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.

What Are the Effects of Accounting Information Systems for a Company?

An accounting information system is a subset of the management information system. A management information system focuses on providing business owners and managers with supporting documents for making decisions. Accounting systems focus primarily on financial transactions. Business owners, directors and managers may not be on the forefront of the company's operations. An accounting information system provides several benefits for owners and managers needing to review financial transactions.

Workflow Improvements

o    Improving workflow is a common goal for business owners and managers. Accounting workflow represents the individual processes by which financial documents flow through a company. Internal documents relate to financial reports for business owners and managers, while external ones represent information relating to the economic market. The accounting information system ensures these documents get to the individuals responsible for making decisions.

Better Processes

o    Companies typically use several types of processes in their accounting department. Paying bills, collecting customer accounts, posting journal entries and creating account reconciliations are just a few common processes. Accounting systems often allow managers to develop processes that take advantage of the company's information system. Business owners may also be able to reduce the number of processes in their accounting department. Reducing the number of processes can decrease the amount of time it takes to process financial information.

Decision Support

o    Business organizations often use accounting information systems to provide support for management decisions. Support usually includes financial analysis from company accountants. Analysis is often taken for the company's accounting information system. Using business technology, this system can process copious amounts of documents electronically for owners and managers. Information systems also allow business owners and managers to request specific analysis reports within the scope of the company's accounting system.

Flexibility

o    Accounting information systems usually provide companies with a certain level of flexibility. This flexibility allows business owners and managers to change how their system gathers and distributes financial documents. Changes to business operations usually can create significant changes in a company's financial or accounting processes. Business owners and managers need the most current documents when reviewing their company's overall performance. Automated information systems allow companies to add new business divisions or departments into their accounting gathering process.

Definition of Accounting Information Systems

Accounting Information Systems (AIS) are systems that are used to record the financial transactions of a business or organization. The system combines the methodologies, controls and accounting techniques with the technology of the IT industry: computers, software and the user interface. The software used to track transactions provides internal reporting data, external reporting data, financial statements, and trend analysis capabilities. This information is essential to decision makers and top executives

AIS

o    The ledger book and pencil have been replaced by a computer and keyboard. Since the data is entered by people, errors in the data do still occur. The software records the data into accounts that track to the proper places within the assets, liabilities and equity columns. This information can be queried, combined, sorted, and reproduced to create many different evaluative tools or reports.

Input Devises

o    The input devices are computers, clone workstations, fax machines, and scanners. The secondary input tolls are the keyboard and mouse. All of these tools are available to help get the information into the storage drive of the computer system. The software that the user interfaces with can be either server or we based. Software loaded onto a company server is much more secure than information downloaded to a web based software package. It is important to remember to back up your material twice every day.

Output Devises

o    When you want to create a statement or report you will need to extract the information from the accounting information system through an output devise. These kinds of devises include printers, electronic transfer methods or PDAs. The information entered goes through a process of being coded by the software. This way, the computer generates the financial reports, and the user does not have to spend her time creating one. As long as the data was entered properly, the data that comes out will be accurate.

The Effects of AIS

o    Accounting information systems come in all sizes. The software that a large company uses will be very different from a small business. Large corporations have complex accounting issues like: derivatives, real estate, stocks, bonds, investments and multiple divisions, locations, and products. Smaller companies often do not have as many of these complex issues. Therefore, the software has to be much more robust as does the AIS itself. The enterprise resource planning system (ERP System) is large-scale AIS that are used for such companies. They use high end technology that is present throughout the organization. These large systems also have applications in the supply chain management and financial reporting arenas. The accounting regulation and code is built into the software.

Software

o    Accounting information systems have made the job of bookkeeping and accounting much easier. The knowledge needed to be an accountant is still necessary. However, much of the time intense work can now be done with fewer employees in a shorter time period. Accounting information systems have revolutionized the industry of accounting, tax compliance and attestation.