The Basic Functions of an Accounting Information System.

·         An accounting information system (AIS) provides financial information about a business. This information helps managers plan and control operations and provides reports to outside parties such as stockholders, creditors and government agencies.

Parts of an accounting information system might include financial reporting, cost accounting, management accounting and enterprise resource planning (ERP). A well-designed AIS gives a business a consistent way to view and analyze financial information and has three basic functions.

Collect and Store Data

·         One function of an accounting information system is to efficiently and effectively collect and store data about business activities and transactions. The system must capture transaction data on source documents, record transaction data in journals to present a chronological record of transactions, and post data from journals to ledgers that sort the data by account type.

Provide Information

·         The second function of an accounting information system is to provide information useful for making decisions. This information usually involves reports in the form of financial statements and managerial reports.

Provide Controls

·         The third function of an accounting information system is to incorporate controls to ensure the accurate recording and processing of data. The system must make certain that the information that comes out of the system is reliable, ensure that business activities are efficient and in line with management's objectives and keep business assets safe.

Traditionally, bookkeepers and accountants did the work of accounting systems by hand on paper, but today much of the work is automated with computers. According to Maryville University, setting up an accounting information system requires knowledge of topics such as database design and development, business process analysis, accounting applications, internal control requirements, information technology (IT) auditing and accounting requirements.

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Accounting Information Systems (AIS)

The collection, storage and processing of 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 statistical reports can be used internally by management or externally by other interested parties including investors, creditors and tax authorities.

Investopedia Says:
An accounting information systems that combines traditional accounting practices such as the Generally Accepted Accounting Principles (GAAP) with modern information technology resources. Six elements compose the typical accounting information system:      

1. People: users who operate on the systems
2. Procedures and instructions: processes involved in collecting, managing and storing the data
3. Data: data that is related to the organization and its business processes
4. Software: application that processes the data
5. Information technology infrastructure: the actual physical devices and systems that allows the AIS to operate and perform its functions
6. Internal controls and security measures: what is implemented to safeguard the data

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Components of Accounting information systems.

Accounting information systems are composed of six main components:

1. People: users who operate on the systems
2. Procedures and instructions: processes involved in collecting, managing and storing the data
3. Data: data that is related to the organization and its business processes
4. Software: application that processes the data
5. Information technology infrastructure: the actual physical devices and systems that allows the AIS to operate and perform its functions
6. Internal controls and security measures: what is implemented to safeguard the data.

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Define Accounting Information Systems?

An accounting information system is designed to record accurate financial data in a timely manner, to facilitate retrieval of that data in a form useful to management, chronologically based, and to ease periodic preparation of financial statements for external use.

Why Study Accounting Information Systems?

Businesses use accounting information systems to help facilitate the accounting process. With accounting information systems, a computer program performs accounting processes such as payroll, accounts payable/receivables, general ledger and others. In addition, such as system streamlines multiple accounting processes by assisting with compiling and recording financial information for better record keeping. Because accounting information systems are expected to continue to grow over the next 10 years, there is an increased need for people who know how to use them.

Function

o    The use of information systems is crucial in recording vital financial data. Major corporations keep data such as sales, profits, expenses and many other items for financial reporting and budgeting. Additionally, these systems allow some type of transaction recording on a periodic basis. Good record keeping is important for both tax purposes and possible audits. By using computerized accounting information systems to manage accounting processes and maintain proper records, companies are able provide accurate, timely data to shareholders and/or regulatory agencies when necessary.

Benefits

o    Accounting information systems provides businesses with the ability to record all types of financial information for future use. In addition, these systems are huge time-savers and make the accounting processes and procedures easily repeatable. Because of that, these systems save companies money because the number of people needed to complete accounting processes is reduced. Also, the risk of human error is drastically reduced because the computer systems manage the accounting processes, and documents are automatically created by the systems. It is imperative that businesses keep accurate books, and accounting information systems make this requirement much easier to meet.

Careers

o    Because the accounting industry has become much more computerized, the role of accountants and auditors are changing drastically. Instead of doing many of the tedious tasks that are now handled by the computer systems, accounting professionals are seen more as system managers, information analysts and/or advisers. Accounting information systems professionals usually go into careers in accounting systems, systems design, accounting systems management, auditing, consulting and other systems-related areas of accounting. The salary for these positions ranges anywhere from $54,000 to $85,000 or more a year, depending on experience.

Curriculum

o    Generally, in addition to the standard accounting curriculum, a student studying accounting information systems will take several information systems classes. Courses such as accounting information systems, systems analysis and design, and database analysis design are commonplace in most programs. Courses such as system quality assurance and controls, and e-business-type courses are also included.

Considerations

o    The accounting information systems profession is growing rapidly with the advent of businesses computerizing their accounting processes. As a result, businesses are seeking professionals with not only an information systems background, but also people who understand accounting concepts. Although students pursuing an accounting information systems degree are faced with pretty rigorous coursework, pursuing this line of study will reap many rewards because the career outlook for this profession is excellent in terms of job growth and financial rewards.

The Role & Importance of an Accounting Information System

An effective accounting information system processes large amounts of data and provides effective reporting to management and other users. Nowadays, most of the accounting systems are computerized, but traditional accounting principles and methodology still applies.

1.     Support

o    A primary function of an accounting information system is to support management in decision making, providing a centralized place where financial data reside. An accounting system provides financial information on expenses and revenues, who owns what and what bills need to be paid along with information on inventory and tax matters. If a system is used properly, it can speed up lots of processes and decisions.

Objectivity

o    An accounting information system is objective with numbers speaking for themselves. For example, if an expense is over budget, then it is over budget; it is there in black and white. Accounting systems don't allow for emotions and can be seen as unbiased information sources. Decisions can be made based on real data, not gut feelings. For example, a sales person may talk about all the virtues of the latest marketing campaign, but if sales reports show low numbers, his talk may be just talk and nothing else.

Speed

o    To be effective, an accounting system needs to operate at a fast speed. For instance, bills need to be paid promptly and management needs information fast. In order to work at top speed, an accounting system must be set up properly, including using default values in a computerized program. Training is imperative for people to use the system correctly, making use of all its functionality and improving speed and productivity.

Financial Reporting

o    An important benefit of an accounting system is to give management and interested parties financial reports, such as an income statement or aging of receivables, helping management do a better job. For example, if a manager reads a financial report showing that his postage expenses will be over budget soon, he can take proactive measures to decrease that expense. Other reports are sales reports, usually important to marketing to evaluate a new campaign. Easy reporting is of key importance to management.

Considerations

o    Errors do happen in accounting systems. For example, digits can be reversed or an invoice can be entered twice. So, controls must be in place to minimize pesky mistakes, such as reconciliations and reports. Another control to detect errors is to have management review accounting reports and to ask questions about unusual items.