Accounting Information System
Accounting Information System (AIS An accounting information system (AIS) is a system of collection, storage and processing of financial and accounting data that is used by decision makers. accounting information system (AIS) consists of: – People – Procedures – Data – Software – Information technology infrastructure What important functions does the AIS perform in an organization? 1. It collects and stores data about activities and transactions. 2. It processes data into information that is useful for making decisions. 3.
It provides adequate controls to safe-guard the organization’s assets. Uses of (AIS) * Producing External Reports * Supporting Routine Activities * Decision Support * Planning and Control * Implementing Internal Control Producing External Reports Businesses use (AIS) to produce special reports that follow a required structure established by organizations such as (FASB). These reports include financial statements, tax returns, etc Supporting Routine Activities Managers need an (AIS) for handling routine operating activities during the firm’s operating cycle.
Computer systems excel at handling repetitive transaction by many accounting software support these routine functions. Decision Support Information is needed for nonroutine decision support at all levels of an organization. Some information are critical for planning, deciding, marketing functions. Planning and Control An information system is required for planning and control activities as well. Historical data can be extracted from the database and used to forecast growth and cash flows. Planners can use data mining to reveal long-term trends and relationships.
Implementing Internal Control Internal control includes the policies, procedures, and information system used to protect a company’s assets from loss and to maintain accurate financial data. It is possible to build controls into a computerized accounting information system to help reach these goals. Benefits AIS * Speed The main benefit of information systems in accounting is the speed of processing tasks. Data is entered once and can then be used and reused in compiling reports by literally pressing a button.
If a transaction needs correction, it is easily done, with reports generated afterward at speeds never possible with manual accounting systems. * Classification When data is entered in an accounting system, manual or computerized, an accountant needs to classify it in a detailed fashion. For example, a transaction could be a sales revenue or an interest revenue. Using information systems, this classification process is easily accomplished with a drop-down menu from which you choose the proper category.
You can also quickly generate reports involving classifications. With a manual system, this process takes much more time. * Safety Once data is entered into a computer, it is safe. The chances of losing data are remote, especially when you perform regular system backups. In manual systems, paper pads can be lost or damaged more easily. You can save data on the Internet, where it will not only be accessible anytime you need it but will also still be secure even if your computer is lost or damaged. One disadvantage of Accounting Information System
One disadvantage of Accounting Information System is that this system cannot identify any future loss or wrong transaction entry. As we know that computer is a machine, and it cannot do any activity itself. Therefore, computer cannot give any advice or warning. However, accountants in business are capable to estimate any future loss on the basis of their knowledge and experience. Due to this disadvantage it is important and wise for small and mid-size businesses to have some accountants in their business on permanent basis to avoid future losses.