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Computer Based Accounting Assignment

Grasim Industries Limited, a flagship and private sector company of the Aditya Birla Group which was incorporated on 25 August 1947, just 10 days after India became independent, manufacturing textiles made from imported raw materials with consolidated net revenues of Rs. 141 billion and a consolidated net profit of Rs. 20 billion. Grasim has a strong presence in fabrics and synthetic yarns and is well known for its branded suitings, mainly in the polyester – cellulosic branded menswear. Its textile plants are located at Bhiwani (Haryana) and Malanpur (Madhya Pradesh).

They have recently acquired VSF Plants in Canada and China respectively (http://grasim. com) Currently, Viscose Staple Fiber factory, they maintain an accounting system that doesn’t allow them to have sufficient information in exact manner about inventory costs (raw materials, work in process, cotton yarn, pledged inventory etc. ), current banks’ balance, updated accounts receivables & payables, Bank loans, payrolls etc. Therefore, this becomes a problem for the Head office to maintain financial and accounting records for managerial decisions to make overall financial positions and for product costing.

Today manufacturing firms are facing mounting global competition, and concurrent pressures on both cost and quality of their products. Over the past two decades, manufacturing firms have taken actions to these pressures by investing in process and information technologies to rationalize the operations (Bardhan, I. , Whitaker, J. & Mithas, S). As recent development in manufacturing technology and advances in the information processing capabilities of organizations boost the importance of designing the proper information system that provide support for these required competencies (Nicolaou, A. I. (2003).

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As information is a conceptual resource that represents physical resources such as machinery, equipment, and labor etc. Therefore, there is a need to build up an information system that provides timely information used for production schedules, inventory costing, and financial matters which would lead to make better informed decisions, enhance the production capabilities, competing with others and increase the organizational performance. (Xu, L. , 2000)

Discussion There is a need to develop computerized information system that integrates ll business functions of a firm. (Li & Li, 2000) It helps providing relevant information to company’s managers to find out the problems and does assist in solving problems (Lucas Jr. , H. C. 1975) and we found that “…. many firms have made substantial investments in information systems to improve the quality of information available to decision-makers”. (Hinss, S. , Kunz, A. & Pfeiffer, T. 2005) Implementing this new computer-based information system requires considerable time, energy, costs in the short run.

But we believe that company needs to consider all positive and negative aspects before implementation of new information system. As new system would lead to drastic changes in the existing manual accounting system as it keeps maintain all daily accounting transactions with minimum time and human errors with high level of accuracy and data security. It fulfills the valuable financial information needs in a timely manner to help managers to make operational decisions like purchasing raw materials, product costing, production schedules, tracking internal purchase orders etc. s well as short-term financial decisions such as managing working capital problems like inventory, accounts receivables, accounts payables, short-term financing, cash flow and sales issues etc. to keep daily operations smooth and meet sales objectives. (Li et al, 2001)

It also provides quality information regarding analysis of financial statements for strategic decisions. Furthermore, the study found that “…. the financial reporting system was the most frequently used module (99% of the surveyed organization)…” (Zhou, X. , Chaudhry, P. E. , Zhu, Z. & Li, F. 005, p 2604) Within existing manual accounting system, it is difficult to achieve process costing that affects the managerial as well as strategic decisions and analysis whereas new system would help managers to provide reliable data or information for product profitability analysis, variance analysis, budgeting and costing factors like raw materials, labor and factory overhead costs at each and every stage of production process (Nicolaou, A. I. 2003) (Davila, A. & Foster, G. , 2005) (Fry, T. D. , Steele, D. C. & Saladin, B. A. , 1998) (Salterio, S. E. & Webb, A. 2006)

As this company has been exporting the goods to different customers in various regions and they need to maintain properly updated customers’ information. However, we believe that new system would maintain all customers’ profiles and other relevant information like demographic, specific customers’ purchase orders details and shipping instructions in its database that help operational managers to get informed about product demand, customer preferences, running product and their volumes etc. to oversee internal control operations properly and manage in advance to meet the customers’ requirements on time by planning and control.

On the other hand, company also needs to think about other aspects such as a huge amount of investment required deploying this new information system such as installation costs, hiring technical and repair and maintenance staff etc. but it would be “… justified by the argument that better and cheaper information leads to improved profits”. (Hinss, S. , Kunz, A. & Pfeiffer, T. 2005) Deploying this computerized system would lead to unemployment by taking over some of the employees’ work that would be performed by this new system alone more efficiently with enhancement in productivity and reduction in costs (U. S. Congress, 1986) (Dahlbom, B. & Lars, M. 1993)

Implementing new system creates resistance to change and there is a need to respond strongly against resistance in employees to the organizational change. However, Folger & Skarlicki (1999) claim that “organizational change can generate skepticism and resistance in employees, making it sometimes difficult or impossible to implement organizational improvements” (p. 25). It is management’s capability to create such type of environment, which minimizes the resistance behaviors of the employees.

We found that company needs to conduct training programs and there would be additional costs incurred for training the employees in how to run new system effectively and efficiently and redesigning their job responsibilities. However, employees would be able to operate it in the most effective manner (Tom, W. G. 1997). As Steven, M. B. (2003) states that, “…since a few untrained employees can result in the failure of new best practice. ”

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