Accounting Information Systems

From Isopedia

1 General Overview
2 What is MIS/AIS?
3 Study of AIS
4 Technical Information
- 4.1 Hardware
- 4.2 Software
5 Development & Implementation
6 Company Usage
- 6.1 Small Businesses
- 6.2 Service and Nonprofit
7 Applications of AIS
8 Pros and Cons of AIS
9 References
- 9.1 Sources
- 9.2 External Links
10 Team Members

General Overview

Accounting Information Systems (“AIS”) is a subset of Management Information Systems (“MIS”). AIS produce accurate and time sensitive financial and statistical reports, which include aspects of the practices and applications of accounting alongside the development and implementation of Information Systems. [[1]]

AIS collect and process data of transactions and then disseminate financial information from accounting processes to business employees through use of advanced technological resources. Such systems are shaped by a wide variety of factors ranging from the nature of business in the organization to the transactions involved to the benefit of the business community. AIS enable management to generate answers to questions using that data for basic operating functions such as: tracking purchases, controlling production and inventories, and even payroll processing.

What is MIS/AIS?

Accounting information systems (“AIS”) consist of two major components:

• Financial Accounting

• Important objective is to process efficiently a company’s business transactions so that informative financial statements can be prepared.

• Managerial Accounting

• Encompasses cost accounting, budgeting, and systems study.

Accounting information system’s role in a business information system is to perform the service function of transforming financial data into useful information that aids management, creditors, current and potential investors, and others in making decisions.

Official Definition: an organizational component which accumulates, classifies, processes, analyzes, and communicates relevant financial-oriented, decision-making information to a company’s internal customers (management and executive staff) and/or external parties (such as current and potential investors, federal and state tax agencies, and creditors).

Distinguishing between AIS and MIS:

• AIS accumulates, classifies, processes, analyzes, and communicates relevant financial information.

• MIS performs these functions for all types of information affecting a company’s operations.

Examples: – shows the needs companies can satisfy using their AIS.

Study of AIS

With accelerating technological advances and constantly changing ITS support in the business workplace, there exists an expanding requirement for business accounting students and work sector employees to learn the basic skills necessary for effective use/implementation of AIS. Topics such as database structures, management of information systems, and required hardware and software are typically within the curriculum design for this academic emerging field. A number of colleges and universities worldwide already offer opportunities for individuals to enroll as an Accounting Information Systems major (or minor) with courses focusing upon such challenging subjects as basic transaction cycles, computer tracking of financials, and external threats (i.e. spyware, viruses, worms, etc.) to information technology and software. An academic knowledge of AIS technology and its business applications uses can help prepare students for future careers in the science of business and the next age in the evolution of financial analysis.

Colleges and Universities presently offering AIS majors include:

• Bentley College

• Canisius College

• Harvard University

• MIT

• Rutgers University

• Stetson University

• St. Joseph’s University

Technical Information

Hardware

The hardware used for AIS can involve a wide range of advanced technological material from standard PC's to mass storage CPU's. AIS has significantly evolved over the years from a mere calculator form to one that connects the separate applications of the system. The few components that are involved include (1) a server, (2) a web server, and (3) a CPU. The single network server allows financial information to transfer itself between applications in the accounting department. The web server allows financial information to be communicated to other departments via the internet. The CPU, being the most vital, handles all processing of accounting transactions.

Software

There are various types of accounting software. Accounting software may be developed in- house by the company or organization using it. These brands can be categorized by market focus, type, and structure. In this section, we will discuss specific programs and the types of businesses they aid. Some of the specific programs that we will discuss include; Access Accounting, Banana Accounting, Cougar Mountain Software, Finance To Go, Gnu Cash, HansaWorld, NolaPro, SAP ERP, Simply Accounting, and Xero.

Access Accounting-Access Accounting is a Program designed specifically for Financials CRM, Manuacturing Job Costing, POS, Stock, ERP, Business Intelligence, CIS and Payroll. Access accounting is a UK based program that specializes in designing and developing programs for growing companies.
Banana Accounting-GL; Double Entry Accounting; Small Business Accounting. Very useful for beginning users. Cost for program is around $130.
Cougar Mountain Software-Business Accounting, POS Retail, Nonprofit, Inventory Control, and Online Demonstration. A change in one component is automatically reflected in all related areas.
Finance To Go-Double- Entry Accounting, Mortgage/Leases & Loss Accounts, Share Portfolio Management, and Small Business Accounting. Allows users to track multiple accounts and thousands of transactions simultaneously. Inexpensive- starts around $50.
Gnu Cash-GL; Double- Entry Accounting, Stock/Bond/Fund Accounts; Small- Business Accounting.
Hansa World-ERP, CRM, Sales Management and Manufacturing, Job Costing, Stock, POS, Rental, Calendarings, Service Orders, Webshop, Loans, Alerts, Hospitality Management, Document Management, Graphical Resource Planning
NolaPro-Double- Entry Accounting, Small Business Accounting, Inventory Control, Order Entry/Track Payroll, ERP, ecommerce, POS

SAP ERP Erp, CRM, SCM, SRM, PLM, GTS, e-commerce, Mobile Business

Simply Accounting-Business Accounting, Retail, Inventory Control. The cost for this program is about $300. A disadvantage of it is that it does not contain a Banking Section.
Xero-Small and medium- sized enterprises

Development & Implementation

• An Accounting Information System should first include a “business focus” that helps in the making of management decisions regarding the growth of the company. Emphasis is placed on the economics as well as management strategy of the business in relation with the implementation of AIS

• A sufficient computer software program must then be selected by the user that meets its particular needs. All benefits (e.g. cost savings) must be measured in relation to the benefits of the previous system used.

• The organization continues in taking the chosen software and formatting it to fit its particular business needs and processes through the actions of coding, reporting and configuring. Aspects of security controls and tailored design are constructed and reviewed by senior management officials.

• Companies must then choose a proper Accounting software package that offers a certain level of “friendliness” to the accounting user. Features such as graphic guidance are useful as well as its default controls and usage feel. However, the accounting software package chosen by an organization may differ depending on its market location in which 3 separate categories are considered: low-end market, middle market, and beginning enterprise resource planning (ERP).

• Finally, an organization must take part in the installation and training process which involves a sufficient amount of implementation effort focusing primarily on the requirements and system design. Consultants are also brought in to assist in employee training for everyday use of the system throughout the company

• Final security measures prove vital in the ongoing use of AIS. Protection with the use of encryption, passwords, and virus barriers make the transition of internal and external information much safer. Manipulation, alteration and issues of falsification can arrive if specific security measures are not implemented correctly within the AIS.

Company Usage

Small Businesses

ACCOUNTING INFORMATION SYSTEMS FOR SMALL BUSINESSES:

Design Considerations for a small business AIS is unique because:

• Simplicity – small businesses tend to be less complicated. AIS designed for them should be simple and straightforward.

• Lack of specialized accounting personnel – accounting expertise may be limited.

• Closely held ownership – family ownership or a very limited number of stockholders may eliminate the need for lengthy financial reports.

• Lack of working capital

• Lack of financial skills – managers may be uninterested or unskilled in accounting.

• Informal organizational structure

• Lack of integrated accounting applications

• Lack of computer expertise.

All problems that must be dealt with when designing an AIS.

Service and Nonprofit

AIS FOR SERVICE AND NONPROFIT ORGANIZATIONS

Service organizations provide intangible services. These organizations are unable to build up an inventory of their products for current and future sales. Nonprofit Organizations also provide intangible services. Not profit-oriented. These organizations are evaluated based on their contributions to the public welfare. Accounting Information Systems are unique to the service and nonprofit organizations (pg. 687).

Examples of established firms with advanced and secure AIS

• Ernst and Young

• Deloitte Touche Thomatsu

• KPMG

• Arthur Andersen

• Frendel Brown and Weissman

• Marcum and Kleigman

• Phillips Gold and Co.

• Wiss and Co.

• Rubin and Katz

• Matson, Driscoll and Damico

• Freeman and Davis

Applications of AIS

There exist three distinctive major categories when it comes to the use of information systems, which cover the span of three major eras in systems technology. These are known as (1) calculation systems, (2) functional systems and (3) integrated or cross-functional systems. Most widely known Accounting and Finance information systems find themselves closely tied to the functional systems category which in itself facilitates the work of a single function or department. This work is aided by the use of applications used within the functions of an accounting information system. Some common examples of functional applications of AIS include:

Treasury Management Application - supports the management of retained earnings, payments of dividends and all long-term financing activities. Storing, editing and sharing information is common with the use of such applications to track not only the risks to the stockholders but also to the companies.

General Ledger Application - used to construct a clear representation of all assets, liabilities and owners equity accounts within the organization. It allows users to organize, consolidate and maintain records of cash flows with the aid of support from other applications such as accounts receivable and accounts payable.

Cost Accounting Application - provides internal users with the measurements of costs that are directly related to the organizations purchase and use of specific products and services. It aids users in monitoring and controlling their fixed and variable costs in such a way that profits and losses are closely analyzed and budgeted.

Accounts Payable Application - helps users track the measured amounts that the organization owes to its creditors and suppliers. Both full and partial payments are usually closely monitored with the use of schedules in the application while providing special features such as check, bill and online payments.

Accounts Receivable Application - assists users in tracking the measured amounts that the organization is owed by its customers and clients. The collections of payments are monitored along with detailed information. Some examples include payment requirements, billing and statement generation and demographics.

Budgeting Application - aids users in the process of stating and quantifying goals for revenue earnings and the management of expenses while monitoring the success or failure in meeting such goals. Applications such as these are sometimes offered for home use and include features that allow the user to track their amount of debt and their spending habits.

Cash Management Application - helps managers and users alike manage the total cash flows of the organization along with any budgeting and finance activities. Bank-like activities are concentrated upon in such an application, and aids in the balancing of such cash needs.

In several organizations these applications are integrated and cross-functional to cover the entire scheme of an organization’s business processes. These process based systems prove to be essential to the function and success of the accounting department in which they are used. As time progresses and technology is improved, businesses will find themselves increasing there use of such cross-functional systems.

Pros and Cons of AIS

Pros:

• Manages to cover a broad range of business functions from standard accounting transactions to financial reporting.

• Blend the practices of traditional accounting procedures in with new advances of computer technology.

• Improves the rate of efficiency in accounting departments by allowing users to utilize automation.

• Tracking programs pinpoint the occurrence of errors arriving from information transfer between applications in the process of calculations.

• Frees up time from the use of senior staff due to the growth of internal controls and independence of accountants

• Easy access to financial information as well as current market costing that aids in accounting analysis

• Reduces the risk of tax evasion by providing assistance for disclosures

• Heightens potential for investment by outsiders due to high company transparency and accounting system technology

Cons:

• Expense- AIS programs can cost a lot of money which could hurt unstable accounting firms in the short-run.

• Time/ Training- AIS programs take a considerable amount of time to run and operate. Firms must make sure they take a considerable amount of time in training their employees how to correctly operate and store info. Firms must learn how to operate AIS programs while running their business.