The elaborate form of AIS is accounting information system which involves collecting data and converting it into information used by those who need it, such as a company or business management and investors. Accounting information systems are useful for companies and businesses wanting to make the accounting process easier by utilizing a computer program or other system that will perform payroll and other functions. These systems, commonly including accounting software, make it easier to compile financial data for use in taxes, payroll, and other bookkeeping requirements. . 0 Information system: An Information system (IS) is the study of complementary networks of hardware and software that people and organizations use to collect, filters, and process, create, and distribute data. Business Firms and other organization rely on information system to carry out and manage their operations, interacts their customers and suppliers, and compete in the market place. 2. 0 Accounting information system (AIS): An accounting information system (AIS) is a system of 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. Accounting information system makes tasks easier and because of it any person or any organization member can easily get accounting and financial based data within a moment. 3. 0 History of AIS( Accounting Information System): Initially, accounting information systems were predominantly developed “in-house” as legacy systems. Such solutions were difficult to develop and expensive to maintain.
Today, accounting information systems are more commonly sold as prebuilt software packages from vendors such as Microsoft, Sage Group, SAP and Oracle where it is configured and customized to match the organization’s business processes. As the need for connectivity and consolidation between other business systems increased, accounting information systems were merged with larger, more centralized systems known as enterprise resource planning (ERP). Before, with separate applications to manage different business functions, organizations had to develop complex interfaces for the systems to communicate with each other.
In ERP, a system such as accounting information system is built as a module integrated into a suite of applications that can include manufacturing, supply chain, human resources. These modules are integrated together and are able to access the same data and execute complex business processes. With the ubiquity of ERP for businesses, the term “accounting information system” has become much less about pure accounting (financial or managerial) and more about tracking processes across all domains of business. 4. 0 Types of Accounting Information Systems There are three types or categories of accounting information systems.
What a business firm uses depends on the type of business, the size of the business, the needs of the business, and the sophistication of the business: 5. 1 Manual systems Manual accounting information systems are used mostly by very small businesses and home-based businesses. If a system is entirely manual, it would require the following: source documents, general ledger, general journal, and special journals or subsidiary journals you might need. 5. 2 Legacy systems Legacy systems are often in existing business firms and were used before information technology got as sophisticated as it is today.
Even though legacy systems may appear to be old-fashioned, they have some definite advantages to the firm. They contain valuable historical data about the firm. The firm personnel tend to know how to use the system and understand it. A legacy system has usually been customized to the specific needs of an individual firm. You won’t find this kind of customization in generic accounting software packages. Unfortunately, legacy system also has significant disadvantages. Often, they have no documentation. It is usually hard to find replacement parts because hardware and software may become obsolete.
Even the computer language that legacy systems use is usually an older language. Most legacy systems have been built from scratch. 5. 3 Replacement of Legacy Systems You can completely replace your legacy system with a new, up-to-date system. That is quite an expensive solution. You can also update your legacy system. You can use a procedure called screen scraping, which is a technique that takes the data displayed on the computer screen and translates it so a newer application can read it. You can also set up an enterprise application integration system.
This type of system networks the different applications in your legacy system, such as inventory, payroll, and others. If you are a SMB, unless you are the smallest, hone-based variety, you will want your accounting information system to be up-to-date in order to keep you competitive within your industry. There are many options to choose from. 5. 0Components of accounting Information System: Accounting information systems generally consist of six main parts: people, procedures and instructions, data, software, information technology infrastructure and internal control.
Let’s look at each component in detail. 5. 1 People The people in AIS are simply the system users. Professionals who may need to use an organization’s AIS include accountants, consultants, business analysts, managers, chief financial officers and auditors. AIS help the different departments within a company work together. For example, management can establish sales goals for which staff can then order the appropriate amount of inventory. The inventory order notifies the accounting department of a new payable.
When sales are made, sales people can enter customer orders, accounting can invoice customers, the warehouse can assemble the order, the shipping department can send it off, and the accounting department gets notified of a new receivable. The customer service department can then track customer shipments and the system can create sales reports for management. Managers can also see inventory costs, shipping costs, manufacturing costs and so on. With well-designed AIS, everyone within an organization who is authorized to do so can access the same system and get the same information.
AIS also simplify getting information to people outside of the organization when necessary. For example, consultants might use the information in AIS to analyze the effectiveness of the company’s pricing structure by looking at cost data, sales data and revenue. Also, auditors can use the data to assess a company’s internal controls, financial condition and compliance with the Sarbanes-Oxley Act (SOX). The AIS should be designed to meet the needs of the people who will be using it. The system should also be easy to use and should improve, not hinder, efficiency. . 2Procedure and Instructions The procedure and instructions of an AIS are the methods it uses for collecting, storing, retrieving and processing data. These methods will be both manual and automated, and the data can come from both internal sources (e. g. , employees) and external sources (e. g. , customers’ online orders). Procedures and instructions will be coded into AIS software; they should also be “coded” into employees through documentation and training. Procedures and instructions must be followed consistently to be effective.
To store information, AIS must have a database structure such as structured query language (SQL), a computer language commonly used for databases. The AIS will also need various input screens for the different types of system users and different types of data entry, as well as different output formats to meet the needs of different users and different types of information. 5. 3Data: data contained in AIS is all the financial information pertinent to the organization’s business practices. Any business data that impacts the company’s finances should go into AIS.
The data included in an AIS will depend on the nature of the business, but it may consist of the following: * sales orders * customer billing statements * sales analysis reports * purchase requisitions * vendor invoices * check registers * general ledger * inventory data * payroll information * timekeeping * tax information This data can then be used to prepare accounting statements and reports such as accounts receivable aging, depreciation/amortization schedules, trial balance, profit and loss, and so on.
Having all this data in one place – in the AIS – facilitates a business’s recordkeeping, reporting, analysis, auditing and decision-making activities. For the data to be useful, it must be complete, correct and relevant. On the other hand, examples of data that would not go into AIS include memos, correspondence, presentations and manuals. These documents might have a tangential relationship to the company’s finances, but excluding the standard footnotes, they are not really part of the company’s financial recordkeeping. 5. 4Software
The software component of AIS is the computer programs used to store, retrieve process and analyze the company’s financial data. Before there were computers, AISs were manual, paper-based systems, but today, most companies are using computer software as the basis of the AIS. Small businesses might use Intuit’s QuickBooks, Sage Peachtree Accounting, or Microsoft’s Small Business Accounting but there are many others. Small to mid-sized businesses might use SAP’s Business One. Mid-sized and large businesses might use Microsoft’s Dynamics GP, Sage Group’s MAS 90 or MAS 200, Oracle’s PeopleSoft or EPCOR Financial Management.
Quality, reliability and security are key components of effective AIS software. Managers rely on the information it outputs to make decisions for the company, and they need high-quality information to make sound decisions. AIS software programs can be customized to meet the unique needs of different types of businesses. If an existing program does not meet a company’s needs, software can also be developed in-house with substantial input from end users or can be developed by a third-party company specifically for the organization.
The system could even be outsourced to a specialized company. For publicly traded companies, no matter what software program and customization options the business chooses, Sarbanes-Oxley regulations will dictate the structure of the AIS to some extent. This is because SOX regulations establish internal controls and auditing procedures that public companies must comply with. 5. 5Information Technology Infrastructure Information technology infrastructure is just a fancy name for the hardware used to operate the accounting information system.
Most of these hardware items are things a business would need to have anyway – they include personal computers, servers, printers, surge protectors, routers, storage media, and possibly a backup power supply. In addition to cost, factors to consider in selecting hardware include speed, storage capability and whether it can be expanded and upgraded. Perhaps most importantly, the hardware selected for an AIS must be compatible with the intended software. Ideally, it would be not just compatible, but optimal, a clunky system will be much less helpful than a speedy one.
One way businesses can easily meet hardware and software compatibility requirements is by purchasing a turnkey system that includes both the hardware and the software that the business needs. Purchasing a turnkey system means, theoretically, that the business will get an optimal combination of hardware and software for its AIS. Good AIS should also include a plan for maintaining, servicing, replacing and upgrading components of the hardware system, as well as a plan for the disposal of broken and outdated hardware so that sensitive data is completely destroyed. 5. 6Internal Controls
The internal controls of an AIS are the security measures it contains to protect sensitive data. These can be as simple as passwords or as complex as biometric identification. AIS must have internal controls to protect against unauthorized computer access and to limit access to authorized users which includes some users inside the company. It must also prevent unauthorized file access by individuals who are allowed to access only select parts of the system. AIS contain confidential information belonging not just to the company but also to its employees and customers.
This data may include Social Security numbers, salary information, credit card numbers, and so on. All of the data in an AIS should be encrypted, and access to the system should be logged and shriveled. System activity should be traceable as well. AIS also need internal controls that protect it from computer viruses, hackers and other internal and external threats to network security. Furthermore, it must be protected from natural disasters and power surges that can cause data loss. 6. 0Principles of Accounting Information System:
Efficient and effective accounting information systems are based on certain basic principles. Those basic principles are Cost effectiveness, Usefulness Output and Flexibility. These principles are explained bellow: 6. 1 Cost effectiveness : The accounting system must be cost effective. Benefits of information must outweigh the cost providing it. 6. 2 Usefulness Output : To be useful, information must be understandable, relevant, reliable, timely and accurate. Designers of accounting system must consider the needs and knowledge of various users. 6. 3 Flexibility:
The accounting system should accommodate a variety of users and changing information needs. The system should be sufficiently flexible to meet the resulting changes in the demands made upon it. 7. 0Work processing of accounting information system (AIS): Accounting information system (AIS) is working through a systematic, process. To complete its task, it uses different kinds of device like system input device, stored device, processing device, output device etc. Firstly users put some data like business transaction or events to get desirable output like financial statement or reports.
Then the system stored data for processing and also retrieve the data when it is necessary. The processing device process and summarize the transaction. At last the output system provides financial statement and reports according to the input data. Environment Operating System System Output: Financial statements and reports Process and summarize Business Entry “A” System inputs: Measurable transaction ;amp; events 8. 0 Users of accounting information system: Accounting information system helps users to make better financial decisions and other organizational reports.
There are two types of users of accounting information system where they directly and indirectly use the system. 9. 1 Internal users (Primary Users): Internal users are those kinds of users whose are addressed as organizational member. Internal or primary users included the followed members: 9. 2. 1 Owners: Business owners want to know whether their funds are being properly used or not. Accounting information helps them to know the profitability and the financial position of the concern in which they have invested their funds. 8. 1. 2Management:
Accounting information is called the eyes and ears of management. It helps a manager in appraising the performance of the subordinates. 8. 1. 3Employees: Employees of the organization can get the actual information about the financial position of their organization with the help of financial statements prepared by the accountant where accounting information system is contributed a major role. Accounting information is presented to internal users usually in the form of management accounts, budgets, forecasts and financial statements , reports, information in decision making etc. . 2External users (Secondary Users) 8. 2. 1 Creditors: Creditors or lenders uses the accounting information to find out the ability of the borrower to repay the loan, the amount of assets and liabilities of the borrower, evidence of income, economic position etc. before he or she lend the money to the economic entity. 8. 2. 2 Tax Authorities: Tax authority is one kind of external authority in accounting information system. They use the AIS by determining the credibility of the tax returns filed on behalf of the company. 8. 2. 3 Members Of Non Profit Organizations :
Nonprofit organizations such as hospitals, clubs, schools, colleges etc. need accounting information to know how their contributed funds are being utilised. This information helps them to make decision regarding future support. 8. 2. 4 Investors: Investors are the capital providers of a business. Before investing, an investor sees the financial report for figuring out the possibilities of the business in future. Financial information is important for an investor for making sure that the investment is secure. 8. 2. 5 Trading partners: Business need business to do business, it is the truth.
Associate trading companies looks at the financial information and makes the decision to trade with the particular economic entity. 8. 2. 6 Government Regulatory Agencies The financial information is vital for government regulatory agencies as it allows them monitoring the economy and market. 8. 2. 7 Law makers and economic planners It is important to keep a nation’s economy structure up-to-date with the global change. It is a job for the lawmakers and economic planners. The accounting information provides information that is necessary for making changes of the existing laws at the right moment for the economy and society betterment. . 2. 8 Other examples There are other external users for example; labor unions, customers and consumers, suppliers, SEC, tax authorities, chamber of commerce, press, competitors, auditors etc. Anybody out side of the managing radius of an economic entity is interested to the financial information of it, is defined as external user. For example to that statement; a BBA student looking for financial information of GOOGLE, he or she is the external user of the accounting information of GOOGLE. The financial reports or information are the result of accounting process that transferred to the users in two forms-internal and external.
These reports used for effective for operating the business by the internal users, on the other hand the etc. vendor 9. 0 Software Architecture of modern accounting Information System (AIS): Modern AIS typically follows a multitier architecture separating the presentation to the user, application processing and data management in distinct layers. The presentation layer manages how the information is displayed to and viewed by functional users of the system (through mobile devices, web browsers or client application). The entire system is backed by a centralized database that stores all of the data.
This can include transactional data generated from the core business processes (purchasing, inventory, and accounting) or static, master data that is referenced when processing data (employee and customer account records and configuration settings). As transaction occurs, the data is collected from the business events and stored into the system’s database where it can be retrieved and processed into information that is useful for making decisions. The application layer retrieves the raw data held in the database layer, processes it based on the configured business logic and passes it onto the presentation layer to display to the users.
For example, consider the accounts payable department when processing an invoice. With an accounting information system, an accounts payable clerk enters the invoice, provided by a vendor, into the system where it is then stored in the database. When goods from the vendor are received, a receipt is created and also entered into the AIS. Before the accounts payable department pays the vendor, the system’s application processing tier performs a three-way matching where it automatically matches the amounts on the invoice against the amounts on the receipt and the initial purchase order.
Once the match is complete, an email is sent to an accounts payable manager for approval. From here a voucher can be created and the vendor can ultimately be paid. 10. 0 Implication of Accounting information system(AIS): A big advantage of computer-based accounting information systems is that they automate and streamline reporting. Reporting is major tool for organizations to accurately see summarized and timely information used for decision-making and financial reporting.
The accounting information system pulls data from the centralized database, processes and transforms it and ultimately generates a summary of that data as information that can now be easily consumed and analyzed by business analysts, managers or other decision makers. These systems must ensure that the reports are timely so that decision-makers are not acting on old, irrelevant information and, rather, able to act quickly and effectively based on report results. Consolidation is one of the hallmarks of reporting as people do not have to look through an enormous number of transactions.
For instance, at the end of the month, a financial accountant consolidates all the paid vouchers by running a report on the system. The system’s application layer provides a report with the total amount paid to its vendors for that particular month. With large corporations that generate large volumes of transactional data, running reports with even AIS can take days or even weeks. After the wave of corporate scandals from large companies such as Tyco International, Enron and WorldCom, major emphasis was put on enforcing public companies to implement strong internal controls into their transaction-based systems.
This was made into law with the passage of the Sarbanes Oxley Act of 2002 which stipulated that companies must generate an internal control report stating who is responsible for an organization’s internal control structure and outlines the overall effectiveness of these controls. Since most of these scandals were rooted in the companies’ accounting practices, much of the emphasis of Sarbanes Oxley was put on computer-based accounting information systems.
Today, AIS vendors tout their governance, risk management, and compliance features to ensure business processes are robust and protected and the organization’s assets (including data) are secured. 11. 0 Advantages of Accounting information System (AIS) : Information systems changed forever the way accounting tasks are processed. The days of green paper pads are gone, and instead businesses have a centralized place where all accounting transactions are entered and saved. No more looking for paper journals or adding up long columns–computer software does that for you, error-free.
Thanks to reasonably priced hardware and software, even small businesses can benefit from computerized accounting. The advantages or benefits of accounting information system are explained bellow: 12. 2 Speed The main benefit of information systems in accounting is the speed of processing tasks. Data is entered once and can then be used and reused in compiling reports by literally pressing a button. If a transaction needs correction, it is easily done, with reports generated afterward at speeds never possible with manual accounting systems. 12. 3 Classification
When data is entered in an accounting system, manual or computerized, an accountant needs to classify it in a detailed fashion. For example, a transaction could be sales revenue or interest revenue. Using information systems, this classification process is easily accomplished with a drop-down menu from which you choose the proper category. You can also quickly generate reports involving classifications. With a manual system, this process takes much more time. 12. 4 Safety Once data is entered into a computer, it is safe. The chances of losing data are remote, especially when you perform regular system backups.
In manual systems, paper pads can be lost or damaged more easily. You can save data on the Internet, where it will not only be accessible anytime you need it but will also still be secure even if your computer is lost or damaged 12. 5 Better information : One of the benefits of accounting information system is better information. In an organization, an accountant always seeks for better information for his financial statement or reports. Accounting information system (AIS) provides essential information in accounting sector of an organization to complete its financial task. 12. 6 Improved Service:
Accounting information system provide better and quick sufficient information that’s why an enterprise could provide better service of its client or other sectors 12. 7 Increased Productivity: The one of the advantage of accounting information system is increased productivity. Productivity has to do with how much people can accomplish in a given period. With the accounting information system, people of the organizations can make more financial statement and reports in a given period than they would be able to do if they did not have such system. Increased productivity means that it costs less for a business to provide its goods and services.
These cost savings any be passed on to the customer in reduced prices. Such savings also result in increased profits for the business. 12. 8 Competitive Advantage : A business has competitive advantage when customers clearly prefer its products over those of other business. For example accounting information system can help reduce the cost of production so that a business can have the least expensive product from of its competitors. 12. 0 How to effectively implement Accounting information system (AIS) : As stated above, accounting information systems are composed of six main components.
When AIS is initially implemented or converted from an existing system, organizations sometimes make the mistake of not considering each of these six components and treating them equally in the implementation process. This results in a system being “built 3 times” rather than once because the initial system is not designed to meet the needs of the organization, the organization then tries to get the system to work, and ultimately, the organization begins again, following the appropriate process.
Following a proven process that works, as follows, results in optimal deployment time, the least amount of frustration, and overall success. Most organizations, even larger ones, hire outside consultants, either from the software publisher or consultants who understand the organization and who work to help the organization select and implement the ideal configuration, taking all components into consideration. Certified Public Accountants (CPAs) with careers dedicated to information systems work with small and large companies to implement accounting information systems that follow a proven process.
Many of these CPAs also hold a certificate that is awarded by the American Institute of CPAs—the Certified Information Technology Professional (CITP). CITPs often serve as co-project managers with an organization’s project manager representing the information technology department. In smaller organizations, a co-project manager may be an outsourced information technology specialist who manages the implementation of the information technology infrastructure. The steps necessary to implement a successful accounting information system are as follows: 12. Detailed Requirements Analysis Where all individuals involved in the system are interviewed, the current system is thoroughly understood, including problems and complete documentation of the current system—transactions, reports, and questions that need to be answered are gathered. What the users need that is not in the current system is outlined and documented. Users include everyone, from top management to data entry. The requirements analysis not only provides the developer with the specific needs, it also helps users accept the change.
Users who have the opportunity to ask questions and provide input are much more confident and receptive of the change, than those who sit back and don’t express their concerns. 12. 2Systems Design (synthesis): The analysis is thoroughly reviewed and a new system is created. The system that surrounds the system is often the most important. What data needs to go into the system and how is this going to be handled? What information needs to come out of the system, and how is it going to be formatted? If we know hat needs to come out, we know what we need to put into the system, and the program we select will need to appropriately handle the process. The system is built with control files, sample master records, and the ability to perform processes on a test basis. The system is designed to include appropriate internal controls and to provide management with the information needed to make decisions. It is a goal of an accounting information system to provide information that is relevant, meaningful, reliable, useful, and current.
To achieve this, the system is designed so that transactions are entered as the occur (either manually or electronically) and information is immediately available on-line for management to use. Once the system is designed, an RFP is created detailing the requirements and fundamental design. Vendors are asked to respond to the proposal and to provide demonstrations of the product and to specifically respond to the needs of the organization. Ideally, the vendor will input control files, sample master records, and be able to show how various transactions are processed that result in the information that management needs to make decisions.
An RFP for the information technology infrastructure follows the selection of the software product because the software product generally has specific requirements for infrastructure. Sometimes, the software and the infrastructure is selected from the same vendor. If not, the organization must ensure that both vendors will work together without “pointing fingers” when there is an issue with either the software or the infrastructure. 12. 3 Documentation As the system is being designed, it is documented.
The documentation includes vendor documentation of the system and, more importantly, the procedures, or detailed instructions that help users handle each process specific to the organization. Most documentation and procedures are on-line and it is helpful if organizations can add to the help instructions provided by the software vendor. Documentation and procedures tend to be an afterthought, but is the insurance policy and the tool that is used during testing and training—prior to launch.
The documentation is tested during the training so that when the system is launched, there is no question that it works and that the users are confident with the change. 12. 4 Testing Prior to launch, all processes are tested from input through output, using the documentation as a tool to ensure that all processes are thoroughly documented and that users can easily follow the procedures so that you know it works and that the procedures will be followed consistently by all users. The reports are reviewed and verified, so that there’s not a garbage in-garbage out.
This is all done in a test system not yet fully populated with live data. Unfortunately, most organizations launch systems prior to thorough testing, adding to the end-user frustration when processes don’t work. The documentation and procedures may be modified during this process. All identified transactions must be tested during this step in the process. All reports and on-line information must be verified and traced through the “audit trail” so that management is ensured that transactions will be handled consistently and that the information can be relied upon to make decisions. 12. 5 Training:
Prior to launch, all users need to be trained, with procedures. This means, a trainer using the procedures to show each end user how to handle a procedures. The procedures often need to be updated during training as users describe their unique circumstances and the “design” is modified with this additional information. The end user then performs the procedure with the trainer and the documentation. The end user then performs the procedure with the documentation alone. The end-user is then on his or her own with the support, either in person or by phone, of the trainer or other support person.
This is prior to data conversion. 12. 6 Data Conversion Tools are developed to convert the data from the current system (which was documented in the requirements analysis) to the new system. The data is mapped from one system to the other and datafiles are created that will work with the tools that are developed. The conversion is thoroughly tested and verified prior to final conversion. Of course, there’s a backup so that it can be restarted, if necessary. 12. 7 Launch The system is implemented only AFTER all of the above is completed. The ntire organization is aware of the launch date. Ideally, the current system is retained and often run in “parallel” until the new system is in full operation and deemed to be working properly. With the current “mass-market” software used by thousands of companies and fundamentally proven to work, the “parallel” run that is mandatory with software tailor-made to a company is generally not done. This is only true, however, when the above process is followed and the system is thoroughly documented and tested and users are trained PRIOR to launch. 2. 8 Tools Online resources are available to assist with strategic planning of accounting information systems. Information Systems and Financial Forms aid in determining the specific needs of each organization, as well as assign responsibility to principles involved. 12. 9 Support The end-users and managers have ongoing support available at all times. System upgrades follow a similar process and all users are thoroughly appraised of changes, upgraded in an efficient manner, and trained.
Many organizations chose to limit the amount of time and money spent on the analysis, design, documentation, and training, and move right into software selection and implementation. It is a proven fact that if a detailed requirements analysis is performed with adequate time being spent on the analysis, that the implementation and ongoing support will be minimal. Organizations who skip the steps necessary to ensure the system meets the needs of the organization are often left with frustrated end users, costly support, and information that is not current or correct.
Worse yet, these organizations build the system 3 times instead of once. 13. 0Importance of AIS in decision making and others: An importance 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. A primary function of an accounting information system is to support management in decision making, providing a centralized place where financial data reside. So, in decision making the importance of Accounting Information System are in below this epartment: 13. 1 In financial accounting department: The importance of AIS in financial accounting department is to measure business activities of a company. It communicates information about those activities to investors and creditors and other outside users for decision-making purposes. It helps two sides both Internal & External information user. In financial budget, auditing, expanding business, profit etc AIS helps the internal information user. Internal information user make financial budget after getting information from AIS.
Again they get know how much profit has gained after financial period. By this way internal information user make decision how the best outcome can be achieved from the firm. Again there are two primary external users are Investor and Creditor. Investors make decisions related to buying and selling the company’s stock (shares of ownership); is the company profitable? Will the company’s stock increase in value? Creditors make decisions related to lending money to the company; will the company be able to repay its debt when it comes due? Will it be able to pay interest in the meantime?
By this way investor and creditor make their decision. * 13. 2In managerial accounting department: The importance of AIS in managerial accounting department is analyzing data, planning, and decision making of entire firm. AIS supply their information to interest parties for making proper decision of firm. The main task of AIS in the managerial department is providing information for decision making and planning, and proactively participating as part of the management team in the decision-making and planning processes. Example, a firm wants to expand its business activities.
Now how many area of its business activities will be expand it depends on organization’s information. And this information supplies to the management body from AIS. Again management takes its decision collecting the information from different department of the organization. And AIS helps the management of getting information. 13. 3 In marketing Department: Marketing sector is dynamic portion of business firm. Here information is very much important. What types of promotion, add, selling strategy will be follow it is guided by management body.
Again management need lot different information about current position of that business field. This information supplies to the management from marketing department. How much product has sold, what types of product has demand in the market, what types promotion need, what is the present position of the organization in the current business field. This information supplied by marketing department to the management department. After getting this information management takes decision how way business will be run. 13. 4 In Accounting Department: AIS plays very significant role in accounting department in the firm.
It supplies information to the management about the financial statement, income statement, liquid assets, current assets, long term assets, liability and owner’s equity of the firm. In this department informs to the appropriate parties how much profit has earned or how much profit will be gained. In a word, an accounting is a mirror of a company. And it helps to the management to take right decision. 13. 5 For Good cooperation: Anything is always linked to certain environment, exists and develops third-party logistics enterprises in the supply chain linking play a role of a bridge.
Although the third-party logistics business as a separate entity exist in the market, it and other enterprises still have to maintain a close relationship. This is because the consumers in order to ensure normal operation of their production, they must understand and control the flow and the keeping of materials timely, which calls that third-party logistics enterprises accounting information systems cooperate with up-downstream enterprises, together control and manage the value-added activities occurred in the whole supply chain, and achieve really supply chain competition.
In addition, in the traditional enterprise organization mode, the enterprise’s business activities are divided in accordance with the functions and implement, so the lack of co-ordination between departments the “islands of information” inevitably come into being. The new system really record and reflect the economic business activities, do not require accountants note into the system according to the pre-format, consequently avoid duplication of information collection and shortcomings; nd accountant no longer were limited to the accounting departments, but to participate in the enterprises operational activities to coordinate other departments do well accounting information records and analytical work. In addition, other companies could line on a third party logistics enterprises accounting information system through the Internet, timely query and know the flow situation of logistics, do well their production plans. 13. 6 To meet the needs of multi-users:
With the change of the environment, the use objects of accounting information becomes expansion, including all levels of enterprise management, all investment bodies outside, government agencies, intermediary organizations, and so on, among them there are accountant and non-accountant. Traditional accounting information system can only generate financial statements afforded to financial executive and fewer accounting information, which make the use objects become narrow.
But in the new system entity DB record all resources and economic business activities, users through event-driven buttons on interactive interface can get the information they want. According to the value chain management, any of the activities should be the value-added process, and account is a measure means of the value of economic activity, therefore, any economic activity through the accounting information system can be measured and reflected.
However, as part of the current business activities cannot be measured by money, and we are currently unable to find suitable means of measuring the value, which caused some economic activities not reflected through accounting information system. 13. 7 To control afterwards and control in advance and in concurrent: Account has the functions of supervision and control of the economic activities of the enterprise. And the traditional manual account and of the computer accounting system for “accounting” can only do inspection Afterwards, the mistakes could not be avoided.
New accounting information system integrate of real-time processing, the standard cost, authorized the approval process control, budget management, and so on, so that employees based on the standard budget, change from passive to active to manage their own activities, do Real-time check, control, and timely identify problems, correct deviations and do truly Control afterwards, in advance and in concurrent Managerial Information Making Decision Financial Information Accounting Information Marketing Information ————————————————-
Illustration: – the decision making sectors 14. 0 Basic sub system of AIS: 14. 1The Revenue Circle: Economic enterprises, both for-profit and not-for-profit, generate revenues through business processes that constitute their revenue cycle. In its simplest form, the revenue cycle is the direct exchange of finished goods or services for cash in a single transaction between a seller and a buyer. Most business transactions are conducted on a credit basis. Cash is received after goods are shipped to the customer. There are two types of phase process.
I. The physical phase in which goods or services are transferred to the buyer. II. The financial phase in which the cash is received from the buyer. The functions of revenue cycle are: * Sales, * Credit, * Billing, * Warehouse, * Shipping, * Billing, * Inventory control, * Account receivable * General ledger Sales General ledger Revenue Circle Billing Billing Inventory control Shipping Account receivable Warehouse Credit ————————————————- Illustration: the circle of revenue 14. 2 The Expenditure Cycle:
The expenditure cycle follows a purchase from the decision to buy through the final payment. Shopper’s use the expenditure cycle every time they make a purchase: They decide they need to purchase product and compare pricing and suppliers; next, they make a purchase and choose a method of payment. A company’s expenditure cycle usually has more steps and involves a number of people and departments. It is a type of process that helps to define what occurs from the point that a business or consumer decides that the purchase of a given good or service is necessary to the point that the purchase is paid for in full.
The number and type of steps included within the cycle will vary, based on the complexity of researching and ultimately obtaining permission to make the purchase. The process may further be complicated based on the policies and procedures that are involved in deciding when and how to tender payment for those purchases The function of expenditure is: * Purchasing Decisions * Ordering Materials * Receiving Materials * Inventory and Story * Payment 14. 3The Human Resources / payroll cycle:
The HRM/payroll cycle is a recurring set of business activities and related data processing operations associated with effectively managing the employee work force. The first activity in the HRM/payroll cycle involves updating the payroll master file to reflect payroll changes such as new hires, terminations, changes in pay rates, or changes in discretionary withholdings. It is important that all payroll changes are entered in a timely manner and are properly reflected in the next pay period. The basic activities of payroll cycle are: 1. Update master payroll file 2. Update tax rates and deductions . Validate time and attendance data 4. Prepare payroll 5. Disburse payroll 6. Calculate employer-paid benefits and taxes 7. Deduct payroll taxes and other deductions 14. 4The production cycle: The production cycle represents part of the production time, excluding the period during which the objects of labor are in production reserves. The reduction of the production cycle accelerates the output of products and contributes to the better utilization of productive capital to the acceleration of the rate of turnover of circulating capital under socialism, and to the turnover of capital under capitalism.
The most important factors for reducing the production cycle are the introduction of advanced technology and the automation of production processes. Production cycle is started with the customer and ends up with satisfying the need of the customer by delivering their required product. It’s a frame work which describe how and from where the production started and when the various operation are interrelated with each other and how one is depend one is other from where its returns to its first step where it is initiated. 14. 5 The Financial Cycle: Financing cycle is the counterpart to the Investment cycle and business ycle. It covers the period from raising financial resources to their repayment. This cycle includes capital increases in cash, the payment of dividends and Share buy-backs, change in Net debt resulting from the repayment of borrowings, new borrowings, changes in Marketable securities and changes in cash and cash equivalents. In addition to standard cycles, we examine the more intense forms of financial cycles – disruptions and booms – because large movements in financial variables are often associated with highly volatile fluctuations in economic activity.
Disruptions include credit crunches and busts in housing and equity markets while booms are simply associated with booms in credit and asset prices. 15. 0 The Impact of Information Technology on Accounting: Information technology (IT) has created significant benefits for accounting departments. IT networks and computer systems have shortened the lead time needed by accountants to prepare and present financial information to management and stakeholders. Not only has IT shortened the lead time required to present financial information, but it also has improved the overall efficiency and accuracy of the information. 6. 1 Computerized Accounting Systems: The biggest impact IT has made on accounting is the ability of companies to develop and use computerized systems record financial transactions. Paper ledgers, manual spreadsheets and hand-written financial statements have all been translated into computer systems that can quickly present individual transactions into financial reports. Most of the popular accounting systems can also be tailored to specific industries or companies.
This allows companies to create individual reports quickly and easily for management decision making. Additionally, changes can be made relatively easy to reflect any economic changes in business operations. 16. 2 Increased Functionality: Computerized accounting systems have also improved the functionality of accounting departments by increasing the timeliness of accounting information. By improving the timeliness of financial information, accountants can prepare reports and operations analyses that give management an accurate picture of current operations.
The number of financial reports has also been improved by computerized systems; cash flow statements, departmental profit and loss, and market share reports are now more accessible with computerized systems. 16. 3 Improved Accuracy: Most computerized accounting systems have internal check and balance measures to ensure that all transactions and accounts are properly balanced before financial statements are prepared. Computerized systems will also not allow journal entries to be out of balance when posting, ensuring that individual transactions are properly recorded.
Accuracy is also improved by limiting the number of accountants that have access to financial information. Less access by accountants ensures that financial information is adjusted only by qualified supervisors. 15. 4Faster Processing: Computerized accounting systems allow accountants to process large amounts of financial information and process it quickly through the accounting system. Quicker processing times for individual transactions has also lessened the amount of time needed to close out each accounting period.
Month- or year-end closing periods can be especially taxing on accounting departments, resulting in longer hours and higher labor expense. Shortening this time period aids companies in cost control, which increases overall company efficiency. 15. 5Better External Reporting: Reports issued to outside investors and stakeholders have been improved by computerized accounting system. Improved reporting allows investors to determine if a company is a good investment for growth opportunities and the potential has to be a high-value company.
Companies can utilize these investors for equity financing, which they use for expanding business operations. 16. 0 The basic function of accounting information system (AIS) An accounting information system (AIS) provides financial information about a business. This information helps managers plan and control operations and provides reports to outside parties such as stockholders, creditors and government agencies. Parts of an accounting information system might include financial reporting, cost accounting, management accounting and enterprise resource planning (ERP).
Well-designed AIS gives a business a consistent way to view and analyze financial information and has three basic functions. 17. 4 Collect and Store Data One function of an accounting information system is to efficiently and effectively collect and store data about business activities and transactions. The system must capture transaction data on source documents, record transaction data in journals to present a chronological record of transactions, and post data from journals to ledgers that sort the data by account type. 17. 5 Provide Information
The second function of an accounting information system is to provide information useful for making decisions. This information usually involves reports in the form of financial statements and managerial reports. 17. 6 Provide Controls The third function of an accounting information system is to incorporate controls to ensure the accurate recording and processing of data. The system must make certain that the information that comes out of the system is reliable, ensure that business activities are efficient and in line with management’s objectives and keep business assets safe.
Traditionally, bookkeepers and accountants did the work of accounting systems by hand on paper, but today much of the work is automated with computers. According to Maryville University, setting up an accounting information system requires knowledge of topics such as database design and development, business process analysis, accounting applications, internal control requirements, information technology (IT) auditing and accounting requirements 17. 0 The services of accounting information system The Accounting Information System (AIS) is a common mainframe application system. It is online and features a menu for selection needs.
It addresses accounts payable information for a variety of both consolidated and non-consolidated Illinois State agencies, boards, and commissions on such matters as: AIS are a paramount internal accounting system for the 50+ Illinois State agencies, boards, and commissions that it serves. Both batch and on-line processing can be conducted in conjunction with such other Illinois State financial systems as the Illinois Governmental Purchasing System (IGPS), the Accounts Receivable Posting System (ARPS), Workers Compensation (WC), and the Comptroller’s Statewide Accounting Management System (SAMS).
It is described as a critical Category One application system within the business continuity plan of the Department of Central Management Services pertaining to disaster recovery. AIS serve approximately 2900 users and processes over 2 million transactions per month. By offering a common application such as AIS to its customers, BCCS is able to reduce the costs associated with individual duplication of accounting system operations among its various customers. 18. 7 Gathering and Preparation of Primary Documents AIS specialists work both in-home and in the client’s office.
The client company can gather its incoming and prepare its outgoing documentation itself or assign the functions to us fully or partially. It guarantee the quality of our accounting service by delivering the incoming and preparing the outgoing primary documentation in accordance with the National Accounting Standards in a timely, complete and accurate manner. 18. 8 Comprehensive Accounting Database Creation Any primary document is properly stored in the database in order for the accounting database to reflect the company’s economic activities.
These documents relate to interaction with contractors and to the company’s internal documentation. 18. 9 Optimal Tax Model Development Any company pays taxes. Our clients only pay the minimum required tax, due to our planning and tax optimization strategy. The most significant taxes for many companies are as follows: i. Value Added Tax ii. Income tax iii. Taxes on salary fund iv. Taxes on shareholder income We take every opportunity to help our clients minimize their tax burden. Please note our rule of thumb is to keep well-organized and well-documented tax records under the Ukrainian tax regulations.
In addition, we provide a full range of tax-related services such as follows: i. Development of a customized tax optimization strategy based on the client company’s activities over a previous period (month, quarter, year). ii. Our tax planning services enable you to use our accounting skills and knowledge of the Ukrainian tax regulations in order to minimize your current and future tax burden. iii. Development of a customized financial and tax strategy that is designed for creating a detailed financial model specifically for your business operations. 18. 10 Accounting and Tax Reporting under Ukrainian Standards 18. 1 Salary Accounting and Reporting 18. 12 HR Workflow 18. 13 Reporting to Tax Authorities, Social Insurance and Statistical Institutions 18. 14 Defense of Tax Reports against Supervisory Authorities 18. 15 Comprehensive Accounting and Tax Consulting 18. 16 Outsourced Financial Reporting under IFRS or Special Corporate Standards. Many multinational corporations are involved in consolidated management accounting in order to analyze their global corporate management and financial performance of local units and to create their global consolidated reports. 18. The Characteristics of accounting information system Accounting involves the process of transforming data about an organization’s operations into information that various stakeholders can use for myriad reasons. However, accounting requires the production of good information according to specific standards. Good information possesses a significant number of characteristics. 19. 17 Completeness Good accounting information is complete. This means that it provides intended users with all the information that is necessary to fulfill their information needs and requirement. Completeness also suggests that all ecessary information is included in any report that the organization produces. The assumption is that there would be no error of omission in the information. 19. 18 Reliability Information is said to be reliable if it is free from error and bias and faithfully represents what it seeks to represent. Information must be believed and depended upon by the users for a given purpose. To ensure that information is reliable, it must be verifiable, neutral and faithful in representing the economic condition. 19. 19 Relevance Information is said to be relevant if it influences the decisions.
To be relevant, information must be available in time, must help in prediction, and help in feedback. 19. 20 Understandability The accounting information must possess the quality of economic significance to the user, i. e. to understand the content and significance of financial statements and reports. The qualities that distinguish between good and bad communication in a message are fundamental to the understandability of the message. A message is said to be communicated when it is interpreted by the receiver of the message in the same sense in which the sender has sent. 9. 21 Comparability The quality of information enables users to identify changes in the economic phenomena over a period of time between two or more entities. Accounting reports should be comparable across the firms to identify similarities and differences. To be comparable, accounting reports must belong to a period, use common unit of measurement and common format of reporting. 19. 22 Confidence A major reason why independent auditors audit some accounting information is to inspire confidence in the validity and worth of the information.
This is a vital aspect of good accounting information, especially where critical decisions are taken based on such information. There must be confidence in the competence and integrity of those who produce accounting information. 19. 23 Timely Since information has an objective, there are usually periods within which these objectives operate. Good information neither is produced too frequently nor is it compiled after it is needed most. For instance, information that reaches a decision-maker after the decision is of limited use in the context of the decision-making process. 9. 24 Volume Information overload can be a problem- particularly with the inherently limitations of the human mind. Accounting information need to be distilled in a manner that makes it clear and concise and does not overwhelm the user. An unnecessarily high volume of information can do just that. 19. 25 Cost –efficient Valuable information should not cost more to produce than it is worth. This is the reason why information that is produced more regularly than required is less useful/ valuable than information that is produced to satisfy a specific need or requirement. 9. 26 Representational faithfulness Exists when there is agreement between a measure or description and the phenomenon it purports to represent. For example, assume that the term inventory in a balance sheet of a retail company is understood by external users to represent items that are intended for sale in the ordinary course of business. If inventory includes, say, machines used to produce inventory, then it lacks representational faithfulness. 19. 27 Useful Business owners need accounting information that is applicable to the business decision at hand.
They can request financial statements, accounting schedules, reconciliations or cost-benefit analysis. For example, cost allocation reports may not provide sufficient information for business owners who must make a decision on hiring employees. Cost allocation usually refers to applying business costs to goods or services produced by the company, which has very little to do human resources. Business owners should carefully request and review accounting information to ensure it provides the most useful information for the decision-making process. 19. 28 Consistent
Consistency refers to how business owners and accountants record financial information in a company amp; risque; s general ledger. Business owners need to ensure financial transactions are handled the same way. Inventory purchases should be recorded the same way as yesterday, today and tomorrow. This helps companies create accurate historical records and limit the amount of financial accounts or journal entries included in their general ledgers. 19. 29 Clarity It is useless to have accurate, timely and complete information if it is not clear to the user of the information.
The ability of the user to understand and properly comprehend the information is critical. This is another reason why accounting standards are created and enforced. 19. 30 Properly communicated It is necessary for organizations to monitor activities and accounting information is useful in so doing. However, good information is properly communicated to those who need it. Accounting departments should not merely create required reports but communicate them to information users in manner that increases the value of the information. 9. 31 Communicated through the right channel You can present and communicate accounting information in a number of ways. The most important factor is whether you communicate and distribute it through the appropriate channels. Since accounting information is created for certain users, you can judge the appropriateness of the communication channel by the effect on intended users. You can communicate some accounting information informally, while others require a very formal approach that strictly adheres to standards.
At any point in time, some characteristics may be more important than others are. Generally, good accounting information possesses all or most of the ten aforementioned qualities. 19. 0 Accounting Information Systems, Business Transactions, and Business Processes In order to understand how these systems work, you have to understand the accounting terms “business transactions” and “business processes” 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: 20. 2 Revenue and return processes, systems, and controls: The business transactions that fall under these business processes are large volumes of daily sales, returns, and cash inflow transactions. 20. 33 Expenditure and return processes, systems, and controls: 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. 20. 34 Conversion processes, systems, and controls The business transactions under this category are raw materials and work-in-progress transactions. 0. 35 Administrative processes, systems, and controls The business transactions that are administrative are investments, borrowing, and capital transactions. All of the 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. 0. 0 AIS in real life: Well-designed AIS allows a business to run smoothly on a day-to-day basis or hinders its operation if the system is poorly designed. A third use of AIS is that when a business is in trouble, the data in its AIS can be used to uncover the story of what went wrong. The cases of WorldCom and Lehman Brothers provide two examples. In 2002, WorldCom internal auditors Eugene Morse and Cynthia Cooper used the company’s AIS to uncover $4 billion in fraudulent expense allocations and other accounting entries.
Their investigation led to the termination of CFO Scott Sullivan as well as new legislation. When investigating the causes of Lehman’s collapse, a review of its AIS and other data systems was a key component, along with document collection and review and witness interviews. The search for the causes of the company’s failure “required an extensive investigation and review of Lehman’s operating, trading, valuation, financial, accounting and other data systems,” according to the 2,200-page, nine-volume examiner’s report.
Lehman’s systems provide an example of how AIS should not be structured. Examiner Anton R. VA Lukas’s report states, “At the time of its bankruptcy filing, Lehman maintained a patchwork of over 2,600 software systems and applications”. Many of Lehman’s systems were arcane, outdated or non-standard. ” The examiner decided to focus his efforts on the 96 systems that appeared most relevant, and the examination required training, study and trial and error just to learn how to use the systems.
Valukas’s report also noted, “Lehman’s systems were highly interdependent, but their relationships were difficult to decipher and not well documented. It took extraordinary effort to untangle these systems to obtain the necessary information. ” 21. 0 Difference between AIS and MIS: MIS means management information system and AIS means accounting information system which are computer based information systems. MIS and AIS both are helpful for organization towards keeping their records properly. Any organization requires a lot of information to keep performing efficiently.
All this information, coming from various sources about different aspects of the business is collected and analyzed through computers. To start off, computer based information system is known as Management Information System (MIS) which is the backbone for any organization to function smoothly. MIS has invaluable information that can be used effectively to evaluate past decisions and to plan accordingly to predict future operational success. On the other hand, Accounting Information System (AIS) is a division or subset of MIS.
AIS are all about a system of maintaining the accounting entries and financial statements along with sales and purchase records and other financial transactions. This system is extremely crucial in maintaining the account system of any organization. While AIS is no doubt very helpful to the management in judging the past performances and to come up with decisions for future projects, it is not just financial information that can make up for all that is required to run any organization successfully. Management requires information that goes far beyond the capability and scope of AIS.
Day by day any organization is growing and becoming more complex with the size and functions. So, additional information is required for many reasons such as production planning, sales forecasting, warehouse planning, market research etc. All this information comes through MIS as this sort of information is not normally processed by traditional AIS. It is clear that AIS is a system collects and stores data and then with the help of computers produces results that are used by managers that include investors, creditors and internal management of the organization.
Though AIS as a system can be performed using a paper and a pencil, in modern context it refers to a very complex computer based system that combines the traditional methods of accounting with the latest information technology to come up with all the financial information that is needed by management to take financial decisions. 22. 0Accounting information system requirements: To use accounting information system, there are some requirements which need to be fulfilled. By fulfilling these requirements an organization can easily use accounting information system and through AIS can meet their need.
The requirements which are needed for accounting information system are described in below: 22. 1 Analysis: Before developing an information system, the needs of the internal and external users need to be established. Then the source of the information, records and procedures for collecting and reporting data must be identified. The system must be cost-effective. The benefits must supersede the costs. 22. 2Input Devices Input devices used in accounting information systems include personal computers, scanning devices and keyboards, among others.
Output devices include computer display, printers, printed information on a paper and financial reports. 22. 3Designing the System: The system designed must be useful to the stakeholders and information must be easy to understand. It must also be relevant, up-to-date, dependable and accurate. In order to make it usable by everyone, a designer of an accounting information system must take into account the needs and knowledge of various users. 22. 4Changing Information Needs: The system must be easy to change in order to meet evolving demands.
It must be able to accommodate a variety of information users and changing information needs. Personnel must be trained and the system must be wholly operational. 23. 0 Uses of AIS: Most accounting tasks these days are processed in a computer, so accounting information systems have a huge impact on how accounting is done and what reports are generated. Accounting information system not only made easy to performed accounting tasks at a high speed, but also made easy to do for most businesses. Calculations are done automatically with fewer errors than manual accounting, greatly improving efficiency. 23. 1Business transaction:
Accounting information system is use for collecting and recording all business transactions so that any business can know about its transaction in a minute. Transactions which are entered by an organization employee are posted to the corresponding accounts. 23. 2Financial statements: Accounting information system is also use for making financial statement. The data which are needed for making financial statement is recorded into the system. The system has the capability of producing reports for any period. 23. 3Spreadsheets: In 1979, the first spreadsheet program which was called VisiCalc was designed by Robert Frankston and Dan Bricklin.
The spreadsheet program which performed calculation over 254 rows and 63 columns, made to simplify financial analysis. In 1983, a more sophisticated spreadsheet program, Lotus 1-2-3, allowed more rows and columns plus data management and graphs. This was a hit with accountants, who often need to analyze data, and perform complex computations and modeling. For instance, a cell which is the intersection of a column and row can be changed and calculations are automatically updated with the new information through accounting information system.
Accounting information system makes it easy to do quickly any accounting tasks or financial work on spreadsheet. Nowadays, Excel and other spreadsheets are the bread and butter of many accountants, making life easier and more efficient. 23. 4General Ledger: Accounting information system records all transaction of a business. Years ago, a general ledger, a list of accounts and transactions, was kept in paper pads and then manually maintained, a time-consuming task for accountants. If the balance sheet didn’t balance, it sometimes took accountants days to find the mistake.
These days are over with computerized accounting information system, where math is handled automatically and financial statements are compiled at the push of a button. 23. 5 Other aspects: Beside these things, accounting information system is also use for making account receivable, accounts payable, special journals such as sales journal, cash receipts journal, purchase journal etc. 24. 0Disadvantage of accounting information system: Accounting information system has some disadvantages which are given below: 24. 1 Learning the system: Learning an accounting information system can often be difficult and time-consuming.
Individuals must be trained on a system, and this can cause a disadvantage to companies in terms of time and manpower. An accounting information system is made up of many different components, and almost all systems are computerized. Because of their complexity, some people may find them hard to use. It can take weeks or months for a person to understand an accounting system, and usually the individual still does not understand completely what the system is capable of. If the employee quits working at the organization, it can take weeks or months, once again, to train another employee. 24. Re-evolution: Companies often change their way of doing business to keep up with the latest trends. To keep up in a demanding business world, these changes may impact an accounting system. An accounting information system is difficult to set up because every company is unique in its own way. In order to keep up with changes, accounting information systems must be re-evaluated often. Changes often need to be made in a system in order to process information efficiently. This can be a disadvantage to companies because it takes time for the re-evaluation, and it costs money. 24. 3 Loss of Information:
Accounting information systems are usually computerized. Because of this, there is always a risk of losing information through power outages or system crashes. When this happens, there is a chance that all the information in the system could be lost. Companies take precautions for this problem by backing up their files regularly and performing standard maintenance on all computer systems. They also install anti-virus software as another precaution. Still, none of these steps eliminates the potential problem that may occur. Accounting information systems store a company’s financial information for years.
If a system crash occurs, it causes a major disadvantage to the company. All, or some, information is lost, and there’s a chance it may never be recovered. 24. 4 Hacking: These systems are always at risk of being hacked. So, this can be also a big disadvantage for an organization if their files are being hacked by other person who does not belong from the organization. The company can face big loss because of being hacked. 24. 5 Human error : Human error and longer to generate a reports both are the disadvantage of manual accounting information system.
Errors in addition, transposition of figures, incorrect recording of a transaction, incomplete recording of a transaction, which are only one side of the double entry is recorded. These are all quite common mistakes and can prove to be quite difficult to locate without a good deal of experience in accounting. In manual accounting information system takes long time to generate reports. An efficient accountant also takes time to generate a report because it is not easy to process and there are many changes to make mistakes. * Conclusion:
Accounting information system is a very good creation of human beings which is made for collecting and processing transaction and it communicates the final information to interested parties. It helps to take decision of an organization so that we can say that it helps an organization to achieve its goals. Because of accounting information system a company can easily store business transaction and can easily make financial statement. Nowadays an organization cannot think to do its work without the help of accounting information system. So to run an organization smoothly an accounting information system is needed for the organization.