Accounting information system is also called AIS. Accounting information system collect and process transaction data and communicate the financial information to interested parties. There are many types of systems and they vary widely. A number of factors shape these systems such as the type of business, the size of the business, the volume of data, the type of data management needs, and other.
Most businesses, except for the smallest, use computerized systems, also called electronic data processing or EDP systems. These systems handle every step in the accounting process from recording the financial transaction to preparing the financial statements. Businesses are constantly improving their systems technology in order to remain competitive and to stay in compliance. Even the smallest businesses use systems like Peachtree or QuickBooks.
Accounting Information Systems:
Business Processes and Business Transactions
In order to understand how these systems work, you have to understand the accounting terms “business processes ” and “business transactions ” and how they come together to generate financial reports. With regard to accounting information systems, business transactions can be divided into four types of business processes.
Expenditure and return processes systems:
The business transactions that fall under these business processes are large volumes of expenditure, returns, and cash outflow transactions. Payroll and fixed asset purchase transaction are also in this category.
Revenue and return processes systems:
The business transactions that fall under these business processes are large volumes of daily sales, returns, and cash inflow transactions.
Replacement of Legacy Systems:
At some point as your business grows, you may want to completely replace your legacy system. In the long run, the cost will be lower with fewer bugs.
Every business must have a way to keep track of its financial transactions. In other words, it must have some sort of accounting information system. You may start out with a simple system and it can grow as your business grows.
Administrative processes systems:
The business transactions that are administrative are investments, borrowing, and capital transactions.
Conversion processes, systems, and controls
The business transaction under this category are raw materials and work-in-progress transactions.
All of these business transactions result in T-accounts set up in the General Ledger processes, systems, and controls. From the general ledger, both internal and external financial statements are developed. Internal financial reports might be an aging schedule for accounts receivable or a sales inventory status report. External financial reports would be the income statement, balance sheet, and statement of cash flows.
Accounting Information System Characteristics
Characteristics that make information useful:
Why study Accounting information System:
in the past few decades the study of accounting information system has become important for all accountants . prior to computerized processing, accounting system used manual technologies that were much easier to understand.
Microcomputer ,however, have made computer practical for even the smallest organization.. because almost every organization today user computer to process accounting data. you must understand not only the conceptual process but also the technology used in process.
As an accountant, you will work with computerized accounting systems in one of three ways; if you become an auditor, you must know how to review computer-based system and to plan and execute audit procedures using them. if you become a management accountant, you will work daily with computerized systems and participate in project teams that develop new ones. many accounting students also become management consultants or system analysis. there accountants work full time developing new accounting systems. regardless of your career path you must understand both the process and the technology . this text makes it easy for you to achieve this understanding.