worksheet
Suggested Activities:
Case Studies Group Discussion Role play Decision-making Game
Topic Overview Topic BAFS Elective Part – Accounting Module – Financial Accounting
A05: ICT Applications in Accounting Level S5 / S6 Duration 3 lessons (40 minutes per lesson)
Topic A05: ICT Applications in Accounting Topic Overview P.2
BAFS Learning and Teaching Example As at April 2009
Lesson 1
Theme Advantages and Disadvantages AIS - Part 1 Duration 40 minutes Expected Learning Outcomes: Upon completion of this lesson, students will be able to identify the advantages and disadvantages of using a computerised accounting system. Teaching Sequence and Time Allocation:
Activities Reference Time Allocation
Part I: Introduction Teacher begins lesson by emphasising the business
trend of using computerised accounting information system (AIS).
PPT#1-3 2 minutes
Part II: Content A Case Study
Teacher briefs students on the case before starting the role play.
Activity 1: Role play Students are divided into five groups, each group
represents one party. Groups will discuss and identify the advantages
and disadvantages of using the computerised AIS from their roles’ viewpoints.
Each group nominates one representative to role play.
Teacher chairs the meeting. Each representative presents an opinion. Teacher concludes meeting.
PPT #4-5
Student
Worksheet p.1
PPT #6-7
Student
Worksheet pp.2-6
PPT #8-13
5 minutes 15 minutes 10 minutes
Part III: Conclusion Teacher reviews the key points and briefs students to
prepare them for the next lesson. PPT #14-28
8 minutes
Preparation for the next lesson: Students will collect data concerning the impact of using different implementation methods of the computerised accounting systems and possible solutions to minimise the disadvantages.
Topic A05: ICT Applications in Accounting Topic Overview P.3
BAFS Learning and Teaching Example As at April 2009
Lesson 2
Theme Advantages and Disadvantages AIS - Part 2 Duration 40 minutes Expected Learning Outcomes: Upon completion of this lesson, students will be able to: 1. Find out possible solutions in minimising the disadvantages; and 2. Distinguish the impacts on different implementation methods of a computerised
accounting system. Teaching Sequence and Time Allocation:
Activities Reference Time Allocation
Part I: Introduction Teacher begins by recalling the case and key points of
last lesson. PPT #29-31 3 minutes
Part II: Content Activity 2: Group Discussion
Students are divided into five groups. Groups will discuss and identify solutions to
minimise problems with the computerised AIS. Each group presents their findings. Teacher reviews the key points and ask students
to vote on group findings.
PPT #32
Student Worksheet
pp.7-8
PPT #33-41
15 minutes
4 minutes
Activity 3: Role play Students remain in the same groups from Activity
2. Groups will identify the advantages of the election
method on their role, and the disadvantages of the other two methods.
Each group nominates one representative to role play.
Teacher chairs the meeting. Each representative presents an opinion. Teacher concludes meeting.
PPT#42-43
Student Worksheet
P.9-13
PPT#44-45
10 minutes
5 minutes
Part III: Conclusion Teacher reviews the key points and briefs students in
preparation for the next lesson. PPT #46-53
3 minutes
Topic A05: ICT Applications in Accounting Topic Overview P.4
BAFS Learning and Teaching Example As at April 2009
Preparation for the next lesson: Students are required to review the following accounting ratios:
• Gross Profit Ratio; • Net Profit Ratio; • Current Ratio; • Quick Ratio; and • Sales to Capital Employed.
For the group discussion in lesson 3 Students will make investment decisions using the AIS reports and analysis.
Topic A05: ICT Applications in Accounting Topic Overview P.5
BAFS Learning and Teaching Example As at April 2009
Lesson 3
Theme How AIS Assists the Management Decision-making? Duration 40 minutes Prior knowledge required: Ratio analysis Expected Learning Outcomes: Upon completion of this lesson, students will be able to: 1. Describe the ICT applications in accounting 2. Explain how AIS assists management decision-making Teaching Sequence and Time Allocation:
Activities Reference Time Allocation
Part I: Introduction Teacher begins by recalling the last lesson case work.
The Olympics faced another problem on how AIS assists management decision-making.
Teacher illustrates ICT applications in accounting.
PPT #54-61 10 minutes
Part II: Content Case Study
Teacher briefs students on the case. Activity 4: Group Discussion
Students are divided into five groups. Groups will discuss and comment on the
company’s performance based on the ratios provided.
Teacher checks answer with the class. Activity 5: Decision-making Game
Students remain in the five groups. Students will make two decisions:
Analysis NOT using AIS reports. Analysis USING AIS reports.
Students compare their investment decision results to illustrate the importance of AIS reports and analysis in decision making.
PPT #62
PPT #63-66
Student Worksheet pp.14-15
PPT #67-72
Student Worksheet pp.16-17
10 minutes
17 minutes
Part III: Conclusion Teacher concludes by highlighting the key points. PPT #73 3 minutes
Topic A05: ICT Applications in Accounting Topic Overview P.6
BAFS Learning and Teaching Example As at April 2009
Answer for Activity 2
Disadvantages Suggested Solutions
Work flow is controlled by the system.
1. System requirements must be clearly investigated and defined before system selection process; choose a system best fit for the current company work flow;
2. Thorough system analysis for possible unexpected events before system selection process, and
3. Develop possible manual override procedures to handle unexpected events.
System breakdowns will affect company operations
1. Arrange regular system maintenance ;
2. Use fault-tolerant / fault-safe systems;
3. Install suitable anti-virus software to avoid breakdowns due to viruses;
4. Check for and install security updates regularly; and
5. Do not allow staff to install unauthorised backup system software.
Hackers may breach the system to steal valuable information
1. Install suitable anti-virus software to handle virus attacks;
2. Regularly check for and install security updates;
3. Do not allow staff to install unauthorised software; and
4. Train staff to eliminate possible security pitfalls.
Employees may be fired due to a lack of required technology skills
1. Train unskilled workers to competently operate the system; and
2. Schedule regular training to keep workers abreast of latest technology changes.
Topic A05: ICT Applications in Accounting Topic Overview P.7
BAFS Learning and Teaching Example As at April 2009
Additional financial support is required to install and maintain the system
1. Select a proper system to increase the efficiency in order to compensate for additional costs; and
2. Hidden profits may also compensate for additional costs: company image, increased efficiency, rapid response to external events, improved clarity of current financial situation, accurate cost estimation, etc.
Special skills required to operate the system
1. Ask system supplier to provide system operations training;
2. Ask system supplier to provide thorough documentation;
3. Arrange in-house training to instruct staff on system operation; and
4. Auditor will seek assistance from system experts about how to conduct auditing with the system.
Topic A05: ICT Applications in Accounting Topic Overview P.8
BAFS Learning and Teaching Example As at April 2009
Mark Sheet: (Tick 1 box for 1 mark)
Advantages (1 mark for each point, maximum 4 marks) Sub-total
Disadvantages (1 mark for each point, maximum 4 marks)
Presentation skill (Maximum 2 marks)
Total
Advantages (1 mark for each point, maximum 4 marks) Sub-total
Disadvantages (1 mark for each point, maximum 4 marks)
Presentation skill (Maximum 2 marks)
Total
Manager of Super Systems Limited
Manager of IT Department
Topic A05: ICT Applications in Accounting Topic Overview P.9
BAFS Learning and Teaching Example As at April 2009
Advantages (1 mark for each point, maximum 4 marks) Sub-total
Disadvantages (1 mark for each point, maximum 4 marks)
Presentation skill (Maximum 2 marks)
Total
Manager of Professional Limited
1
BAFS Elective Part Accounting Module –Financial Accounting
Topic A05: ICT Applications in Accounting
Technology Education SectionCurriculum Development Institute
Education Bureau, HKSARGApril 2009
IntroductionThis session aims to introduce ICT Accounting applications to students. Students will gain a solid understanding through active participation in debate and case study.
DurationThree 40-minute lessons
ContentsLesson 1 – Advantages and Disadvantages of AIS - Part 1Lesson 2 – Advantages and Disadvantages of AIS - Part 2Lesson 3 – How AIS Assists in Management Decision-making?
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2Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Lesson 1Advantages and Disadvantages of the AIS - Part 1
Lesson 1
Pre-lesson preparation:Students will collect information about using the computerised accounting information system (AIS) such as: efficiency, cost, workflow, control, skills, competence, etc.
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3Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Learning Objective
Identify the advantages and disadvantages of using AIS
Students will identify the advantages and disadvantages of using the AIS through a role plays with other members of a pseudo company.
After discussing the advantages and disadvantages in role play, teacher will summarise their findings by highlighting that the advantages outweigh thedisadvantages generally.
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4Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Activity 1: Role Play
Students read worksheet P.1 before the lesson and prepare for role-play activities.
Teacher introduces the case in P.1 of student worksheet.
This case study explores the advantages and disadvantages when using the computerised accounting system under different company roles.
Students are divided into 5 groups with different roles:1. Financial Controller – Internal financial control, responsible to maintain the financial health of the company2. Auditor – external party to audit the company financial reports3. Shareholder/Owner – owner of the company, responsible to provide required capital4. Customer – customer of the company5. Employee – responsible for daily company operations
To enhance group discussions keep groups to 6 students as there may be more than one group for each role. Teacher can assign role to the groups.
Each group will nominate a secretary, who is responsible to jot down discussions, and a presenter. The presenter will present the group discussions. The secretary will provide clear written details of group discussions to teacher.
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5Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Directions for discussion
EfficiencyCostWork flowControlSkillsCompetence
Teacher may give some directions to students for discussion.
For each role, students may consider how computerisation may affect their role in the following aspects:
1. Efficiency – How the efficiency of their daily work be affected?2. Cost – How the operation cost of the company be affected? Is there any
hidden cost?3. Work flow – How the daily work flow be affected?4. Control – Is there any possible system breakdown?5. Skills – What are the education background / training received by the
parties? 6. Competence – Is the role able to control/operate the new system?
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6Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Meetings Begin
Meeting begins
Teacher acts as director and chairs the meeting. Each group will form a circle to facilitate the discussions. Each group nominates a secretary and a presenter. The discussion starts.
Students have 5-8 minutes for discussions. They can also use worksheet P.2-6 to jot down the main points of their discussions.
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7Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Discussion in progress
Teacher tours around during the discussions to provide input and assistance as required.
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8Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Presentation
The Director invites the 5 parties to present their findings on using a computerisedsystem.
Teacher asks students to stop discussions and prepare for presentations.
Each group will present their findings.
Teacher reminds groups to think of how the advantages of other roles may benefit their role, and how to solve/minimise the impact of disadvantages.
Teacher collects copy of discussions from secretary to review ideas maintaining a neutral position to guide students in presenting their viewpoint.
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9Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Financial controller
Financial controller illustrates how a computerised system improves efficiency. Also explaining the possible limitations of using such a system.
The Financial controller group will present first.
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10Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Auditor
Auditor explains how the audit process is affected / improved by the new system.
The auditor group presents the advantages and disadvantages of computerisation.
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11Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Shareholder/Owner
Shareholder/Owner explains how the new system brings improvement / drawbacks to the company.
The shareholder / owner group presents the advantages and disadvantages of computerisation.
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12Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Customer
Customer explains if the new system has any improvement / drawback on their relationship with the company.
The customer group presents the advantages and disadvantages of computerisation.
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13Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Employee
Employee explains how the system improves / affects their work.
The last presenter is the employee group. They are affected most by computerisation. They have to learn new skills and they may be laid off due to the reduction of manpower.
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14Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Teacher summarises the advantages and disadvantages in the following slides.
Teacher also makes comments on the students’ findings
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15Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Financial Controller
AdvantagesSimplified transaction postingsEasier transaction retrievalsReadily available financial dataShorter time to prepare reportsDifferent aspects of reports availableMore information for budgetingHigher overall operations efficiency
Teacher summarises the advantages from financial controller’s view point.
Most computerised systems allow users to input sales and purchases directly. The transactions will be automatically posted (debit and credit) to suitable accounts in the accounting system.
With the help of the system, user may retrieve transactions without searching through bundles of accounting books or receipts.
The system keeps up-to-date records of all transactions. The balance of accounts are readily available for inspection producing reports in a short time.
The system produces a variety of reports such as by different class of customers, different class of products, and different time periods.
The system tracks of data for years and provides valuable information for budget estimations.
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16Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Financial Controller
DisadvantagesWork flow may be limited / controlled by the program – a change of work flow may require a change of programKnowledge on how to operate the system is requiredPossible system breakdown may affect company operation, or even a disaster
Teacher summarises the disadvantages from the financial controller’s perspective.
The company work flows will be controlled by the accounting software. Existing work flows may have to be changed to suit the software unless a custom software program is purchased. However, changes in work flows (e.g. company expansion, new sales store) will require a change of program.
All company personnel must be trained in operation of the software.
Company operations will be halted should the system fail.
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17Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Auditor
AdvantagesEasier transactions retrievalEasier data extraction – all data is stored in systemDifferent aspects of report availableShorter time for audit process
Teacher summarises the advantages from auditor’s view point.
Auditor may retrieve transactions without searching through bundles of accounting books or receipts.
Company data stored in the system allows quick extraction and transfer to auditing software for analysis without any manual data inputs. This minimises data input and search time. Depending on the auditing software used, many auditing reports can generated to assist in the auditing process. Thus the auditing time will be reduced.
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18Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Auditor
DisadvantagesSpecial system auditing skills requiredMore difficult data extractions – some data may be hidden in system
Teacher summarises the disadvantages from auditor’s view point.
Auditor must have adequate IT skills to extract data before the audit process can begin.
Having all data stored in the system has both advantages and disadvantages: the data can be easier to retrieve but some may be hidden.
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19Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Shareholder / Owner
AdvantagesCurrent financial situation is easily availableData for sales budgeting is availableEasier cost controlWork flow is controlled by system – less chance for manual overrideImproved company imageReduce staff
Teacher summarises the advantages from shareholder’s view point.
The accounting system keeps up-to-date record of all transactions. The balance of accounts and financial situation are readily available for inspection.
The system also keep tracks of data for years and provides valuable information for budget estimation and cost controls.
For the owner, the work flow control is an advantage. However, it may be a disadvantage for financial controller and employees.
The company image is improved when compared to those companies without a computer system. Customer feels the company has enhanced it accounting systems because it is expanding and growing.
The computer system reduces inputting and recording transactions, thus less employees are required.
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20Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Shareholder / Owner
DisadvantagesSystem installation and maintenance costsMust set-up a new IT department / employ IT related staffPossible system failures may affect operations, or even a disaster
Teacher summarises the disadvantages from shareholder’s view point.
Additional costs are required to install and maintain the system. In lesson 3, students will learn that the AIS system can be implemented in 3 ways: Buy off-the-shelf software, in-house development, or outsource to third parties. The first two ways involve costs to install and system maintenance. Developing in-house is expensive and costs more than pre-built, off-the-shelf software.
Whether the company decides to buy off-the-shelf commercial software or develop its own, it has to set-up a new IT department / employ IT related staff to maintain the system, resulting in increased costs and changing the management hierarchy.
System breakdown will impact all parties due to ceasing company operations.
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21Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Customer
AdvantagesFast transaction processingMore accurate transaction recordsBetter stock records, better shopping experience
Teacher summarises the advantages from customer’s view point.
Fast transaction processing since manual operation is minimised. The customer’s statement can be generated directly from the computerised AIS.
Accurate transaction records such as the customer’s statement.
Some systems have the capability of inventory control. It provides better stock control and a better customer shopping experience. If a customer order is out of stock, the AIS will indicate immediately for appropriate action.
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22Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Customer
DisadvantagesPossible personal information (e.g. credit card number) leakage
Teacher summarises the disadvantages from customer’s view point.
Hackers may steal personal information (e.g. credit card number) from the system.
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23Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Employee
AdvantagesLess effort to record a transactionLess time to record a transaction
Teacher summarises the advantages from employee’s view point.
Most manual operations are minimised, as a result:- Less effort to record a transaction; and - Less time to record a transaction.
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24Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Employee
DisadvantagesAll steps are controlled by system – unable to manage unexpected eventsMust learn new technology skillsPossibility of unemployment – especially low skilled workers
Teacher summarises the disadvantages from employee’s view point.
All working steps are controlled by system. If an unexpected event occurs that is not covered in the system, employees may not know how to handle, E.g. Bad debts caused by financial crisis.
Existing staff are familiar with manual accounting procedures. They have to learn new skills for the computerised AIS.
There is a possibility of releasing low skilled workers who cannot manage the computerised AIS.
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25Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Conclusion
Overall advantagesHigher efficiency Better financial and cost controlBetter company image
Teacher concludes the advantages.
Manual operations are minimised, therefore efficiency will be improved leading to faster responses to a rapid changing market.
As all financial data is readily available in the system, better financial and cost control is expected. Also, a better budgeting will improve financial controls (such as cash flow).
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26Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Conclusion
Overall disadvantagesCompany work flow controlled by systemPossible system breakdown and data leakagePossibility of unemploymentFinancial cost and hidden cost
Teacher summaries the overall disadvantages as shown on the slides.
Teacher reminds students that the cost may include financial costs (e.g. buy and maintain the system) and hidden costs (e.g. company image, staff emotion, customer loyalty, etc)
Though the advantages of the computerised AIS outweigh its disadvantages, teacher should highlight that management must consider the possible solutions to minimise the disadvantages before implementing a computerised AIS.
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27Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Conclusion
The impact of the disadvantages should be minimised by implementing effective measures.
Advantages of computerised accounting outweigh the disadvantages.
Teacher informs students that a second meeting will held to discuss how to minimise the disadvantages.
Teacher concludes that the advantages outweigh the disadvantages if the impact can be minimised. For example, install suitable anti-virus software to avoid breakdowns due to virus inflections and train un-skilled workers to effectively operate the system.
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28Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Preparation for next lesson
You are required to discuss:
Possible solutions to minimise disadvantages of using computerised accounting systems; andThe impacts of different computerisedaccounting systems implementation methods
Teacher asks students to prepare for discussions in next lesson.
End of lesson 1.
29
Lesson 2
Advantages and Disadvantages of AIS - Part 2
Lesson 2
In this lesson, students will continue to work on the cases from lesson 1. Group discussions and role-plays will be conducted.
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30Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Learning Objectives
Identify possible solutions in minimisingimpact of disadvantagesIdentify impacts on different implementation methods of computerisedaccounting systems
As a continuation of lesson 1, students will identify possible solutions in minimising the disadvantages and impacts on different implementation methods of computerised accounting systems in this lesson.
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31Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Recap of last lesson
Impacts of disadvantages of AIS must be minimised!Disadvantages include:
Affect company work flowSystem breakdownData leakageUnemploymentFinancial cost and hidden cost
Teacher recap the conclusion from last lesson.
Teacher can refer to slide #26 for details.
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32Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Activity 2: Open forum discussion
Teacher introduces activity 2 by referring to p.7 of student worksheet.
The objective of this activity is to explore the possible solutions in minimisingthe impacts of disadvantages of AIS as discussed in lesson one.
Students are divided into 5 groups and are required to propose solutions to minimise the impacts. In each group, a leader and a secretary are nominated. The leader will lead the discussion whilst the secretary will jot down the points in the student worksheet.
In guiding the discussion, teacher may refer to the suggested answer in appendix of overview.
Teacher tours around during their discussion and provides assistance if required.
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33Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Teacher asks students to present a short summary of their discussions.
Teacher will cover the suggested answers with students in the following slide.
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34Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Impact on Work Flow
The system controls the work flow of the company
Normal work flowUnexpected events
Teacher reviews the suggested solutions in the following slides.
Suggested solutions:
1. System requirements must be clearly investigated and defined before a system selection process; choose a best fit system that matches current company work flows;
2. Thorough system analysis about possible unexpected events must be conducted prior to system selection; and
3. Develop possible manual override procedures to manage unexpectedevents.
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35Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Impact on System Breakdown
Company operations stopped if system fails
Suggested solutions:
Arrange adequate regular system maintenance procedures1. Use fault-tolerant / fault-safe systems2. Install suitable anti-virus software to avoid breakdowns caused by viruses3. Regularly check and Install security updates4. Do not allow staff to install unauthorised programs or files5. Backup system software
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36Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Impact on Data Leakage
Hackers may invade the system to steal valuable information
Suggested solutions:
1. Install suitable anti-virus software to avoid breakdowns due to virus inflections
2. Check for and Install security updates regularly3. Do not allow staff to install unauthorised software4. Train staff to eliminate possible security pitfalls
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37Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Impact on Unemployment
Employees may be released due to reduction in processes and lack of technology skills to manage system
Suggested solutions:
1. Train un-skilled workers to operate the system2. Regularly update workers on new technology advances
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38Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Impact on Financial Cost
Additional cost to install and maintain the system
Suggested solutions:
1. Select a proper system to increase the efficiency to compensate for additional costs
2. Hidden profits may also compensate the financial costs: company image, employer efficiency, rapid response to external events, understand of current financial situation, accurate cost estimation, etc
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39Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Impact on Hidden Cost
Special skills required to manage and operate the system
Suggested solutions:
1. Ask system vendor to provide training on operating the system2. Ask system vendor to provide thorough documentation3. Arrange in-house training for staff on system operation4. Auditor to seek guidance from auditing expert to effectively use system
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40Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Vote for the following statements
Disadvantages of using a computerisedaccounting system can be minimised by suggesting possible solutions.I would support the implementation of a computerised accounting system.
Teacher asks students to vote for the following statements:1.Disadvantages of using a computerised accounting system can be minimised by the suggesting possible solutions.2.I would support the implementation of a computerised accounting system.
Teacher counts the no. of students for and against the statements. A majority of students will vote for this statement after the discussion in activity 2. It would reinforce their concept that the disadvantages of using computerised accounting systems can be minimised by the suggested solutions.
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41Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Summary of Activity 2
Impacts of disadvantages may be reduced by the suggested solutions
Company decides to implement the computerised system
Teacher declares that the company will implement the computerised system.
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42Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Meeting: Selection of Implementation Method
Activity 3: Role Play
Teacher addresses different implementation AIS methods as listed in p.9 of student worksheet.
The objective of the case study is to guide students’ discussions on how the advantages of using a computerised accounting system may vary due to using different implementation methods.
Students remain in the 5 groups as in Activity 2. Each acts as one of the 3 parties in the student worksheet, the manager of Super Systems Limited, the manager of IT Department and the manager of Professional Limited.
Students will discuss within their groups and identify the advantages of their selection method based on their role, and the disadvantages of the other two. One student will act as the discussion leader and jot down their points from others on the student worksheet.
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43Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Directions for discussion
CostTimeControlUsers’ requirementsStaff competence, etc.
Teacher may give some directions to students for discussion.
For each role, students discuss how the advantages of using a computerisedaccounting system may vary due to different implementation methods.
Directions for discussion:Cost – What is the AIS cost due to different implementation methods?Time – What is the time required for implementing the AIS by differentmethods?Control – What is the degree of control over the AIS by different methods?Users’ requirements – Would the different methods meet the all users’requirements?Staff competence – Will staff be competent enough to use the AIS developed by the different methods?
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44Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Discussion in progress
Teacher tours around during their discussions to provide input and guidance as required.
Students are asked to use worksheet p.10-12 during discussions
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45Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Meeting Begins
During the meeting, the director (teacher) should be neutral as each method have both advantages and disadvantages. In starting the meeting, he should invite the participants to present their views in the following order:1. Manager of Super Systems Limited2. Manager of IT Department3. Manager of Professional Limited
Teacher should listen carefully to the points addressed by each student, raise questions if their points are not clear and guide them to express their viewpoints.
In the meantime, he should also fill in the mark sheet in the appendix of the topic overview (p.8-9) on:1. Advantages (1 mark for each point, maximum 4 marks)2. Disadvantages (1 mark for each point, maximum 4 marks)3. Presentation skill (maximum 2 marks)
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46Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Final Director Decision
At the end of the meeting, teacher is convinced by the manager with the highest marks (i.e. relevant points and presentation skill) and select their suggested best implementation method.
A summary of the advantages and disadvantages of implementing different methods is conducted by teacher in the following slides.
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47Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Buy an AIS Commercial version
AdvantagesCost is cheaper when comparing with developing in-houseAvailable within a short periodUpdates are inexpensiveThe purchased AIS are more likely to be bug-free after various testing
Teacher summarises the advantages of buying the AIS commercial version.• Cost is cheaper compared to developing in-house as the cost is shared by
other accounting package customers • Available immediately as its off the shelf.• Updates are inexpensive as the cost of updates are shared by other
accounting package customers.• The commercial version has been tried and tested over a period of time
and known bugs have been eliminated.
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48Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Buy an AIS
DisadvantagesPurchased AIS may not fit exact requirementsDeveloper may close down or cease to update the AISEvaluation of the purchased AIS is time-consuming and costlyReduced competitive advantages
Teacher summarises the disadvantages of buying an AIS commercial version.
• The purchased AIS may not fit exact requirements as it was developed for the general customer usage
• If the developer closes down or ceases to update the AIS, the buyer will be in trouble.
• As the AIS was not developed by the company, evaluation of the purchased AIS by the company is time-consuming and costly.
• As the AIS can be acquired by other companies in the market, it reduces the company’s competitive advantages.
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49Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Develop an in-house AIS
AdvantagesTailored to exact user needsSystem development process can be managed and controlledUsers may have greater loyalty Competitive advantages are built by a unique AIS
Teacher summarises the advantages of developing an in-house AIS.• As the AIS was developed by IT department based on the company
requirements, it can be tailored to exact users’ needs• As the AIS was developed in-house, the system development process can
be managed and controlled.• Users may have greater loyalty of systems developed in-house by the IT
department. They can suggest some functions that are company specific.• A competitive advantages are built by a unique AIS. No other company
will adopt the same software in handling their accounting tasks.
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50Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Develop an in-house AIS
Disadvantagescostlylabor intensivetakes longerNew programs contain bugs
Teacher summarises the disadvantages of developing an AIS.• It is costly as all cost is borne by the company.• It is labor intensive and the AIS is solely developed by the IT department.
It requires IT staff to monitor and support the system.• It takes a longer time for system development and testing. • The developed AIS is a new program and must be tested for bugs and
repaired requiring excessive time to perfect.
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BAFS Elective PartLearning and Teaching Example
Outsourcing
Advantagesless costlyImproved company cash flow when avoiding substantial capital investment in computer hardware and softwareDevelopment time is not requiredAccess to more advanced technology
Teacher summarises the advantages of outsourcing.• It is less costly as no cost is incurred on the hardware and software.• As no substantial cost is incurred in the hardware and software, it
improves the company cash flow.• As the AIS is already developed, development time is not required.• The outsourcer will usually update with more advanced technology to
attract customers.
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Outsourcing
DisadvantagesLoss of controlReduced competitive advantagesInflexible 5-year contractIneffective if communication fails between outsourcer and client
Teacher summarises the disadvantages of outsourcing.• Loss of control of the AIS as it is owed by the outsourcer.• Reduced competitive advantages as the AIS is owned by the outsourcer.
Other competitors may use the same outsourcer for handling theiraccounting tasks.
• Inflexible in 5-year contract. The company has to pay penalty for cancellation of agreement. (The company may negotiate with the outsourcer for shorter contract period.)
• If there is lack of good communications between the outsourcer and client, the AIS will not function properly.
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53Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Preparation for next lesson
You are required to review the following accounting ratios:
Gross profit ratioNet profit ratioCurrent ratioQuick ratioSales to capital employed
Make investment decisions with AIS reports and analysis
Students prepare for the discussion in next lesson.
End of lesson 2.
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Lesson 3
How AIS assists in management decision-making?
Lesson 3
In this lesson, students are going to discuss how AIS assists in management decision-making. Students will conduct a group discussion to argue with whether to use AIS when having decision-making.
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Learning Objectives
Describe ICT applications in accountingExplain how AIS assists management decision-making
Students will understand ICT application in accounting and how AIS assists management decision-making by group discussion and decision-making game.
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56Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
ICT Applications in Accounting ~ Financial Reporting ~
Generate financial reportsDebtors / Creditors’ aging reportTrial balanceProfit and loss account / income statementBalance sheetCash flow statement
Teacher briefs students on the ICT applications in financial reporting.
Generate financial reports• Debtors / Creditors’ aging report: shows details of transactions with
debtors / creditors and due days eg. Due within 0-30 days, 31 – 60 days etc.
• Trial balance: shows ending balance (debit / credit) of accounts on a specific date
• Profit and loss account / income statement: shows income and expenses for a period
• Balance sheet: shows assets, liabilities and on a specific date• Cash flow statement: shows cash inflows and cash outflows for a
specific period
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BAFS Elective PartLearning and Teaching Example
ICT Applications in Accounting ~ Costing Analysis ~
Perform financial result analysis in actual, fixed budget and flexible budgetConduct financial statement analysisConduct profit volume analysisPerform discounted cash flow analysis for financial management
Teacher briefs students on the ICT applications in costing analysis.1. Perform financial results analysis in actual, fixed budget and flexible
budget:• e.g. Sales budget, purchase budget and cash budget etc.• A fixed budget is designed to remain unchanged irrespective of
the quantity of goods produced. • A flexible budget is designed to change in accordance with the
level of the quantity of goods produced. 2. Conduct financial statement analysis, eg. compares the result between
this year and last year and shows the difference (variance).3. Conduct profit volume analysis:
• Study the relationship between costs and operating income at different sales levels for management decision-making.
4. Perform discounted cash flow analysis for financial management:• Compute present value and net present value for investment
decision.
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58Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Examples of accounting systems and software
MYOBDacEasyMicrosoft Excel
MYOB and DacEasy are international providers of computerised accounting package for business owners and accountants.
MYOB provides multi-user business management software with accounting, inventory, time billing and multiple currency transaction capability
The DacEasy product line includes different systems, for example, Accounting, Payroll, Order Entry, Point of Sale and Job Costing.
Microsoft Excel is an electronic spreadsheet program that can produce professional-looking documents that perform numeric calculations. Its basic functions are formulas and charts.
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BAFS Elective PartLearning and Teaching Example
Examples of ICT Applications in Accounting
Charts and graphs in Excel
An example Excel charts and graphs
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60Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Examples of ICT Applications in Accounting
Financial Functions in Excel: “PMT” function is used to calculate the periodic cash flow of annuity“PV” function is used to calculate the monthly contribution for a given return and expected sum“NPV” function is used to calculate the net present value of a stream of cash flows based on certain discount rate
Teacher briefs students on the usage of different financial functions.
“PMT” function (PMT stands for payment)• use this function to determine the monthly payment, total interest, and
total costs for a mortgage with input of principal, interest rate and repayment period.
“PV” function (PV stands for present value)• use this function to calculate the present value of an investment with
input of investment amount, interest rate and repayment period.
“NPV” function (NPV stands for net present value)• use this function to calculate the net present value of cash flow stream
by a certain interest rate.
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BAFS Elective PartLearning and Teaching Example
How AIS assists the management decision-making?
Step I: Identify areas requiring management actions
Step II: Provide a basis for choosing among alternative
actions
Teacher briefs students on the two steps on how AIS assists the management decision-making.
Step I: Identify areas requiring management action E.g. The AIS generates Profit and Loss Account and Balance Sheet. By computing the accounting ratios, the accountant can identify areas requiring management action.
Step II: Provide a basis for choosing among alternative actionsOnce an area of action is identified in step I, management must evaluate different actions to remedy the area. E.g. Evaluate theprofitability of different investment proposals by AIS.
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BAFS Elective PartLearning and Teaching Example
Activity 4 - Case Study
Identify areas requiring management actions
Teacher briefs the case as listed in P.14 of student worksheet.
The objective of the case study is to apply the 2 steps on how AIS assists management decision-making by:Activity 4: identifying areas requiring management actions (accounting ratios analysis)Activity 5: providing a basis for choosing among alternative actions (evaluation of investment proposals)
In activity 4, students are provided with an AIS report containing accounting ratios. They are required to comment on the company’s performance in the following aspects: profitability, liquidity and efficiency. Group discussions are suggested using student worksheet p.15 for recording notes.
Prior knowledge required: ratio analysis
Teacher conducts a review of accounting ratios in the next slide.
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BAFS Elective PartLearning and Teaching Example
Accounting Ratios
Gross profit ratio: Gross profit / SalesNet profit ratio: Net profit / Sales Current ratio: Current assets / Current liabilitiesQuick ratio: (Current assets – Inventory) / Current liabilitiesSales to capital employed: Sales / Capital employed
1.Gross profit ratio: Gross profit / Sales• indicates a company’s good or bad cost controls and its marketing
policies. Low margins may be caused by relatively low selling prices, high costs or both.
2.Net profit ratio: Net profit / Sales • indicates the profitability generated by a company. It can be viewed as
a measurement of efficient cost controls.3.Current ratio: Current assets / Current liabilities
• is used to measure the ability of a company to meet its current liabilities from current assets.
4.Quick ratio: (Current assets – Inventory) / Current liabilities• indicates a company’s ability to meet its immediate commitments.
5.Sales to capital employed: Sales / Capital employed• indicates the efficiency of using capital to generate sales.
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BAFS Elective PartLearning and Teaching Example
Profitability
Both the Gross Profit Ratio and Net Profit Ratio dropped.It may be caused by low selling prices, high costs, high administrative expenses etc.It indicates the company has poor cost controls or marketing policies.
Before going through the answer, teacher invites groups to provide comments. Then teacher goes through the suggested answers with students.
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BAFS Elective PartLearning and Teaching Example
Liquidity
Both the Current Ratio and Quick Ratio dropped.
Poor ratios indicate company has liquidity problems and is unable to meet its current commitments.
Teacher goes through the suggested answer with students.
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BAFS Elective PartLearning and Teaching Example
Efficiency
A sales drop to capital used indicates an inefficiency in using capital to generate sales.
Teacher goes through the suggested answer with students.
Teacher recaps that activity 4 is to identify areas requiring management decisions. It evaluates the company’s performance by accounting ratios generated by the AIS.
Teacher reminds students that the AIS will calculate the ratios thereby eliminating manual calculations.
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BAFS Elective PartLearning and Teaching Example
Activity 5 –Decision-making Game
Mr. Risky Ms Prudent
•Choosing among alternative actions
As mentioned before, the objective of the case study is to apply the 2 steps on how the AIS assists management decision-making by:
• Activity 4: identifying areas requiring management actions (accounting ratios analysis)
• Activity 5: providing a basis for choosing among alternative actions (evaluation of investment proposals)
The company’s performance is not good in activity 4, so the company would like to improve profitability and liquidity by taking 2 actions:
1. Decision 1: purchase a machine by bank loan (Which bank loan is more favourable?)
2. Decision 2: make investments (Which investment is more profitable?)
The objective of this decision-making game is to show that Ms Prudent would make better decisions than Mr. Risky with more useful information and analysis.
Teacher briefs students on the decision game. In this game, students remain in the group as in activity 4. In each group, they have dual roles of both Mr. Risky and Ms Prudent.
• Mr. Risky makes decisions without AIS reports and analysis but by experience. • Ms Prudent makes decisions with AIS reports and analysis.
One student will act as discussion leader and record answers of Mr. Risky and Ms Prudent.At the end, students will discover the importance of the AIS in selecting alternatives actions.
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BAFS Elective PartLearning and Teaching Example
Decision 1
Which is the best proposal?
Teacher briefs students on Decision 1 by referring to P.16 of student worksheet.
Teacher asks students to choose the best proposal for Mr. Risky. No reportwould be provided to them. They are also not allowed to use a calculator in making this decision. They have to write down their choice on the worksheet as Mr. Risky.
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69Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
Analysis of Loan Proposals
Scenario Summary
Bank A Bank B Bank C Bank D
Changing Cells:
Loan $100,000 $100,000 $100,000 $100,000
Interest rate 7% 8% 9% 10%
Years 7 8 9 10
Result Cells:
Monthly payment $1,509 $1,414 $1,354 $1,322
Total Interest $126,779 $135,712 $146,263 $158,581
Based on the AIS report, students are required to make decisions for Ms Prudent. They have to write down their choice on the worksheet as Ms Prudent.
(This analysis is intentionally not provided in the worksheet. Otherwise, students may refer to it in answering the question for Mr. Risky.)
The correct answer is Bank C because:1. Monthly payment is <$1,400 (i.e. Bank A and B are not feasible)2. Total interest is $146,263 (the least comparing with Bank C and Bank D)
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Decision 2
Which is the best investment plan?
Teacher briefs students on Decision 2 by referring to P.17 of student worksheet.
Students must select the best proposal for Mr. Risky. No report would be provided to them. They are also not allowed to use a calculator in making this decision.
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BAFS Elective PartLearning and Teaching Example
Analysis of Investment Plans
Plan A Plan B Plan C Plan D
Interest Rate 8% 8% 8% 8%
Year 1 Initial Cost ($300,000) ($400,000) ($500,000) ($600,000)
Year 2 Returns $95,000 $120,000 $150,000 $175,000
Year 3 Returns $95,000 $120,000 $150,000 $175,000
Year 4 Returns $95,000 $120,000 $150,000 $175,000
Year 5 Returns $95,000 $120,000 $150,000 $175,000
Year 6 Returns $95,000 $120,000 $150,000 $175,000
Net Present Value
$79,307 $79,125 $98,907 $98,724
Based on the AIS report, students are required to make decisions for Ms Prudent. The correct answer should be Plan C, which gets the highest Net Present Value.
(This analysis is intentionally not provided in the worksheet. Otherwise, students may refer to it in answering the question for Mr. Risky.)
Note:
NPV of returns
Year 2: Returns / (1+8%)Year 3: Returns /{ (1+8%) (1+8%)}Year 4: Returns /{ (1+8%) (1+8%) (1+8%)}Year 5: Returns /{ (1+8%) (1+8%) (1+8%) (1+8%)}Year 6: Returns /{ (1+8%) (1+8%) (1+8%) (1+8%) (1+8%)}
NPV of investment plan:
NPV of returns – Initial cost
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Activity 5: Decision Game
By comparing the answer of Mr. Risky and Ms Prudent, whose management decisions are better? And why?
The objective of this decision-making game is to show that Ms Prudent would make better decisions than Mr. Risky due to more useful information and analysis.
Ms Prudent’s performance is better because the AIS provides more useful information to make better and correct decisions. Mr. Risky’s performance is poor due to insufficient information.
At the end of the game, students will see the importance of the AIS in providing valuable information to choose among alternatives.
End of lesson 3
73Topic A05ICT Applications in Accounting
BAFS Elective PartLearning and Teaching Example
The End
Teacher concludes the lesson by highlighting the key points learned.
End of Lesson 3.
Topic A05 ICT Applications in Accounting Student Worksheet p.1
BAFS Learning and Teaching Example As at April 2009
BAFS Elective Part – Accounting Module – Financial Accounting Topic A05: ICT Applications in Accounting
Activity 1 – Role Play
Olympics Limited is a sportswear trading company. Due to substantial increases in transactions, the current ‘manual system’ cannot meet the stakeholder requirements, especially in generating timely reports. The financial controller proposed implementing a computerised accounting system to improve efficiency and effectiveness of accounting. Meeting: Director calls a meeting with the following participants: 1. Financial Controller 2. Auditor 3. Shareholder/Owner 4. Customer 5. Employee
They are required to discuss the advantages and disadvantages of the implementation of computerised accounting information systems (AIS) from their roles’ viewpoints. (Hint: Efficiency, cost, work flow, control, skills, competence etc.)
Topic A05 ICT Applications in Accounting Student Worksheet p.2
BAFS Learning and Teaching Example As at April 2009
Financial controller illustrates how a computerised system improves efficiency. He also explains the possible limitations of using such a system. Advantages of computerised AIS Disadvantages of computerised AIS
Financial Controller
Topic A05 ICT Applications in Accounting Student Worksheet p.3
BAFS Learning and Teaching Example As at April 2009
Auditor explains how their audit process is affected / improved by the new system. Advantages of computerised AIS Disadvantages of computerised AIS
Auditor
Topic A05 ICT Applications in Accounting Student Worksheet p.4
BAFS Learning and Teaching Example As at April 2009
Shareholder/Owner explains how the new system brings improvements / drawbacks to the company.
Advantages of computerised AIS Disadvantages of computerised AIS
Shareholder / Owner
Topic A05 ICT Applications in Accounting Student Worksheet p.5
BAFS Learning and Teaching Example As at April 2009
Customer explains if the new system has any improvement / drawback on their relationship with the company. Advantages of computerised AIS Disadvantages of computerised AIS
Customer
Topic A05 ICT Applications in Accounting Student Worksheet p.6
BAFS Learning and Teaching Example As at April 2009
Employee explains how the system improves / affects their work. Advantages of computerised AIS Disadvantages of computerised AIS
Employee
Topic A05 ICT Applications in Accounting Student Worksheet p.7
BAFS Learning and Teaching Example As at April 2009
Activity 2 – Open Forum Discussion
Group Discussion:
Solutions to minimise implementation impacts of computerised AIS. Director calls a meeting to discuss solutions to minimise the implementation impacts of the computerised AIS. The main areas of impact are:
Company work flow System breakdown Data leakage Potential Unemployment Costs
Students form 5 groups to discuss and propose solutions to minimise the impact. Based on your particular role you will vote on agreeing or not with the solutions. Students can refer to p.8 for discussion.
Topic A05 ICT Applications in Accounting Student Worksheet p.8
BAFS Learning and Teaching Example As at April 2009
Group Discussion Disadvantages Suggested Solutions
Work flow is controlled by the system.
System breakdowns will affect company operations.
Hackers may try to break into the system and steal valuable information.
Employees may be fired due to a lack of necessary technology skills.
Additional financial support is required to install and maintain the system.
Special skills are required to operate the system.
Topic A05 ICT Applications in Accounting Student Worksheet p.9
BAFS Learning and Teaching Example As at April 2009
Activity 3 – Role Play
Meeting : Selection of Implementation Method
After the first meeting, Olympics Limited decides to adopt a computerised accounting information system (AIS) to enhance the efficiency and effectiveness of accounting. There are three ways to acquire the system:
1. Buy an AIS Quotation of $700,000 is received from Super Systems Limited,
a supplier of popular accounting software. Setup is immediate.
2. Develop an AIS in-house The company Information Technology (IT) manager advised that
the AIS could be developed in-house at $1,000,000. Setup will take approximately 3 months.
3. Outsourcing
All accounting data processing activities could be handled by an outside firm, Professional Limited, for a monthly fee of $50,000 for 5 years.
Director calls a meeting to select an implementation method for Olympics Limited with the following participants: 1. Manager of Super Systems Limited 2. Manager of IT Department 3. Manager of Professional Limited
Topic A05 ICT Applications in Accounting Student Worksheet p.10
BAFS Learning and Teaching Example As at April 2009
Quotation of $700,000 is received from Super Systems Limited, a supplier of popular accounting software. Setup is immediate. The manager tries to convince the Director to buy the AIS by emphasising the advantages and the disadvantages of the other 2 methods. (Hint: Cost, time, control, user requirements, staff competence etc.)
Advantages of buying the AIS Disadvantages of developing the AIS in-house Disadvantages of outsourcing
Manager of Super Systems Limited
Topic A05 ICT Applications in Accounting Student Worksheet p.11
BAFS Learning and Teaching Example As at April 2009
The Information Technology (IT) manager advises that the AIS could be developed in-house at $1,000,000 within 3 months. The manager tries to convince the Director to develop the AIS by emphasising the advantages of developing it in-house and the disadvantages of the other 2 methods. (Hint: Cost, time, control, user requirements, staff competence etc.)
Advantages of developing the AIS in-house Disadvantages of buying the AIS Disadvantages of outsourcing
Manager of IT Department
Topic A05 ICT Applications in Accounting Student Worksheet p.12
BAFS Learning and Teaching Example As at April 2009
All accounting data processing activities could be handled by outsourcing to Professional Limited at $50,000/month for 5 years. The manager tries to convince the Director to outsource by emphasising the advantages / disadvantages of outsourcing compared to the other 2 methods. (Hint: Cost, time, control, user requirements, staff competence etc.)
Advantages of outsourcing
Disadvantages of developing the AIS in-house Disadvantages of buying the AIS
Manager of Professional Limited
Topic A05 ICT Applications in Accounting Student Worksheet p.13
BAFS Learning and Teaching Example As at April 2009
The Director (teacher) invites the 3 managers to present their proposals and then guides the discussion. After presenting their proposals, the managers are allowed to challenge other proposals by emphasising the disadvantages. In conducting the meeting, the Director should fill in the mark sheet based on relevant points made by managers and their presentation skills. At the end of the meeting, the Director would be convinced by the manager with the highest marks and select their proposal as the implementation method.
Director
Topic A05 ICT Applications in Accounting Student Worksheet p.14
BAFS Learning and Teaching Example As at April 2009
Activity 4 – Group Discussion
After the Lesson 2 meeting, Olympics Limited has implemented a computerised accounting information system (AIS) to enhance the efficiency and effectiveness of the accounting work.
The AIS generated the company’s financial statements and the following ratios:
Ratios Current
Year Previous
Year 1 Gross Profit Ratio 19.8% 22.7% 2 Net Profit Ratio 12.9% 15.6% 3 Current Ratio 1.62 1.92 4 Quick Ratio 0.42 0.72 5 Sales to capital employed 1.58 1.63
Notes: Gross profit ratio: Gross profit / Sales Net profit ratio: Net profit / Sales Current ratio: Current assets / Current liabilities Quick ratio: (Current assets – Inventory) / Current liabilities Sales to capital employed: Sales / Capital employed
Topic A05 ICT Applications in Accounting Student Worksheet p.15
BAFS Learning and Teaching Example As at April 2009
Based on the above ratios, comment on the company’s performance:
Profitability
Liquidity
Efficiency
Topic A05 ICT Applications in Accounting Student Worksheet p.16
BAFS Learning and Teaching Example As at April 2009
Activity 5 – Decision-making Game To improve the profitability and liquidity of the company, managers are required to make two decisions. Two managers of Olympics Limited have different decision-making approach: Mr. Risky makes decisions WITHOUT the AIS reports and analysis but by experience.
Ms Prudent makes decisions WITH the AIS reports and analysis.
Decision 1:
Olympics Limited will purchase a machine at $100,000 for upgrading the product quality. The purchase will be financed by a bank loan. According to the cash flow budget, the company has surplus cash $1,400 available per month for loan repayment. The following four proposals were received from banks:
Bank A Offer a 7-year loan at an annual interest rate of 7% Bank B Offer an 8-year loan at an annual interest rate of 8% Bank C Offer a 9-year loan at an annual interest rate of 9% Bank D Offer a 10-year loan at an annual interest rate of 10% Which one is the best proposal?
Mr. Risky Ms Prudent
Topic A05 ICT Applications in Accounting Student Worksheet p.17
BAFS Learning and Teaching Example As at April 2009
Decision 2:
Olympics Limited would like to make investments through a fund manager. Assuming that the annual interest rate for the coming 6 years is 8%, the following four investment plans were received from the fund manager.
Plan A The investment requires an initial outlay of $300,000 at the beginning of first year. The expected returns at the beginning of second year to sixth year are $95,000.
Plan B The investment requires an initial outlay of $400,000 at the beginning of first year. The expected returns at the beginning of second year to sixth year are $120,000.
Plan C The investment requires an initial outlay of $500,000 at the beginning of first year. The expected returns at the beginning of second year to sixth year are $150,000.
Plan D The investment requires an initial outlay of $600,000 at the beginning of first year. The expected returns at the beginning of second year to sixth year are $175,000.
Which one is the best investment plan?
Mr. Risky Ms Prudent
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