Defination of 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:      

• People - the system users.
• Procedure and Instructions - methods for retrieving and processing data.
• Data - information pertinent to the organization's business practices.
     
• Software - computer programs used to process data.
      
• Information Technology Infrastructure - hardware used to operate the system.
• Internal Controls - security measures to protect sensitive data.

An accounting information system (AIS) is a system.

Accounting information systems are composed of six main components:^[1]

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

What Are the Characteristics of a Commercial Bank?

Commercial banks are financial entities that accept deposits and provide loans for individuals and businesses. The term "commercial bank" came into common usage as a way to distinguish this type of financial institution from an investment bank, which primarily manages securities for governments and corporations by underwriting their financial activities.

Run for Profit

·         Commercial banks are operated with the objective of making a profit. Their fee structure and interest rate is designed with the intention of making money for owners and shareholders. This characteristic of commercial banks contrasts with the primary function of credit unions, which are nonprofit community institutions that help individuals and businesses manage their money. Commercial banks make money by charging clients who use their services and borrow their funds. Credit unions charge for bank accounts and loans as well, but they charge less because their fee structure is designed to cover their costs, rather than also making a profit.

Privately Owned

·         Commercial banks are owned by private individuals or collections of private individuals acting as shareholders. They are regulated by government institutions and must follow all applicable laws, but they are not owned by the government. Except under unusual circumstances such as the 2008 financial bailout, the private individuals who run commercial banks are responsible for major policy decisions. Unlike credit unions, where depositors automatically become members and stakeholders by joining and making deposits, shareholders in commercial banks must invest money specifically in ownership by purchasing stock.

Primarily Interested in Working with Businesses

·         Commercial banks sometimes offer products and services to individuals, but their primary interest is in working with businesses; in fact, commercial banks are also sometimes known as "business banks." Banking services offered to individuals are sometimes referred to as "retail banking," because they are often small scale transactions. Business accounts tend to involve larger sums of money, and the fees and profits that commercial banks reap from them tend to be greater.

What is specialized bank?

Specialized banks are foreign exchange banks, industrial banks, development banks, export-import banks catering to specific needs of these unique activities. These banks provide financial aid to industries, heavy turnkey projects and foreign trade.

What Are the Functions of Finance Management?

Finance management is essential to the ongoing Finance worthiness and day-to-day financial functioning of a business. It is possible for a business to successfully make sales but find itself unable to meet its day-to-day financial obligations because it employs poor Finance management practices. Finance management involves several distinct functions that contribute to the financial health of a successful business.

Finance Checking

·         Most commercial enterprises are sales-driven, which is to say that a great emphasis is placed on finding new customers and getting customers to place product orders. The function of Finance management in this process is to check the Finance worthiness of prospective new customers and continue to monitor the Finance worthiness of existing customers. It may be that some prospective customers have such a bad Finance rating that it is not worth doing business with them. Finance management is also responsible for negotiating payment terms and conditions with new and existing customers with the intention of minimizing the potential exposure to bad debt. For example, if a customer orders products monthly but only has a payment due every three months, Finance managers might renegotiate the Finance terms offered to this customer if they suspect that the customer's Finance rating has lowered. Monthly terms, or even cash on delivery terms would minimize the amount of outstanding bad debt owed by the customer.

Invoices and Billing

·         Finance management is responsible for ensuring that invoices, statements and bills are issued to customers, reflecting accurately the current status of the customer's account and the amounts and details of payments due. Invoices must be dispatched early enough for the customer to have time to evaluate the details contained in them and make payment by the due date. An important Finance management function is the checking of the details of invoices and statements for accuracy. Inaccuracies could lead to the customer disputing the invoice, resulting in a subsequent delay in payment, which would then adversely effect cash-flow.

Credit Collection

·         Finance management officers are responsible for identifying bad debts and for taking steps to recover bad debts. This can involve the renegotiation of lines of Credit (the cash-value of goods and services that will be supplied to the customer on account), renegotiation of terms of payment for subsequent purchases, and the negotiation of terms to repay currently outstanding amounts. Where a customer is not willing or able to negotiate the repayment of a debt, Finance management officers may decide to pass the debt to commercial Credit rating and Credit collection agencies. In extreme cases, civil actions are instigated, allowing the courts to mandate the recovery of the debt.

What is Credit management?

Credit management is a term used to identify accounting functions usually conducted under the umbrella of Accounts Receivables. Essentially, this collection of processes involves qualifying the extension of credit to a customer, monitors the reception and logging of payments on outstanding invoices, the initiation of collection procedures, and the resolution of disputes or queries regarding charges on a customer invoice. When functioning efficiently, credit management serves as an excellent way for the business to remain financially stable.

The process of credit management begins with accurately assessing the credit-worthiness of the customer base. This is particularly important if the company chooses to extend some type of credit line or revolving credit to certain customers. Proper credit management calls for setting specific criteria that a customer must meet before receiving this type of credit arrangement. As part of the evaluation process, credit management also calls for determining the total credit line that will be extended to a given customer.

Several factors are used as part of the credit management process to evaluate and qualify a customer for the receipt of some form of commercial credit. This includes gathering data on the potential customer’s current financial condition, including the current credit score. The current ratio between income and outstanding financial obligations will also be taken into consideration. Competent credit management seeks to not only protect the vendor from possible losses, but also protect the customer from creating more debt obligations that cannot be settled in a timely manner.

Difference between Traditonal Bank and Islamic Bank.

There are two major difference between Islamic Banking and Conventional Banking:

1. Conventional banking practices are concerned with "elimination of
risk" where as Islamic banks "bear the risk" when involve in any
transaction.

2. When Conventional banks involve in transaction with consumer they
do not take the liability only get the benefit from consumer in form of
interest whereas Islamic banks bear all the liability when involve in
transaction with consumer. Getting out any benefit without bearing its
liability is declared Haram in Islam.