Accounting Information System (AIS) – A Short Guide

 

Keywords – Accounting Information System – Functions of Accounting Information System – Importance of Accounting Information System – Components of Accounting Information System – Objectives of Accounting Information System – Benefits of Accounting Information System

 

An AIS is a structured effort of collecting, storing, processing, and reporting financial data of a business. The said structuralism is exercised during the development of an AIS for the effective use of accounting information by accountants and alike, including but not limited to auditors, regulators and financial officers. 

Doing so helps in making sure that the reported accounting information is accurate to the needed degree, fulfilling both internal and external requirements. 

 

Components, Functions, and Importance of AIS

There are four main components of an AIS. This includes:

  1. People – The users, including but not limited to accountants, analysts, and regulators. From an organisational perspective, this allows the people within an organisation to adhere to set goals. For example, the sales team enters the orders into the system, the fulfillment of which may require added external resources, e.g. materials and services, going into the payables section. Later, when the orders are fulfilled, the accounting team can forward and track invoices, the information regarding which also goes into the AIS. As a result of the whole process here, managers are able to make decisions, based on the available financial ins and outs. In short, a well put AIS provides valuable information to all layers of organisational forces. 
  2. Processes – The methods of collecting, storing, and retrieving the data. Given that data comes from both internal and external sources, it is important to train the people involved in the process. Doing so, also ensures consistency and effective management layouts.
  3. Data – All information collected during a work-chain. It is important to understand the internal needs and build structures that can support all levels of data collection. This may include sales orders, purchases, payrolls, and billings etc. Collecting such information also forms the basis of various forms of accounting, e.g. account receivables and profit and loss accounts
  4. IT – Given that most AIS systems are now digital based, companies require the right IT infrastructure to fulfil their needs. Even further, most AIS systems are now cloud-based, eliminating the need for internal storages. Doing so also limits the degree of required encryptions and the chances of data breaches, as long as the available sources are used with the right training effectively. 

 

Closing Remarks

We have tried to keep this article as short as possible, eliminating any tangents and complexities generally associated with an AIS.

The bottomline is, an AIS, when used effectively, provides information on key financial components, helping internal decision making; a key component in building and maintaining a successful business.

To learn more, get in touch with us today. 

And, to learn about other areas of internal accounting, check:

  1. Cost Accounting – Equipping Yourself for Better Decision Making
  2. Understanding Revenue Recognition and How to Account for it
  3. Loss Relief – How Does it Work & are You Entitled to it?

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