INTRODUCTION Technology has become an essential and integral part

INTRODUCTION

Technology
has become an essential and integral part of making information available to
everyone at any anytime. Using technology is convenient for decision makers all
around the world since information is available everywhere. The banking sector
has encompassed the aid of technology to assist its client’s faster. Digitized
and networked banking service has changed the obsolete methods of banking i.e.
paper and branch-based banks. Accounting information is very useful in banking
activities because it can lead the bank management to come up with successful
strategies for the bank and their customers. Bank accounting is a realm where
all accounting information vital for bank activities are collected and
integrated. It has benefited both the customers and the organizations.  Now the banks are delivering faster services
to their customers, implementing technology is expensive but the rewards of
this technology are immeasurable. The purpose of this project is to assess and
describe the accounting information system used in the Bank as well to study
the accounting cycle used in the Bank, such as the Revenue cycle, Expenditure
cycle, Human resource cycle, and Financing cycle. This project will also be
focusing on discovering the strengths and weaknesses of the accounting
information system and how to overcome the weak points and enhance the strong
points.

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Several studies have been
carried out to evaluate the accounting information system of the Bank. The
information was accumulated by browsing the Bank’s website and an interview has
been conducted with an employee. (The name is not be disclosed due to privacy
reasons)

 

 

BAHRAIN
ISLAMIC BANK BACKGROUND

 

BisB Incorporated in 1979
as the first Islamic bank in the Kingdom of Bahrain, and the fourth in the GCC.
Bahrain Islamic Bank (BisB) has played a pivotal role in the development of the
Islamic banking industry and the Kingdom’s economy. The Bank operates under an
Islamic Retail banking license from the Central Bank of Bahrain and is listed
on the Bahrain Bourse.

At the end of 2016, the
Bank’s paid up capital was BD 101 million, while total assets stood at BD 1042
million. The Bank’s modern branch network comprises 5 branches, 4 innovative
financial malls, and 56 ATMs located throughout the Kingdom. A steadfast focus
on continuous innovation, strong corporate governance and risk management,
employee development, and the use of state of the art technology to deliver
superior customer service, has cemented Bahrain Islamic Bank’s position as the
leading Sharia’a – compliant bank in the Kingdom.

Their Vision

To be the preferred Islamic
Financial Partner going beyond boundaries to grow together.

Their Mission

To provide value delivery
to:

o  
Customers: Exceed their expectations and build loyalty.

o  
Employees: Retain and nurture talent.

o   Shareholders: Consistent value maximization.

o  
Community: Social commitment to the community

The Bank, with six local
branches and four new Financial Malls such as Bahrain City Centre, Riffa, Arad,
and Hamad Town has established the largest network among Islamic banks in the
Kingdom. These branches offer quality banking services, financing and investment
opportunities compliant with Sharia’a requirement for individual and corporate customers,
normally known that bank’s top management team and staff are very qualified and
have huge universal experiences. However, they are professionals in many segments
like finance, banking and IT. Staff participates in many courses and workshops
that bank provide to motivate them. Also, they gain several rewards and bonuses
for making efficient and effective performance. Many activities provided to the
local public to facilitate the social and economic well-being.

 

AIS IN BAHRAIN ISLAMIC BANK

Accounting Information Systems (AIS) is a discipline that informs theory
and practice in accounting and auditing, in a way that draws upon information
systems, broadly defined. In so doing, AIS employs theory and practice from the
cognate disciplines of MIS and computer science as well as from accounting,
auditing, other business disciplines including management and marketing, and
the disciplines of economics, psychology, sociology, philosophy, and history.

 

Accounting information system (AIS) is
a system of collecting, storing and processing financial and accounting data
that is used by decision makers. An accounting information system is generally
a computer-based method for tracking accounting activity in conjunction with
information technology resources. The resulting financial reports can be used
internally by management or externally by other interested parties including
investors, creditors and tax authorities. Accounting information systems are
designed to support all accounting functions and activities including auditing,
financial accounting & reporting, managerial/ management accounting and
tax. The most widely adopted accounting information systems are auditing and
financial reporting modules. The importance of AIS is vital, given the
essentially total reliance of accounting and auditing on computerized
information systems. The accounting function within organizations was among the
first consumer of business computing. Accounting systems are a primary
application in organizations large and small. These accounting systems do not
operate in isolation because information technology plays a ubiquitous role in
all aspects of the lives of individuals and organizations. Indeed, decision
makers increasingly access accounting information systems directly, bypassing
accounting and MIS functions, for purposes of their own analyses and reporting.
Within these organizations, information systems and technologies are key for
value adding and risk management. We also see enhanced innovation in the
building of solutions for accounting and auditing, as well as data repositories
for all organizational users. Information technology, of course, also brings
its own risk to the organizational risk landscape and that risk must be
identified, understood, and managed.  

 

 

AIS in Islamic
bank:

Islamic Bank uses an automated
accounting information system called “Oracle”.

One of the reasons that encouraged the
bank to use this system is that Oracle has been the leader in database software
for more than 35 years.

Oracle Financials Accounting Hub (FAH)
allows you to efficiently create detailed, auditable, reconcilable accounting
from a variety of source systems. It includes an accounting transformation
engine with extensive validations plus accounting and rules repositories. The
transformation engine consistently enforces accounting policies. The
repositories provide centralized control; detailed audit trails, and
simultaneously accommodates diverse corporate, management and reporting
requirements.

The major subsystems of Islamic Bank:

o  
General
ledger and financial reporting system: to compare the required financial
statements.

o  
Fixed
Assets System: operates purchasing, maintenance and selling of assets.

o  
Transaction
Processing System: improves day to day transactions.

 

 

 

 

 

 

 

 

 

ACCOUNTING CYCLES

As BisB is a non- manufacturing company, it
consists of only four cycles. The four cycles are as follows:

1. REVENUE CYCLE

The revenue cycle is a set of repeated activities and
information processed related to services provided and payment received. A
banks revenue sources and cycle is demonstrated below:

1.      Investments:

Ø   BISB put resources into diverse  projects:

 Invest in Real estate

·        
Musharakah in Real estates: BISB income
from. Musharakah On 2015 Furthermore 2016 need aid BD110, 263 What’s more BD
106,761 separately.

·        
Mudaraba investments Income is recognized
when the right to receive payment is established or on distribution by the
Mudarib.

 

Investment of Associate

·        
BISB Investment in associates comprises
of:

·        
Takaful International Company B.s.c

·        
 Liquidity Management Centre B.S.C. 

·        
Arabian C Real Estate Company

·        
 Al
Dur Energy Investment Compan

 

 Invest in Securities:

o  
Debt type instruments:

·        
 Sukuk: Issues bonds with legitimate contract
it is committed to its provisions. It consist of:  Central Bank of Bahrain Sukuk and Corporate Sukuk 

      Equity type instruments:

·        
Shares: BISB total Investment has reached
208 million BD in 2014 and gradually decreases in 2015 and 2016 to BD 208 and
BD 200 million respectively

 

2.      Other
sources of revenue:  BISB mainly uses the
following to obtain revenue:

(i)                
 Murabaha:
Income from Murabaha and Wakala contracts is recognized on a time-apportioned
basis over the period of the contract using the effective profit rate method.

(ii)             
Ijara: condition of the Ijara will promise
to own except that at the time of signing the agreement the property is under
construction

(iii)           
Ijara with ownership: Income from ijara
with ownership is recognized proportionately over the lease term.

(iv)            
 Dividend
income: Dividends are recognized when the right to receive payment is
established. 

Ø   The procedures of the bank to obtain revenue:

(i)                
 The
customer visit BISB and request the financial service he is willing to take.

(ii)             
The customer service must provide the
customer with the suitable application forms for the request.

(iii)           
 The
customer should fill all the information required in the application form and bring
all documents required.

(iv)            
The employee checks if all the documents
are appropriate then send it to the credit department to verify the request.

(v)              
 After approval from credit department, the
request will go back to the customer service employee which will provide
recommendation for customer’s method of collection.

(vi)            
 Finally, the transaction will be recorded by
the operation department.

2. EXPENDITURE CYCLE

 

 

The expenditure cycle is a recurring set of business activities and
related information processing operations associated with the purchase of and
payment for goods and services. The expenditure cycle involves interactions
with suppliers (vendors). A company purchases goods from suppliers and pays
cash. The primary objective of the expenditure cycle is to minimize the total
cost of acquiring goods and maintaining inventory, supplies and services.

•        
The three
basic activities performed in the expenditure cycle are:

–       
Ordering
goods, supplies, and services

–       
Receiving
and storing these items

–       
Paying
for these items

Activities involved in the expenditure cycle

 

 

The main document required for the expenditure cycle is the deposit
slip. This cycle involves a number of procedures. The purchase order is placed
by the entity employee to the supplier by making a request according to the
needs of services or assets for the bank. These requests are examined carefully
by the employee. The finance department receives and records the invoice sent
by the supplier. The manager of the finance department would examine the
recorded information by the employees of finance department. After examining,
these are signed and approved by the manager. Finally, these are sent to the operation
department to determine when to issue it.

 

 

Context Diagram of the Expenditure Cycle

 

 

 

 

 

3. HUMAN RESOURCE CYCLE

 

The supervisor for human
asset group to BISB is Dawood al Ashhab.

He joins Bahrain Islamic
bank (BISB) for a riches from claiming global. Saving money knowledge.

This cycle will be
basically worried with the connection for workers furthermore is. Comprised of
the taking after stages:

1.     
Recruitment
Furthermore selection:

 Since the course about 2008, the hr section
actively functioned to. Satisfy those recruitment needs of the bank. Concerning
illustration an aftereffect for this tricky. Work, outer recruitment expanded
Eventually Tom’s perusing 30% on 2008 raising the. Bank’s downright staff.  Profoundly encountered hopefuls loaded senior
positions inside the. Bank, same time and host of working also more level
administration level. Representatives were brought over and groomed should turn
into the pioneers. .

2.     
Preparing
and development.

“BISB
bank staffs are great prepared for how will handle suspects and. looking into
how will liable monetary frameworks should sharia guidelines What’s more
regulations”. Might have been expressed Eventually Tom’s perusing the general
administrator Mr. Ashoor. Under the approach of. That national bank of Bahrain,
BISB bank provides preparation for antimony. Washing on all their staff parts.

3.     
Preparing
and record keeping:

·        
Reductions administration: In this stage,
those division gives two sorts for reductions to the. Employees

·        
Non-monetary benefits: those bank gives
profits other than. Cash for example, such that wellbeing protection
Furthermore training.

·        
fiscal benefits: these need aid
money-based profits including. Salaries, bonuses What’s more remunerates.

4.      Termination

·        
This is a vital stage in the HR cycle.

·        
This obliges the bank will follow:

v  Lawful
What’s more administrative consistence.

1-      For
those standards of Islamic Sharia’a.

2-      The
Worker would be obliged to do assignment.

3-      Those
representative ought to have secrecy.

In the event of
terminating employees, those bank takes them. Followings under consideration, the
HR Branch must be notified at the end and make the obliged activities.  The Worker will give a chance to be ended must
make educated something like the. End.

a.       The
system right of the ended representative ought a chance to be. Handicapped.

b.      At
whatever supplies claimed by the bank that the ended representative needed must
be come back.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.FINANCING CYCLE

 

A company issues debt
instruments to lenders, followed by a series of interest payments and
repayments of the debt. Also, a company issues stock to investors, in exchange
for periodic dividend payments and other payouts if the entity is dissolved. These
collections of transactions are more dissimilar than the preceding transaction
cycles, but may involve substantially more money.

Also in this cycle it give cash and get cash,
it give cash to all business cycles payroll cycle , expenditure cycle , and it
get funds from Revenue cycle and provides data to general ledger and report
system.

 

 

 

     
It
providing funds to the expenditure cycle and the human resources cycle and then
sending data to the general ledger and reporting system.

 

 

 

 

 

 

 

 

 

 

 

The
financial cycle connected to all other cycles: revenue, expenditure and human
resources.

 

·        
 The
financial cycle receives funds from the revenue cycle which is generated from
Musharakah, Mudaraba etc.

 

·        
The financial cycle makes cash disbursements
to the expenditure cycle to check the invoices whether valuable or not and then
classifies them either as expenditures or tangible assets

 

BISB
provide the following financing services:

 

1. Personal financing:

 

Tas’heel
has been planned with strict constancy to the principles of Islamic Sharia’a as
a personal finance product on a Murabaha basis.

 

·        
Maximum Finance Amount:
BD100,000

 

·        
Processing Fees:
BD120

 

·        
Maximum Tenor: 7
years

 

·        
Salary Transfer:
Obligatory

 

Tas’heel
is offered for the following purposes:

 

·        
Education and training (within Bahrain or
internationally), Treatment and medical care (within Bahrain or
internationally), Marriage and associated expenses, Family tourism and travel
and many other services.

 

2. Property financing:

 

·        
 Maximum Finance Amount: BD750,000(residential)
and BD 1,000,000

 

·        
Down payment: compulsory

 

·        
 Processing Fees: 0.75% of finance amount

 

·        
Maximum duration: Varies from 10 to 25 years
based on the application.

 

·        
Salary Transfer: Compulsory

 

The
Property Finance product designed by BISB can be used to:

 

·        
Finance ready properties for residential
purposes.

 

·        
Finance commercial properties.

 

·        
Re-finance owned properties

 

Other
contracts available to the customers:

 

·        
Ijara with promise to own (for financing
ready residential units)

 

·        
Ijara (for financing under construction
properties)

 

·        
Diminishing Musharaka (for financing
commercial properties)

 

3. Automobile financing:

 

BISB
facilitates the path of acquiring a Sharia ‘a compliant finance to possess the
car that a customer desire. BISB’s Auto Finance can be used to facilitate new
or used vehicles.

 

·        
Maximum duration: 7 Years (Employed), 5 Years
(Self-Employed).

 

·        
Maximum Finance Amount: BD50,000

 

·        
Salary Transfer: Obligatory

 

·        
Processing Fees: BD100.

 

 

 

 

STRENGTHS
AND WEAKNESSES POINTS

 

STRENGTHS:

·        
The Computer based information systems in
Bahrain Islamic bank is useful in upgrading their uses and expand their
influence in order to realize the strategic competitive advantage that is
definite for a bank.

·        
In order
to use the system for longer period, BisB consistently updates and develops its
system.

·        
In order
to minimize errors and save time the system use computerized reporting in paper
work rather than manual reporting.

·        
Appropriate
information is provided by the system for the decision making process.

·        
To ensure
the efficiency of the system; Information, transaction and other documents are
safely stored.

·        
In the
system the information is stored in appropriate way so that the users can
easily understand and use them.

 

 

WEAKNESSES:

Everything good comes with its own price and same goes for the
technology, Although the use of technology has 
made our life easy and simple but 
using computerized accounting system its own issues and risks, such as
hackers can steal the data(data theft) and use it for identity theft or other
purposes. Data can be destroyed by viruses, as computer fraud is a concern. To
protect the data the Bank needs to install strong Anti-virus software and also
it should implement a control system for those who can access information, in
particular customer information. In case of data loss due to lack of security
management can be personally responsible. The bank also needs to make sure that
the data is entered correctly in the system, as a data entry error can be disposed
of a complete set of data.

 

 

 

 

 

RECOMMENDATIONS

 

BISB has followed several strategies which would improve
the system and help the company to grow rapidly. However it is recommended to
ensure the following:

 

Ø  BisB must continue developing an excellent
monitoring system in order to limit hacking attempts which are getting stronger
in this era.

Ø  As technology is evolving rapidly, Bisb
should continue keeping the consistency in updating and developing the system.

Ø  The bank should create backup files regularly
in order to cope up with the data loss.

Ø  It is also recommended that the employees
should have proper skills to use the modern devices and programs.

Ø  It should train the employees in case of
adopting new system or updated version. Also the company should provide full
knowledge of the AIS to the new employees.

Ø  It should hire highly qualified specialists
in order to ensure the development and maintenance of the accounting information
system.

Ø  It
should always monitor antivirus expiration dates to prevent expiration in all
the computers.

Ø  The
bank should use the latest technology in order to meet the market requirements.

Ø  However,
it is better to consider the cost-benefit while making any decision.

 

 

 

 

 

 

 

 

 

 

 

 

 

CONCLUSION

Accounting information
system played an important role inside the organization to improve its
accounting system to maintain high level of communication, accuracy,
integration and customization .The
aim of the project was to evaluate and explain the accounting information
system used in the Bank as well to study the accounting cycle used in the Bank.
Also, to find the strengths and weaknesses of the AIS to overcome the weakness
points and improves the strength points. All the information in this project
were gathered from the Bank’s website and queried personally from the
representative of AIS of BISB Bank, discussing pros and cons of AIS to the
Bank, how the Bank implement their AIS in such ways that improve its efficiency
and quality of the AIS. The report contains a brief explanation on the AIS and
the type of software used by the BISB. The main system BISB uses is “oracle
accounting software” which is one of the most acknowledged accounting
information systems. Also, the accounting cycle’s procedures of the bank are
explained briefly. Based on the information collected; we observed that Bahrain
Islamic bank consistently updates and develops the system to ensure that it can
be used for a long period which is a strength point to BISB. On the other hand,
some weaknesses are captured regarding the use of a computerized accounting
system. That is backed by problems like loss of data etc. But these problems
can be overwhelmed through regular backup of files.

 In conclusion, accounting
information system provides its users with so many advantages and disadvantages
in today’s business. Accounting information system combines collecting, storing,
controlling and monitoring with designing and the implementation of the
information systems. It also combines the modern information technology and the
traditional accounting system to provide a better financial system to manage
and improve the financial performance of the Bank.