4 Report

To: Ms Swainsthorpe
From: AN Accountant
Re: Computerised accounts and stock control
Date: December 2002
The following report addresses the advantages and disadvantages of implementing a computer
system. It also explains what a
management information system is and how it can be used. Finally it addresses your current stock
control procedures.
Computer system
The advantages of a computer system is that it will be quicker to input entries to the accounting
system and easier to extract
management information. Another advantage is that fewer errors are likely to occur as the computer
can check that all the debits
equal the credits.
The disadvantages are the expense of the new system. Also the training costs involved may be high
and you may also experience
some resistance from the employees to this new way of working. Finally you would not be able to
switch over immediately as you
would have a cost of running two parallel systems for a short time to check that everything is working
correctly.
Management Information System (MIS)
A MIS is an accounting system that will provide management with appropriate information both routine
and non-routine as required
by the organisation. It is expected that management will be able to effectively utilise the output from
the system to make efficient
use of the resources of the business.
The MIS will help you run the business as it will provide you with relevant information. This information
will help with decisionmaking,
planning and control and coordination of the organisation. The type of information extracted will
depend on the needs of
you, the user.
Stock
The current stock-take procedures seem onerous as they require the business to be closed once a
month. This results in a loss of
a days production and so will eventually impact on profit.
If the bin card system is working effectively then an entire stock-take should only be necessary once or
twice a year. Instead of a
complete stock-take spot checks could be carried out comparing actual stock to the bin card value and
any errors noted and the
system updated. High value or high usage items could be checked more often than slower moving
stock. In this way the business
need not close so often.
5 (a) Return on investment
Division A
Profit 35,000
Net assets 150,000
Return on investment = 35,000/150,000% = 233%
Division B
Profit 70,000
Net assets 325,000
Return on investment = 70,000/325,000% = 215%
Using this method Divisions As project is better.
Residual Income
Division A = 35,000 150,000 015 = 12,500
Division B = 70,000 325,000 015 = 21,250
Using this method Division Bs project is better.
(b) Return on investment would be the better measure when comparing divisions as it is a relative
measure (i.e. a % figure).
(c) Service industry performance measures, in general terms, could include any of the following:
Competitiveness

Financial performance
Quality of service
Innovation
Effective and efficient utilisation of resources

For