Introduction:Technology has became a vital and integral part of making information available to every one and anytime. It is necessary to all decision makers to improve their decisions. The role of accounting information in the banking activity is extremely important in the orientation of bank management towards successful strategies for both customer and bank management.
Bank accounting is a domain where all accounting information essential for bank activities are collected and synthesized.The purpose of this project is to evaluate and explain the accounting information system used in the Bank as well to study the accounting cycle used in the Bank, which are the Revenue cycle, Expenditure cycle, Human resource cycle and Financing cycle. And also in this project will be focusing on discovering the strengths and weaknesses of the accounting information system to overcome the weakness points and improve the strength points.Several studies have been undertaken to evaluate the accounting information system of the Bank. Our information was collected by searching on the Bank’s website and conducts an interview inside the Bank withMs.Reem almutawajEmail: [email protected]
com4 | P a g eBahrain Islamic Bank Background:Bahrain Islamic Bank (BisB) was established in 1979 as the first Islamic commercial bank in the Kingdom of Bahrain. The authorized capital is BD 200 million and paid up capital is BD 97.4 millionThe Bank has been maintaining its leading position in the Islamic banking sector through adopting innovative Islamic investment and financing products, supported by superior retail and corporate banking services. The Bank is listed on the Bahrain Stock Exchange. The major shareholders are leading local and regional financial institutions. The Bank operates under supervision and the regulatory framework of the Central Bank of Bahrain.Their main vision is to be the preferred Islamic Financial Partner going beyond boundaries to grow together they have certain missions like deliver Value to Customers and employee to exceed their expectations and build loyalty also deliver value to the shareholders and communityThe 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 customersCommonly 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.5 | P a g eAIS IN BAHRAIN ISLAMIC BANK:Accounting information system is the process of collecting (input) and processing data related to financing and accounting activities of a company. In which, internal users use it to report processed data to external users (investors, tax authorities and creditors).
The main system Bahrain Islamic bank uses is “oracle accounting software” which is one of the most acknowledged accounting information systems. “Oracle accounting software allows you to efficiently create detailed, auditable, reconcilable accounting from a variety of source systems.”The most important features that inspire BISB to use this software are that it can handle huge number of transactions than any other software. Also, because oracle have been leading the data base for the past 37 years.
Other benefits of oracle accounting software are:1. Efficiently make accounting for multiple, mixed source systems.2. Rapidly update accounting rules to meet latest requirements.3. Quickly integrate new systems.4.
Speed up the monthly close.5. Helps to develop internal control and auditability.During the year 2016, the implementation of the Business Intelligence Tool (BI SAP) has helped business users to improve performance. It enables timely and more informed decisions, combining and connecting with data across all systems of the Bank.There are other alternative systems of BISB:? General ledger and financial reporting system: to compare the required financial statements.? Fixed Assets System: operates purchasing, maintenance and selling of assets.? Transaction Processing System: improves day to day transactions6 | P a g eAccounting cycles:As BISB is a service oriented bank it will consist of only 4 cycles.
The four cycles of Bahrain Islamic bank are as follows:I. 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:? BISB have different sources of revenue through services provided to customers in the form of:1. Investments:? BISB invest in different kinds of projects:? Invest in Real estate? Musharakah in real estates: BISB revenue from Musharakah in 2015 and 2016 are BD 110,263 and BD 106,761 respectively.? Mudaraba investments Income is recognised when the right to receive payment is established or on distribution by the Mudarib.? Investment of AssociateBISB 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 Company? 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.? Corporate sukuko 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.7 | P a g e2.
Other sources of revenue:BISB mainly uses the following to obtain revenue:? 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.? Ijara: condition of the Ijara will promise to own except that at the time of signing the agreement the property is under construction? Ijara with ownership: Income from ijara with ownership is recognized proportionately over the lease term.? Dividend income: Dividends are recognised when the right to receive payment is established.
? The procedures of the bank to obtain revenue:? The customer visit BISB and request the financial service he is willing to take.? The customer service must provide the customer with the suitable application forms for the request.? The customer should fill all the information required in the application form and bring all documents required.? The employee checks if all the documents are appropriate then send it to the credit department to verify the request.? 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.? Finally, the transaction will be recorded by the operation department.8 | P a g eThe primary documents are: 1.
the sales invoice (evidence of the sale to the customer) and 2. the deposit slip (evidence of the customer’s payment to the company). II. Expenditure cycle:In the expenditure cycle:? First, identify the need for a service or assets for the bank and make a request.? Then the employee should examine the importance of the request and make a decision to accept or reject.? If the request is accepted a purchase order should be placed by the employee to the seller.? The finance department should be sent the invoice received from the seller and classify them.
? All Invoices recorded by the finance department.? Every group includes the invoices of a particular day, the manager of finance department will examine if all groups are free from error, to sign and approve them.? At the end, the operation department will receive the batch to determine when to issue it.
make a requestexamine the requestpurchase requested order of the bankfinance department recieve invoice from the sellerinvoice recordedexamine the batch and sent to operation department9 | P a g eThe main document required for the expenditure cycle is the deposit slip.The expenses of BISB bank are:1. Expense on placements from financial institutions :That show a rapid increase from BD 546 IN 2015 to BD1,225 IN 2016.
2. Payable to vendors: Increase from BD1,626 in 2015 to BD 2,837 in 20163. Accrued expenses: decrease from BD 3,312 in 2015 to BD2,990 in 20164. Life insurance (Takaful) fees payable: decrease from BD 1,844 in 2015 to BD 1,568 in 20165. Dividends payable: decrease from BD 802 in 2015 to BD 776 in 20166.
Zakah and charity fund.10 | P a g eIII. Human resource cycle:The manager of human resource team in BISB IS Dawood Al Ashhab. He joins Bahrain Islamic Bank (BISB) with a wealth of international banking experience.This cycle is essentially concerned with the interaction with employees and is comprised of the following stages:1. Recruitment and selection:Since the course of 2008, the HR department actively worked to fulfill the recruitment needs of the Bank.
As a result of this hard work, external recruitment increased by 30% in 2008 raising the Bank’s total staff.? Highly experienced candidates filled senior positions within the Bank, while a host of middle and lower management level employees were brought in and groomed to become the leaders of tomorrow.2. Training and development: “BISB bank staffs are well trained on how to handle suspects and on how to subject financial systems to Sharia rules and regulations” was stated by the general manager Mr. Ashoor. Under the policy of the Central Bank of Bahrain, BISB BANK provide training on anti-money laundering to all their staff members.
3. Processing and record keeping:Benefits administration:In this stage, the department provides two types of benefits for the employees:? Non-monetary benefits: the bank provides benefits other than money such as health insurance and education.? Monetary benefits: these are money-based benefits including salaries, bonuses and rewards.4.
Termination: This is a very important stage in the HR cycle.This requires the bank to follow:legal and regulatory compliance1- With the rules of Islamic Shari’a.2- The employee should do the required task.
3- The employee should maintain confidentiality.11 | P a g eAny misconduct of the above conditions will lead to termination of the bank.In case of terminating employees, the bank takes the followings into consideration:? The HR department must be notified about the termination to take the required actions such as preparing the worthy payments for the employee.? The employee to be terminated must be informed about the termination.? The network access of the terminated employee should be disabled.
? Any equipment owned by the bank that the terminated employee had must be returned.IV. Financing cycle: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, Mudarabah 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 assetsBISB provide the following financing services:1.
Personal financing:Tas’heel has been designed with strict adherence to the principles of Islamic Shari’a as a personal finance product on a Murabaha basis.? Maximum Finance Amount: BD100,000? Processing Fees: BD120? Maximum Tenor: 7 years? Salary Transfer: ObligatoryTas’heel is offered for the following purposes:? Education and training (within Bahrain or internationally), Treatment and medical