Accounting Info System

An
accounting information system (AIS) is a system that first collects and stores data and then
processes it into information used by decision makers (investors, creditors, and managers). This
information generated from an AIS can ultimately help decision makers manage organizations more
efficiently and strategically. Though an accounting information system can simply be a paper-and-pencil-
based manual accounting system, today, the term AIS is most commonly referred to as a complex
computer-based system combining the resources and capability of information technologywith
traditional accounting methods and controls.[1]
Accounting information systems are composed of six main components:[2]
1. People: users who operate on the systems
2. Procedures and instructions: processes involved in collecting, managing and storing the data
3. Data: data that is related to the organization and its business processes
4. Software: application that processes the data
5. Information technology infrastructure: the actual physical devices and systems that allows the
AIS to operate and perform its functions
6. Internal controls and security measures: what is implemented to safeguard the data
Software architecture of a modern AIS
A 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, accounting) or static, master data that is referenced when processing data (employee and
customer account records and configuration settings). As transaction occur, 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 avendor, 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.
Advantages and implications of AIS
A big advantage of computer-based accounting information systems is that they automate and
streamlinereporting.[3] Reporting is major tool for organizations to accurately see summarized, 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 greatest 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 retrieves the data from the database and 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 an 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. [4] 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
compliancefeatures to ensure business processes are robust and protected and the organization's assets
(including data) are secured.

Accounting Info System

Uploaded by

Copyright:

Available Formats

Accounting Info System

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Accounting Info System

Uploaded by

Copyright:

Available Formats

An

Accounting information systems are composed of six main components:[2]

1. People: users who operate on the systems

4. Software: application that processes the data

Software architecture of a modern AIS

Advantages and implications of AIS

You might also like