Accounting Information System

Information System- An information system business application of the computer. It is made up of the database, application programs and manual and machine procedures. It also encompasses the computer systems that do the processing. An information system is the set of formal procedures by which data are collected, processed into information, and distributed to users. Accounting information System- Accounting is a specialized information system. Its purpose is to provide information to decision makers regarding the economic status and activity of individuals, business organizations and govt. agencies. Accounting information systems vary widely from one business to another. AIS is responsible for providing timely and accurate financial and statistical reports for internal management decision making, and for external parties such as creditors, investors, and regulatory and taxation authorities. Accounting Information system is a set of interrelated subsystems which collect record and process data to information which is used to make quality decisions. The AIS has changed the way accountants perform their tasks and introduced efficiency and effectiveness in their various fields of study e.g. Auditing, Management Consultants and others. The system of collecting and processing transaction data and disseminating financial information to interested parties is known as the Accounting Information System. AIS are an information system that is specially designed for accounting and finance. A combination of financial and management accounting information system. Why Study AISThe primary objective of accounting is to provide information useful to decision makers. o Accounting is an information identification, development, measurement, and communication process. Students should know: The use of information in decision making. The nature, design, use, and implementation of an AIS. Financial information reporting. Auditors need to understand the systems that are used to produce a companys financial statements. Tax professionals need to understand enough about the clients AIS to be confident that the information used for tax planning and compliance work is complete and accurate. One of the fastest growing types of consulting services entails the design, selection, and implementation of new AIS. Work relating to accounting systems was the single most important activity performed by corporate accountants. Page | 1

 Components of Accounting Information System- The components of Accounting Information are1. Source documents- Source documents are the basic on which the entry is made in the input devices. Such as Sales and purchase invoice, bank checks, deposit slip etc. 2. Input devices- Input devices capture information from source documents and enables its transfer to the information processing component of the system. It includes the conversion of data on source documents to a written or electronic form, to make useable in the accounting environment, like journal entry, it transfer the data from source documents to a useable form. A popular input device is the bar code. 3. Information processor-Information processor is a system that interprets, transforms and summarizes information for use in analysis and reporting. Most of the information processed manually on the basis of the professional judgement of the accountant. Often computer technology with the help of the accounting software can play an important role in transforming the raw data to useful information. Even using the computer software, journal, ledger, working papers and financial statements can be prepared. 4. Information storage- information storage is the component of an accounting system that preserves data in a specialized form accessible to information processor. Often the data are stored in the hard drive of a computer or in a removable disk like CD. 5. Output devices- Output are the presentation of data to the users. The primary output is the formal financial report appeared in the computer monitor. Other forms of output are usually the hard copy. It includes graphics analysis reports, bills to customer etc. Rules for developing a chart of Account- There are several rules for establishing a chart of accounts. The rules are1. Economical- The chart of accounts should be economical and should not be unnecessary long. 2. Expandable- The chart of account should be expandable, so that in future there is much provision for expansion. 3. Numerical Digits- Numerical digit should be used in the chart of accounts. Numerical digits are easier to remember and can reduce the human coding errors. Relationship of MIS and AIS- The relationship between MIS and AIS can be enumerated in the following Diagram-

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Sales/Marketing Information System AIS Personnel / HR Information System

Production Information System

Finance Information System

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