Summaries Accounting Information Systems Chapter 1-3 and 7 book Accounting Information Systems Romney Marshall B.; Bart Paul J.
Sep 16,2019 • Filed to: Accuonting • Proven solutions
Modern companies need current, rapid, high-quality information about their internal conditions for the purpose of making strategic decisions. This can be accomplished by an Accounting Information System (AIS). This a computerized method of recording and maintaining the accounting processes of a business. This system leverages Information Technology (IT) tools for this purpose. It collects, stores, processes and presents accounting information so that it can be utilized by the decision makers in a business. Prior to investing in an Accounting Information System, it is important to know its purpose, components and capability. Here is more on this
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What is Accounting Information System
This is a software tool that can be used to identify, record, organize, qualify, interpret, present and store accounting information. By using customized, intelligent, built-in formulas, the accounting information system is capable of displaying the profitability of a business for a specific period of operation. It is also capable of revealing the overall state of an enterprise by assessing its assets, liabilities and considering the owners' equity. Accounting Information Systems are highly versatile. Therefore, they can be used by a wide range of professionals. Examples of these are accountants, managers, analysts, consultants, Chief Financial Officers (CFOs), regulators and tax agencies too.
The Basic Components of Accounting Information System
An Accounting Information System (AIS) operates upon a foundation of five basic principles. They include the principles of Control as well as Relevance. It also operates upon Compatibility, Flexibility and Cost-benefit principles. By doing so, it fulfills the Generally Accepted Accounting Principles (GAAPs). In addition to that, this specialized system has 5 unique components.
Source Documents
This is one of the components of an accounting system. It refers to the documents which contain the records of business transactions. They are tangible evidence of commercial activity. Some examples of these documents include purchase orders, invoices and receipts. Often created at the end of a business process or the completion of a transaction, they serve as indicators of business activity and keep records of transaction details. Source documents can be tangible or digital in nature.
Devices to Capture Input Data
This is a major component of this system. Input devices are used to capture transaction information for accounting purposes. By using specialized mechanisms of operation, they capture data accurately and allow for its processing or storage. Often used by employees, they help to enter these details into accounting information systems. Examples of input devices include keyboards, scanners, touch pads, modems and bar code scanners.
Processing Devices for Information
This component of the Accounting Information System (AIS) is usually connected to the input devices. It receives raw data from them, processes it and then saves it in digital storage files such as ledgers, reports and journals. Examples of these processors are software and digital tools. Their ultimate objective is to transform accounting data into information that decision makers can utilize successfully. Modern processors are able to process bulky accounting information in seconds.
Storage Devices for Information
This is a component of accounting systems which is used to store the ledgers and reports that are generated from processed accounting data. Traditionally, file cabinets were used as storage devices. However, many Accounting Information Systems are based in computers today. Therefore, the storage is performed in hard disks, flash drives, memory cards and Cloud infrastructure. This component is used for live as well as back up storage of this information. Furthermore, the accounting information is often stored in such a way that it can support shared access.
Output Media
Accounting Information Systems process data into information, so that they may guide the decision makers in an organization. This information is presented through the output media component of the Accounting Information System (AIS). Examples of output media include monitors, projectors and printers as well. These devices work to provide accounting information in a legible, clear and useful way.
An Accounting Information System (AIS) is an excellent way to manage the financial operations and records of your business. It leverages computing power to streamline business accounting today. Its components make this possible. One of the most reliable and effective systems for this purpose is FreshBooks. You can implement it in your business to experience power, automation and convenience.
FreshBooks - Software for Accounting Information System
There are various types of accounting software. An ideal example is FreshBooks. This specific Accounting Information System (AIS) is built on Cloud infrastructure. Furthermore, it is an accounting system for small business. By using the built-in tools within FreshBooks, accountants can manage invoices, track the periods of accounting, manage receipts, include credit card payments and keep track of expenses as well Moreover, this software follows the required basic accounting principles. You can use this digital tool at no cost for a 30 day period. For further use, you have to purchase it FreshBooks is a great long-term investment for small businesses today.
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What is an Accounting Information System (AIS)?
An accounting information system (AIS) involves the collection, storage, and processing of financial and accounting data used by internal users to report information to investors, creditors, and tax authorities. It is generally a computer-based method for tracking accounting activity in conjunction with information technology resources. An AIS combines traditional accounting practices, such as the use of Generally Accepted Accounting Principles (GAAP), with modern information technology resources.
How an Accounting Information Systems (AIS) is Used
An accounting information system contains various elements important in the accounting cycle. Although the information contained in a system varies among industries and business sizes, a typical AIS includes data relating to revenue, expenses, customer information, employee information, and tax information. Specific data includes sales orders and analysis reports, purchase requisitions, invoices, check registers, inventory, payroll, ledger, trial balance, and financial statement information.
Accounting Information Systems Romney A…
An accounting information system must have a database structure to store information. This database structure is typically programmed with query language that allows for table and data manipulation. An AIS has numerous fields to input data as well as to edit previously stored data. In addition, accounting information systems are often highly secured platforms with preventative measures taken against viruses, hackers, and other external sources attempting to collect information. Cybersecurity is increasingly important as more and more companies store their data electronically.
The various outputs of an accounting information system exemplify the versatility of its data manipulation capabilities. An AIS produces reports including accounts receivable aging reports based on customer information, depreciation schedules for fixed assets, and trial balances for financial reporting. Customer lists, taxation calculations, and inventory levels may also be reproduced. However, correspondences, memos, or presentations are not included in the AIS because these items are not directly related to a company’s financial reporting or bookkeeping.
Benefits of Accounting Information Systems
Interdepartmental Interfacing
An accounting information system strives to interface across multiple departments. Within the system, the sales department can upload the sales budget. This information is used by the inventory management team to conduct inventory counts and purchase materials. Upon the purchase of inventory, the system can notify the accounts payable department of the new invoice. An AIS can also share information about a new order so that the manufacturing, shipping, and customer service departments are aware of the sale.
Internal Controls
An integral part of accounting information systems relates to internal controls. Policies and procedures can be placed within the system to ensure that sensitive customer, vendor, and business information is maintained within a company. Through the use of physical access approvals, login requirements, access logs, authorizations, and segregation of duties, users can be limited to only the relevant information necessary to perform their business function.