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Reviewing of Accounting Information System on Account Payable Process in a Pharmaceutical Company?*

CASE STUDY, ACCOUNTING, FINANCE AND CONTROL
ET Cases - GSMC, 12 Pages

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Reviewing of Accounting Information System on Account Payable Process in a Pharmaceutical Company?

 

Accounting Information System

Businesses today operate in a highly competitive and changing global business environment and therefore require information systems that provide speedy  responses to complex business enquiries. An Accounting Information System (AIS) is a system of collection, storage and processing of financial and accounting data that is used by decision makers. An accounting information system is generally a computerbased method for tracking accounting activity in conjunction with management or externally by other interested parties including investors, creditors and tax authorities. Accounting information systems is a tool that  organizations can use to achieve stronger, more flexible corporate culture to face continual changes in the environment.

Initially, accounting information systems were predominantly developed “in-house” as legacy systems. Such solutions were difficult to develop and expensive to maintain. Today, accounting information systems are  more commonly sold as prebuilt software packages from vendors such as Microsoft, Sage Group, SAP and Oracle where it is configured and customized to match the organization’s business processes. As the need for connectivity and consolidation between other business systems increased, accounting information systems were merged with larger, more centralized systems known as Enterprise Resource Planning (ERP). Before, with separate applications to manage different business functions, organizations had to develop complex interfaces for the systems to communicate with each other. In ERP................

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Reviewing of Accounting Information System on Account Payable Process in a Pharmaceutical Company?

 

Synopsis

ABC pharmaceutical limited is a leading Indian multinational pharma company. The company is generic manufacturer of drugs related to cardiology, diabetes,  neurology and psychiatry. The company started out as a humble marketing venture with just 2 sales men aboard later it transform itself a manufacturer. With the advent of globalization the company soon became one of the largest Indian multinational with its major export and operation markets being the UK. The growth  was encountered with several challenges. The challenge of maintaining an efficient account payable process system and vendor management was one of the  prominent issues. The company thus developed a centralized online transaction processor also known as C.O.L.T.P. It enabled the company to organize and segregate the Account payable processor using accounting information system. The Accounting information system using IT enabled services was a timely  initiative taken by the company during its growing stage.

The process was segregated into cycles based on chemical purchases and non-chemical purchases. The chemical purchase cycle required a stringent quality  check while in case of non- chemical purchases, cycle only included need and conformance test. The company provided a credit rating or credit term to the items purchased so as to enable facilitate payment to the vendors within the defined credit period....................

Pedagogical Objectives and Target Audience

  • • The object of the case is to enable the audience to understand the role of accounting information system process in an account payable process
  • • This case tries to identify the issues in present system of payment process. Also, try to find out novel techniques for reduction of cycle time
  • • It aims at company’s wealth maximization through better vendor relationship management
  • • The target audience includes the professionals, researchers and students in the field of managerial accounting

 

Assignment questions

  • I. Can the modified system of account payable process improve the wealth of the company. If so how?
  • II. Can you suggest measures for reducing the overall cycle time of account payable process?
  • III. .................................

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Abstract

The case study discusses on modification of existing accounting information system being practiced by a leading pharmaceutical company. The transaction in the existing system was strictly through a Centralized Online Transaction Processor (C.O.L.T.P). Even though the company had well-defined and established accounting information system, the payments to vendors were delayed causing the problem of vendor relationship. The company had a focus on imperative measures for  maximizing earnings while continuing the cordial relationship with its vendors. Hence, this case study addresses the issues in the present account payable process and identifies that reduction of cycle time in payment process could enhance effectiveness of the existing payment system. The suggested improvement in the accounting system could contribute towards generation of additional profits and enhanced vendor relationship.

* GSMC 2014, IIM Raipur

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