Accounting Information Systems Overview

Accounting Information Systems (AIS)

• AIS is a structure used by businesses to collect, store, manage, process, retrieve, and report financial data
• Accountants, consultants, business analysts, managers, CFOs, auditors, regulators, and tax agencies use AIS data
• An AIS's purpose is to enhance decision-making and ensure accurate financial reporting
• Streamlining accounting processes is essential
• A retail company might use QuickBooks for daily sales tracking, payroll, and financial reporting, as an example

Subsystems of AIS

• Transaction Processing System (TPS): Records daily transactions like sales and purchases
• General Ledger/Financial Reporting System: Summarizes financial transactions for reporting
• Management Reporting System (MRS): A system for reporting

Roles of AIS in the Accounting Cycle

• The accounting cycle is a sequence of steps followed by accountants to record and report financial information, starting from transaction recording to financial statement preparation
• Identifying and analyzing transactions: AIS automatically captures and stores transaction data, such as through point of sale systems
• Journalizing transactions: AIS creates journal entries using predefined templates
• Posting to the ledger: AIS automatically updates ledger accounts in real time
• Preparing the trial balance: AIS generates trial balances to ensure debits equal credits
• Adjusting entries: Facilitates automated calculations for accruals and deferrals
• Preparing financial statements: Generates standardized reports like income statements and balance sheets
• Closing the books: AIS handles closing entries and transitions to the next accounting period

Role of AIS in the Accounting Cycle Continued

• Recording journal entries
• Posting to ledgers
• Generating financial statements
• Example: An AIS automates the preparation of balance sheets and income statements

AIS for Business Operations

• For any business, irrespective of its size, optimum cash flow and proper information flow across channels is essential
• A systematic process of collecting, storing, and processing financial and accounting data, used by internal users to report information to investors, creditors, and tax authorities, is achieved by an AIS
• Disseminating company-related information to stakeholders is crucial for quicker decision-making

Accountant Responsibilities and AIS

• An accountant's responsibility includes working in-depth with an AIS, ensuring the accuracy of financial transactions and record-keeping
• This information should be readily available and accessible to users as and when required

Information Systems

• Information systems are a combination of software, hardware, and telecommunication networks used to collect useful data, particularly in organizations
• Many businesses utilize information technology to complete and manage their operations, interact with customers, and remain competitive

An Accounting Information System (Definition)

• An accounting system as an information system is a system for collecting, storing, and processing financial and accounting data used by decision-makers
• This system is typically computer-based, tracking accounting activity with information technology

Interdepartmental Communication and AIS

• A strong AIS enables seamless information flow between departments, vital for activities like sales budget planning and inventory management
• Sharing of data with the accounts payable department when inventory is purchased ensures visibility and better business planning

Data Access and Security in AIS

• Users can define security configurations in an AIS based on different needs of various departments
• Only relevant information is disseminated to users
• Controlled data access is ensured through various security authorizations

Types of Accounting Information Systems

• Manual, Legacy, and Modern/Integrated systems are the three main types

Manual Accounting Systems

• Primarily used by smaller organizations
• No technological integration
• All records are maintained manually using source documents, general ledgers, general journals, and subsidiary journals

Modern/Integrated Systems

• Windows-based technologies that are more user-friendly
• Cost less than legacy systems
• Easy implementation with fewer bugs

Components of an Accounting Information System (AIS)

• Person (Stakeholders)
• Data
• Established procedures
• Software (ERP)
• Information System Infrastructure
• Internal Controls