An Accounting Information System (AIS) refers to the structure used by a business to collect, process, manage, store, retrieve, and report business related data. Business analysts, accountants, managers, consultants, auditors, tax agencies, and chief financial officers use such information in making crucial business decisions (Gelinas, Dull, and Wheeler, 2012). Professional accountants work with AIS in deriving financial data with high levels of accuracy in record keeping, and avail this information to decision makers (Hall, 2013). AIS also ensure that the data used by accountants remain secure and intact and that it is only availed to legitimate users.
AIS are computerized accounting program that supports the company in keeping its financial records (Turner and Weickgenannt, 2008). The information or data is entered into the system, the system tracks and organizes the data, and produces as output information that is meaningful to the business. The system provides detailed and accurate information about the company’s business position, and its financial statements.
AIS involves use of computer based systems, and information technology for tracking a company’s activities. The statistical reports generated by the system are used internally by the company’s management or externally to business stakeholders (Boczko, 2007). Businesses use different AIS depending on their size, business type, volume of information or data, and managerial needs, amongst other factors. AIS handle every step in accounting procedure from recording to preparing financial statements.
HISTORY OF AIS.
Accounting Information Systems combine traditional accounting procedures and practices, such as Generally Accepted Accounting Principles (GAAP), with modernized information and technological resources. They are decades old business functions. Traditionally, accounting included use of paper work such as ledgers and journals for recording, and maintenance of financial information (Gelinas, Dull, and Wheeler, 2012). Archeological evidence has it that accounting record keeping was an integral part of man’s economic activity. In early societies, record keeping involved pictorial markings, and use of clay tokens.
Managers and business owners were obliged to review this information to ensure its accuracy, reliability, and validity. They then provided additional analysis to generate insights on trends or operational issues that needed attention (Hall, 2013). While this system worked for some time, the process involved massive investments in terms of cost and price.
The evolution of accounting stresses on the commercial and societal factors that influenced the development of accounting processes. Accounting evolved from technological changes, and the need for accuracy and reliability of financial information. Currently, businesses organize data in magnetic storage devices, and process it in silicon microprocessors. Data management procedures and functions that underlie accounting are implemented through data processing systems (Turner and Weickgenannt, 2008). The term data processing has currently become synonymous with the use, and application of computers.
The need and spread of information has provided a new way of information provision. The development of modern information technology has massively impacted accounting in management of data. In the 20th Century the worldwide expansion of information technology and informatics developed the possibility of utilizing accounting information effectively, and consciously. The consequence are development of automated systems or accounting software that supports the work of accountants in compiling reports, recording and processing financial events, and preparation of tax returns.
Besides the provision of information, accounting software should provide sufficient data that managers can use to formulate decisions. Among the areas that demand massive amounts of information, that enhance decision making, is management accounting unit. For efficient operation, management accountants require a high level working accounting system, and modern computing programs. This facilitates comprehensive decisions made on a timely manner.
HOW AIS IS USED.
An accounting system comprises of six elements; people, procedures and instructions, data, software, information technology infrastructure, and internal controls. People are the users of the system who operate and use the information stored to develop or enhance decisions. Procedures and instructions involve all methods for processing and retrieving data in a company. Data are the information relevant to the organization’s procedures and practices (Hall, 2013). The software involves programs installed to process data. Information technology infrastructure involves the hardware used in operating the system while internal controls are security measures that protect sensitive data (Mancini, Vaassen, and Dameri, 2013).
Companies and businesses use AIS to make the accounting process easier by utilizing programs and other systems to perform accounting functions. Accounting software allow for compilation of financial data used for taxation purposes, book-keeping, and payroll requirements, amongst other accounting functions.
The most significant aspect of AIS is in the promotion of the activities of an enterprise to form a reliable image to internal and external stakeholders. AIS promote such activities through effective preparation of updated statements, provision of information sufficient for the data to be understandable to all users, contribution of statistics through system linkages, and in tracking the liquidity. The first step in conducting these functions involves recording data such as expenses and profits. This is referred to as data input in the system. Next the information goes through the system process referred as data processing, and later the data is filed for storage. The system files and stores the information where it is needed, and can be retrieved for use (Gelinas, Dull, and Wheeler, 2012). Accounting information systems have categories or groupings that maintain stored files future use. Communication is the final phase of the systems where the stored information is utilized in making crucial accounting and business decisions.
IMPORTANCE OF AIS.
The use of AIS in any organization is crucial for the purposes of recording and storage of financial data for the present or future use. Corporations in the retail industry need to keep and update such information so that all transactions are captured for reference (Boczko, 2007). AIS support such processes by providing options for daily updates or as per according to the businesses’ needs. Much of these data is kept for a longer time as compared to manual records, which supports business audits. By using computerized systems in organizing, and retaining data, companies are better positioned to survive and succeed.
Businesses are encouraged to use AIS for the purposes of efficiency. Every business aims at reducing time used in input and storage of data. With such systems as AIS, the users automatically generate information hence reducing time used in retrieving data. AIS make the process of making payments faster and efficient from the accounts payable. With the system, payments of bills and taxes are made automatically. It also makes billing effective from the accounts receivable where the system provides time and date when such bills should be printed.
AIS are continuously changing with changes in economic surroundings, and, therefore, it is considered as a dynamic system as it reacts to environmental changes. Its adaptive system, enhances its ability to react and adapt, and this contributes to increased business performance. The working and procedures of AIS depend on the employees or people operating it, and their professional, knowledge, and experience levels. Changes in the system work together with changes in the elements of the system (Boczko, 2007). The demand for human factor, in the recent years, has been on the rise as a result of rapid economic development, and increased expectations in skills and abilities. However, the demand for managers varies in different companies as it depends on the features of the organization. In recent years, an increase in demand of quality and professional publications has contributed massively to the development of accounting information systems (Mancini, Vaassen, and Dameri, 2013). This development does not entirely define the primary objective of the company, but accountants and managers consider it as a requirement for increased quality of accounting information.
AIS are designed to record and store all business transactions. An accounting clerk inputs all business transactions into the system, and the transactions are automatically posted to corresponding accounts. This ensures that, by the time such information is needed, it is found organized and complete. The use of these systems form a significant part of an organization’s current and future trends. This is derived from the ability of managers to make decisions based on the output or the financial statements provided by the system. Such decisions include the formulation and implementation of business strategies that improve the development of the business. The decisions also enhance the realization of organizational goals and objectives. AIS provide business tools that act in reduction of costs, increased profits and savings, and financial stability of the business (Mancini, Vaassen, and Dameri, 2013). The systems make the accounting procedure effective in providing information as at when needed, and to the intended users. They allow a smooth running and maintenance of business goals and objectives. Taking advantage of these systems provide significant benefits for both entrepreneurs and corporate.
Boczko, T. (2007). Corporate accounting information systems. Harlow: Financial Times Prentice Hall.
Gelinas, U. J., Dull, R. B., & Wheeler, P. R. (2012). Accounting information systems. Mason, OH: South-Western/Cengage Learning.
Hall, J. A. (2013). Accounting information systems. Mason, OH: South-Western Cengage Learning.
Mancini, D., Vaassen, E. H. J., & Dameri, R. P. (2013). Accounting information systems for decision making. Berlin: Springer.
Turner, L., & Weickgenannt, A. (2008). Accounting information systems: Controls and the processes. Hoboken, N.J: Wiley.