Financial Accounting Concepts

What is Accounting Information System?

Today, when we refer to an accounting information system (AIS), we typically imply a computerised accounting system, as computers and computer software that assist us in processing accounting transactions have become quite affordable.

The benefits of adopting a computerised accounting system outweigh the costs of obtaining one, and most businesses, including the smallest ones, can afford to and do use one. This does not imply that paper-based or manual accounting processes and systems have been eliminated.

Accounting information systems provide accounting data collection as in different forms in a proper and timely manner by using the accounting system software so that accountants can quickly process and get the information that they want.

The majority of firms utilise both non-computerized and computerised systems. QuickBooks is a popular, reasonably inexpensive accounting software package utilised by small and medium-sized enterprises.

Manual and Computerized Accounting Information Systems

An accounting system is any set of procedures or tools used to account for and store information about a business. In the accounting profession, an accounting system can be any combination of accounting software, hardware and support software, and other tools or services.

Interestingly, the phrase accounting information system existed prior to the invention of computers. Technically speaking, an AIS is a system or series of processes for collecting data on accounting transactions, documenting, organising, and summarising the data, and preparing financial statements and other reports for internal and external users.

These methods or procedures may exist as a collection of paper ledgers, computer databases, or a hybrid of the two. Banks that may lend the company money, investors, and the Securities and Exchange Commission (SEC), which requires publicly traded corporations to present audited financial accounts, are examples of external users. Since businesses were required to prepare financial statements long before the invention of computers, they used manual accounting methods to collect the necessary data. Data refers to the components of accounting transactions input to an AIS.

You may be aware of numerous types of data; for instance, the cash received upon the sale of an item is one data point, the reduction of the inventory account associated with that specific item sold is another data point, and the revenue and cost of goods sold are additional data points associated with that single transaction of a sale. These data points are consolidated and aggregated (i.e., “processed”) into more relevant and useful statistics in the financial statements. All of this data is commonly known as financial information. A corporation that used a manual AIS in the past now employs a computerised AIS. It is essential to remember that a computerised accounting system does not change what we do with accounting transactions, only how we execute it and provide the information to different users.

Benefits of Computerised Accounting Information Systems

For any organization, if the financial information is not collected and analyzed at the right frequency, it may not be reliable for decision-making. At the same time, for the sake of maintaining profitability and productivity, any organization needs to know the status of various financial accounts at any point in time. AIS comes with multiple modules and capabilities to ensure this. These modules include a database (which is also known as an accounting information system), a reporting module, financial management module and system maintenance tools.

AIS software also includes accounting and auditing tools. These help to track the financial information for all business processes. They also provide management with reports of the same information to make good business decisions.

Computerised accounting information systems (CAIS) have a number of benefits for businesses, including:

-Improved accuracy and efficiency in financial reporting

-Reduced costs associated with manual accounting processes

-Easier access to important financial data for decision making

-Improved communication between management and employees

-Reduced risk of fraud and other illegal activities

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