In simple words, it is a system to collect and store all information related to financial transactions and events so that they can be retrieved for decision making by the internal management, accounts, CFOs, auditors, etc. For example, AIS may be a very simple ledger for various accounting, costing, and financial reports like Statement of Profit and Loss, Balance Sheet, etc. You are free to use this image on your website, templates, etc, Please provide us with an attribution link Article Link to be HyperlinkedFor eg: Source: Accounting Information System (AIS) (wallstreetmojo.com) #1 – Person ( Stakeholders)The starting and ending of every accounting aspect. There is a stakeholder who feeds information into the system, collects, analyses, reports, etc., and another person(stakeholder) needs information. For example, an accountant records various financial data and presents them for the use of multiple stakeholders like an owner, shareholders, creditors, government, etc. #2 – DataNow, what do AIS records, reports? It is all about various accounting transactionsAccounting Transactions are business activities which have a direct monetary effect on the finances of a Company. For example, Apple representing nearly $200 billion in cash & cash equivalents in its balance sheet is an accounting transaction. read more, events, and other monetary items. AIS will not record any information which does not have a monetary baseThe monetary base refers to a measure of money supply in the economy consisting of Federal Reserve System (Central Bank) issued currency circulating outside of Treasury and Federal Reserve through the public and Federal Reserve balances of depository institutions. It is also known as MB or M0.read more. Data can be anything like sales ledgerA sales ledger is a ledger entry that records any sale in the book of records, even if the payment is received or not yet received. It records the sales and the cash when received and the amount owed to the business.read more, customer account, vendors ledgers, financial reportsFinancial reporting is a systematic process of recording and representing a company’s financial data. The reports reflect a firm’s financial health and performance in a given period. Management, investors, shareholders, financiers, government, and regulatory agencies rely on financial reports for decision-making.read more like P&L and Balance sheet, cash flow statementA Statement of Cash Flow is an accounting document that tracks the incoming and outgoing cash and cash equivalents from a business.read more, etc. #3 – Established ProceduresAs stated in the definition, AIS follows predefined steps and procedures to perform various functions. Ensure consistency; this is one of the most basic needs of an AIS. AIS may act either with manual intervention or automatically. This action needs to be instructed to the person processing data or coded in the system in case of automatic systems. #4 – Software (ERP)A software or, in broader terms, ERP is a computer-based program that performs the stated functions. ERP is a database software package system that supports business processes and operations, including manufacturing, marketing, financial, human resources, etc. It forms one of the main components of the Accounting Information System (AIS). In simple terms, IT Infrastructure can be a consortium of various IT & IS hardware, tools, and accessories. For example, computers, printers, scanners, etc. #6 – Internal ControlsInternal controlsInternal control in accounting refers to the process by which a company implements various rules, policies, or procedures to ensure the accuracy of accounting and finance information, safeguard the various assets of the business, promote accountability in the business, and prevent the occurrence of frauds in the company.read more are the basic need of every business organization. These are tools, checks, procedures, systems adopted by an organization to ensure the integrity of financial informationFinancial Information refers to the summarized data of monetary transactions that is helpful to investors in understanding company’s profitability, their assets, and growth prospects. Financial Data about individuals like past Months Bank Statement, Tax return receipts helps banks to understand customer’s credit quality, repayment capacity etc.read more, prevention of frauds, errors, safeguarding of assets, etc. Case Study Based on Examples of AIS
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In the era of rapidly changing technology and adaptation of technological advancements, significant changes are occurring in AIS. The latest changes include cloud computing, cloud accounting, real-time accounting, or mobile accounting. This has made accounting much easier and more convenient than the old ways of accounting. Advancement has reached a level that records, classifies, analyses, and reports figures and predicts future trends, which may help to face an actual situation with much preparedness. ConclusionAccounting Information System (AIS) can be described as a boon to any organization as we studied both advantages and disadvantages, limitations of AIS. However, overall it is very beneficial for an organization to migrate from manual accounting to AIS-based accounting. For overcoming various disadvantages, and limitations of AIS, there is software that secures the organization’s AIS from viruses, hackers, and other attacks. Artificial Intelligence, an extended version of the Accounting Information System (AIS), has already started reducing manual intervention and will grow at a breakneck pace soon. Recommended ArticlesThis has guided what an accounting information system is and its definition. Here we discuss its components and examples, advantages and disadvantages & limitations. Here are the other articles in accounting that you may like – |