Running Head: ACCOUNTING INFORMATION SYSTEMS

Accounting Information System

Students Name
Institutional Affiliation

ACCOUNTING INFORMATION SYSTEMS

Accounting Information Systems

I.

Abstract
Keeping good records of your finances pleases God, and this is illustrated in the book of

Proverbs 27:23-24 Know the state of your flocks, and put your heart into caring for your herds,
for riches dont last forever. There is a rapidly growing relationship that exists between
information technology and accounting. Several articles have been developed that range from
being empirical to analytical and are geared towards integration of information technology with
accounting. This research paper has addressed, but not limited itself on the following issues:
definition of accounting information systems, accounting system technology, functions of
accounting information systems, parts of accounting information system, documentation needed,
significance of accounting information systems as well as the role of the accountant and why one
should study information system. At the end of the research paper there is a conclusion which
touches on the different areas highlighted above
II.

Introduction
The main starting argument for this paper is that accounting is double thronged; it is a

field of knowledge apart from being a profession. Any research in accounting therefore calls for
a large component which is applied (Alter, 2012). This is the position which has raised
implications into this research. It is important to understand exactly what an accounting
information system stands for in this context. An information system is refers to a formal process
through which data is collected and the data is processed into information and is distributed to
the final user. Accounting information system does have the purpose of collecting and storage of
data and then process the accounting and financial data which then provides informational
reports to the interested parties and the managers.

ACCOUNTING INFORMATION SYSTEMS

This information is very important when it comes to making decisions. What is very
important to understand is that when we are talking about accounting information system, they
can either be manual or computer based (Alter, 2012). Most of accounting information systems
today is computer based rather than being manual. This does lead us to thinking further into
understanding another definition of information system which states that it is the research into
application of information technology in accounting, auditing and reporting. Bottom line is we
are talking about a system of information which could be electronic and manual but not limited
to either of the two forms (Moscove & Simkin, 2012).
III.

Accounting System Technology

There was a time when accounting data was capture and stored in paper document and

then processed before it was reported in a manual sense. It was a time when accounting clerks
did transcribe data from source documents which included time cards, customer purchase order
and into the paper journal (Leckie & Leckie, 2004). All the data did go straight into paper
ledgers. The financial statements were handwritten and then typed from the draft that was
handwritten. What happened is that manual systems of accounting were prone to errors and very
slow. The amount of data that could be processed at this instance was slow and required huge
number of employees to carry out such duties.
In the current set up, almost all accounting activities are computerized. This is a system
of accounting that is faster, more reliable and more accurate and can handle large volumes of
data for the organization. The most important aspect for any business is to come up with the
cheapest means through which they can keep their data; this is made possible through
computerized accounting information system (Alter, 2012). There is some information which can

ACCOUNTING INFORMATION SYSTEMS

only be captured and be communicated through the use of computers. An example is in the case
where information is to be gathered from a remote data base and then be used to obtain
immediate feedback for use by the management. This could be very impossible if it was not for
the presence of computer technology.
Computerized accounting systems do include several components that are important to its
operation. The computer hardware is the part which performs the important function of input,
storage and transmission of the data through output. The second component is the accounting
software which is utilized in processing of the data inputted into the computer (Leckie & Leckie,
2004). This is made up of set of instructions which commands the hardware on what it should be
done.
IV.

Functions of AIS

In the field of accounting, it is primarily believed that an accounting information system has got
three functions that are basic.
a. Efficient and effective collection and storage of data
There are several financial activities that take place in a business; such activities need to
be recorded. The recording of such transactions calls for the tracking of information from all
documents including the source document, creating a record of the data in the journal, and then
posting such information from the journal to the ledger (Alter, 2012). When we talk about
efficient recording of data, the system must be created in such a manner where the least number
of accounting staff will take part in the collection and recording of the data. Effective is in the
sense that the data collected will be of significance to the activities and decisions that are being
made in the business.

ACCOUNTING INFORMATION SYSTEMS

b. Supply of information for decision

Any business that intends to move forward must always have a strategy through which
they can achieve the set goals. Decisions concerning the business strategy are not made without
useful information. Information systems must be able to provide such information which will aid
the management when it comes to making decisions. The information in this case can be
provided in the form of managerial reports and financial statements.
c. Creation of controls
In the world of record keeping, errors usually may occur. The errors that occur could be
accidental due to certain omissions or commission; on the other hand the errors could be
deliberate in the sense that they are created intentionally to harm the organization. It is upon the
system to come up with control measures that will ensure that such errors are determined and
corrected before the financial reports are provided for decision making. This will ensure that the
data is accurately captured and recorded (Kieso et al., 2011).
V.

Parts of AIS

Typically accounting information system is divided into six important parts

i.

The people
This is made up of the users of the system such as accountants, the managers, business

analysts, auditors and government official. Each and every group of people does have their own
concern with information that is offered in the system.
ii.

Procedure

ACCOUNTING INFORMATION SYSTEMS

Every system must have a manual which offers set procedure on how data is collected,
how the same data is stored, retrieved before it is processed (McLeod, 2010). The procedure is
very important as it will ensure accountability and continuity in the organization. Take for
example a cashier is not present at work for a whole week; it does not mean that the business
activities will have to stop. It is important that when another individual steps in, they are able to
carry on similar duties as expected.
a. Documentation in Accounting system
Documentation does relate to the accounting system and is defined as a method through
which we describe in pictures or words how the system is utilized, what it does and how it
operates to ensure that such events are carried out. Documentation is a reach source of
information that helps users of accounting system when doing their job. Documentation is very
important as per the rules created under Sarbanes-Oxley where it is required that all internal
control of the business need to be documented in details for the purpose of use by the
management and external auditors when they are reviewing the control system (Alter, 2012).
There are important items that need to be documented and they include; design controls
through which the assertions of financial reporting by the management will be based upon,
description of transaction initiation, authorization, recording, processing and reporting. The third
item is the establishment and testing of the fraud control measures, controls over the process of
financial reporting, control on the safeguarding of the assets and controls concerned with the
environment for information technology (Leckie & Leckie, 2004).
Documentation has importantly been divided into the user documentation which is
important for the user of the system and the system documentation which provides information
that can be used in any case the system needs any form of repair.

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iii.

Data
This refers to collection of details about transactions which are yet to be processed into

making meaningful information. Data is always unstructured and put together before it is worked
on. It is from the data that we are able to process and come out with information for making of
important decisions.
iv.

Software
Before information technology was introduced in accounting, there was no software that

could be used in processing of information. What happened is that the management would rely
upon accountant to make manual processing of data in order to come up with vital information
for decision making (Kieso et al., 2011). In the current age, this has changed and we have
computer programs that are used specifically in processing of data.
v.

Information technology infrastructure

With the use of software, came the need for computer hardware which is used to operate

the information system of the business. Accountants and other users do require computer
hardware in order to manipulate data and later on to display the same data for analysis. This is
only possible through having an appropriate information technology infrastructure.
vi.

Internal control
This is a system of checks which ensures that data is safe. It is a measure for the

protection of important data that has been collected and is used for the business. Errors can be
made which may cost the business in terms of decisions, the system of internal control ensures
that information is checked and verified before it goes to the next step in the system.
VI.

Significance of AIS and the role by accountant

ACCOUNTING INFORMATION SYSTEMS

The current accounting information systems are known to be contemporary; they include
data which could not be collected initially since the current level of computerization could not be
attained. The contemporary system is capable of creating quick reports which may indicate the
shortfall in expectation that had been set at the start of the week or month. What initial systems
would do is to provide accurate information and forget the fact that management does need that
information that is highly relevant (Lee, 2012). Accounting systems need to support the
statistical accounts in order to ensure that physical data that include tons, barrels and hour
worked can be accumulated in order to be reported.
Much of accounting information is created for the managers at all the levels that exist in
the organization. There are some first line managers who do require much accounting
information than the other. Middle level managers are known to need much more broader data
which will ensure that there is control and performance evaluation. Upper level managers do
require much more information that is important for strategic implementation of policies.
In such a case where information systems are in existence, the role of accounting data and
accountants should be recognized. Most businesses are of the opinion that they can be able to
come up with successful strategies once they are able to come up with means of production that
cuts on the level of cost incurred (Kieso et al., 2011). The strategies of the organization can only
be attained once they are able to produce at a cost that is lower than that of most competitors. It
is through accountants that the business can be able to come up with proper estimates that may
be capable of influencing the strategy. They can then go ahead and monitor the effect of their
creation across time and see whether they have been successful in changing the plight of the
business. In such a case, an accountant should be able to extend data collection and analysis
beyond the boundary of the organization.

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VII.

Why should one study accounting information system

As an accountant, one should at least have the ability to make use of accounting system.
Data shows that the employment of auditors and accountants is expected to grow by up 16% by
the year 2020. There are several corporate scandals which have taken place in the past and which
has led the focus to be on the accounting knowledge of most accountants and how best they can
navigate through accounting system. There are new strict laws in the financial sector which
demand that people who are involved in accounting activities must be conversant with different
systems that are used in the same profession (Kieso et al., 2011).
In most cases when developing business information systems, end users are asked to take
part as project team members when they are evaluating an information system that is already
existent, and the acceptability of the new system that is being developed as well as how the new
system will be implemented (Lee, 2012). In such case, the users are provided with important
advice on issues such as how the system can be operated, how data is entered, how access can
only be limited to users who are authorized and interactions that can take place between the user
and the system.
In order for an accountant to be in a position where they can offer such information
above, they have to gather sufficient information in terms of the users that they will be
representing. For example, when one is a tax specialist, they should have knowledge that is
sufficient on accounting systems that can help in extracting information that is related to tax
returns, and understand what has taken place in data processing to make sure that some errors
can easily be corrected (Kieso et al., 2011).
VIII.

Conclusion

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10

With the change in technology, there has come the need to ensure that accounting
information is gathered, stored, processed and reported in a quick and efficient manner. This
paper has been able to provide an overview of what exactly accounting information system is. It
is important to the business as a means through which it complies with the rules and regulations
in the market as well as a means through which they can gain information for decision making
from raw data (Vickery, 2013).We have been able to see a brief narrative as to why we need an
information system, the overall objective of the system, the mode of operation and the structure
of the main subsystem. We have also looked at the most important components that make up
accounting information system as well as the users of such information and the benefits that they
gain.

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11

References
Alter, S. (2012). Information systems: A management perspective. Menlo Park, CA:
Benjamin/Cummings Pub.
Leckie., R & Leckie, H. (2004). Higher: Information systems. St. Andrews:
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2011). Fundamentals of intermediate
accounting. Hoboken, NJ: John Wiley & Sons.
Lee, K. S. (2012). An accounting information system. Beaumont, TX: Lamar University.
McLeod, R. (2012). Management information systems. Chicago: Science Research Associates.
McLeod, R. (2010). Information systems. New York: Macmillan.
Moscove, S. A., & Simkin, M. G. (2012). Accounting information system: Concepts and pratice
for effective decision making. New York: John Wiley & Sons.
Vickery, B. C. (2013). Information systems. Conn.: Archon Books.