April 18, 2022 April 18, 2022/ Steven Bragg
An accounting information system is one that accumulates, stores, and processes financial and accounting information. The system generates reports that are used to make decisions regarding how an organization is to be run. These reports are also used by outsiders to evaluate lending and investment opportunities with the firm. The key elements of the system are as follows:
The policies and procedures governing how information is collected.
The internal controls used to ensure that information is recorded correctly.
The training employed to ensure that users operate the system correctly.
The software and integrated database used to store and process information.
The hardware on which the software and database are stored.
An accounting information system is usually run using electronic data processing equipment, but can be operated less efficiently with a manual bookkeeping system. Using a computer-based system is highly advantageous, since it automates many accounting processes and thereby reduces transactional error rates. It can also produce reports much more quickly than a manual system.
An accounting information system is typically comprised of several modules, each of which is designed to handle certain types of transactions. These modules include accounts payable, accounts receivable, inventory, payroll, general ledger, and reporting. The baseline set of modules may be expanded to include ancillary functions, such as purchasing, production scheduling, warehousing, and human resources.
Reports Generated by an Accounting Information System
A multitude of reports can be generated by an accounting information system. Among the more common reports are the accounts receivable aging report, accounts payable aging report, fixed asset depreciation schedule, current inventory report, fixed asset depreciation report, trial balance, and financial statements. However, the system does not contain any supporting information, such as the notes regarding the formulation of journal entries; this information is maintained manually.
April 18, 2022/ Steven Bragg/
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An accounting information system (AIS) involves the collection, storage, and processing of financial and accounting data used by internal users to report information to investors, creditors, and tax authorities. It is generally a computer-based method for tracking accounting activity in conjunction with information technology resources. An AIS combines traditional accounting practices, such as the use of Generally Accepted Accounting Principles (GAAP), with modern information technology resources.
An accounting information system contains various elements important in the accounting cycle. Although the information contained in a system varies among industries and business sizes, a typical AIS includes data relating to revenue, expenses, customer information, employee information, and tax information. Specific data includes sales orders and analysis reports, purchase requisitions, invoices, check registers, inventory, payroll, ledger, trial balance, and financial statement information.
An accounting information system must have a database structure to store information. This database structure is typically programmed with query language that allows for table and data manipulation. An AIS has numerous fields to input data as well as to edit previously stored data. In addition, accounting information systems are often highly secured platforms with preventative measures taken against viruses, hackers, and other external sources attempting to collect information. Cybersecurity is increasingly important as more and more companies store their data electronically.
The various outputs of an accounting information system exemplify the versatility of its data manipulation capabilities. An AIS produces reports including accounts receivable aging reports based on customer information, depreciation schedules for fixed assets, and trial balances for financial reporting. Customer lists, taxation calculations, and inventory levels may also be reproduced. However, correspondences, memos, or presentations are not included in the AIS because these items are not directly related to a company’s financial reporting or bookkeeping.
An accounting information system strives to interface across multiple departments. Within the system, the sales department can upload the sales budget. This information is used by the inventory management team to conduct inventory counts and purchase materials. Upon the purchase of inventory, the system can notify the accounts payable department of the new invoice. An AIS can also share information about a new order so that the manufacturing, shipping, and customer service departments are aware of the sale.
An integral part of accounting information systems relates to internal controls. Policies and procedures can be placed within the system to ensure that sensitive customer, vendor, and business information is maintained within a company. Through the use of physical access approvals, login requirements, access logs, authorizations, and segregation of duties, users can be limited to only the relevant information necessary to perform their business function.