AIS Topic 1 PDF

Icebreaker: "Tech in Your Everyday Life" Ask students to name one technological tool or app they use daily (e.g., mobile banking, shopping apps, etc.). Discuss how these tools rely on information systems. Transition the discussion to accounting and the need for systems in ma...

Icebreaker: "Tech in Your Everyday Life" Ask students to name one technological tool or app they use daily (e.g., mobile banking, shopping apps, etc.). Discuss how these tools rely on information systems. Transition the discussion to accounting and the need for systems in managing financial data. Activity: "Build an AIS for a Business" - Present a simple business scenario (e.g., a small bakery or an online store). - Divide the students into small groups and ask them to brainstorm answers to the following: What processes does the business need to manage (e.g., sales, inventory, payroll)? What data needs to be collected and recorded? What tools or technologies might the business use (e.g., accounting software, spreadsheets)? - Groups document their ideas on sticky notes and arrange them into categories (processes, data, people, tools). Sharing and Discussion Groups present their "AIS" to the class. As a class, compare the components identified and discuss how an AIS integrates these elements.  An accounting information system (AIS) is a structure that a business uses to collect, store, manage, process, retrieve, and report its financial data so it can be used by accountants, consultants, business analysts, managers, chief financial officers (CFOs), auditors, regulators, and tax agencies.  Purpose Enhance decision-making. Ensure accurate financial reporting. Streamline accounting processes. Example - A retail company uses QuickBooks for daily sales tracking, payroll, and financial reporting.  Subsystems: Transaction Processing System (TPS): Records daily transactions such as sales and purchases. General Ledger/Financial Reporting System: Summarizes financial transactions for reporting. Management Reporting System (MRS): Provides internal reports for decision-making. Roles of AIS in the Accounting Cycle Definition of the Accounting Cycle: A sequence of steps followed by accountants to record and report financial information, from transaction recording to financial statement preparation. Steps in the Accounting Cycle and Role of AIS: Identifying and Analyzing Transactions: AIS captures and stores transaction data automatically (e.g., through point-of-sale systems). Journalizing Transactions: AIS generates journal entries using predefined templates. Posting to the Ledger: Automatically updates ledger accounts in real time. Preparing 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 Role: - Recording journal entries. - Posting to ledgers. - Generating financial statements. Example: An AIS automates the preparation of balance sheets and income statements.  For any business, irrespective of its size, to run smoothly, it requires optimum cash flow and proper flow of reports and information across channels. A systematic process of collecting, storing, and processing financial and accounting data is used by internal users to report information to investors, creditors, and tax authorities. This process is called an accounting information system aka AIS. This system disseminates the company-related information to respective stakeholders, which is extremely crucial for faster decision making.  It is considered as one of the key responsibilities of an accountant, to work in-depth with AIS, ensuring perfect accuracy in a company's financial transactions and record-keeping. This information should also be readily available and accessible to users who need to refer them as and when required.  Information system is a combination of software, hardware, and telecommunication networks to collect useful data, especially in an organization. Many businesses use information technology to complete and manage their operations, interact with their consumers, and stay ahead of their competition.  An accounting as an information system is a system of collecting, storing and processing financial and accounting data that are used by decision makers. An accounting information system is generally a computer-based method for tracking accounting activity in conjunction with information technology resources.  A solid AIS paves way for the proper flow of information across various departments within the organization. Let’s say the sales department has just uploaded the sales budget. This information is vital for the inventory department for better inventory planning and stock management. Now once the inventory is purchased based on the sales department’s inputs and analysis, this information is shared with the accounts payable department whenever a new inventory is purchased for an invoice to be raised. In a nutshell, an AIS ensures complete visibility of the company’s transactions within various functions for better business planning and forecasting.  An AIS will allow users to define various security configurations based on the requirements. It is obvious that not all departments need information about everything that is going on in the organization, right? Well, that’s what AIS does. It ensures that only the relevant information is disseminated to a specific user by providing controlled data access. With various levels of security authorizations requiring approvals to access information, and AIS limits the information based on the permissions given by the main authority.  An accounting information system comes in three types – Manual, Legacy and Modern/Integrated systems  Manual systems are primarily used by smaller organizations where the entire system is manual, with no technological integration. Because of the business size, the AIS need not be too complex, and all records can be maintained manually. However, a manual system would require, source documents, general ledger, general journal, and special journals or subsidiary journals for more accurate bookkeeping  Modern/Integrated systems are windows-based technologies that are considered to be much more user-friendly than legacy accounting systems. They generally cost less than legacy systems, can be quickly implemented, and have fewer bugs.  is to collect, store, and process financial and accounting data and produce informational reports that managers or other interested parties can use to make business decisions  The three basic functions of an accounting information system are to collect and process data, to report for the management, and to maintain accuracy and security.  An Accounting Information System is a broad structure of an organization that deals in collecting, storing and processing financial and accounting data that are used by decision makers. It forms a centralized system where the financial information is stored by authorized personnel, and this information is then disseminated to various stakeholders in the organization. Important data like revenue, purchases, employee, customer, tax, etc are stored in AIS.  An accounting information system has a database structure to store information. This database structure is typically programmed with a query language that allows for table and data manipulation. Since AIS has numerous fields that require necessary inputs (whether new or old), it is crucial that the security is extremely strong to prevent any malicious virus attacks.