OVERVIEW OF
ACCOUNTING
INFORMATION SYSTEM
(AIS)
Objectives:
i. Definition of AIS
ii. Objective of AIS
iii.Role of accountants in AIS
iv.Comparisons between manual and computer
based system ( in terms of accounting records and
processing)
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Definition of AIS
“ A unified structure within an entity (such a
business firm) that employs physical resources and
other components to transform economic data into
accounting information, with the purpose of
satisfying the information needs of a variety of
users”
* The system of records a business keeps to maintains its accounting system.
Input process output
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Objectives of AIS
1. To support the day to day operation.
2. To support decision making by internal decision
makers.
3. To fulfill obligations relating to stewardship.
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1.To support the day to day operation.
• The information system provides
information to operations
personnel to assist them in the
efficient and effective discharge of
their daily tasks.
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2.To support decision making by internal
decision makers.
• The information system supplies
managers with the information they
need to carry out their decision-
making responsibilities.
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3.To fulfill obligations relating to stewardship.
• Stewardship is the responsibility of
management to properly utilize the
resources of the firm entrusted to them.
• The information system provides
information about resource utilization to
external users via traditional financial
statements and other mandated reports
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Users of AIS
• Management
• Employee
• Government
• Supplier
• Customer
• Bankers
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Benefits of having computerized
AIS
1. Information can be prepared on time.
2. Produce more accurate and presentable accounting
information.
3. Information can be accessed or retrieved quickly and
timely.
4. In the long run, save time and cost in the preparation
and safe keeping of information.
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Role Of Accountants In AIS
• Accountants as System Users
As the end users, accountants must provide a clear
pictures of their needs to the designers of their
system
Accountants as System Designers
Is responsible for the conceptual system.
Accountants as System Auditors
To express their opinion on the company’s
computer system
Accountants as Information
System Users
• Accountants must be able to clearly convey their needs
to the systems professionals (programmer) who design
the system.
• E.g.: accountant must specify accounting rules and
techniques to be used, internal control requirement
and special algorithms such as depreciation
models.
• The accountant should actively participate in systems
development projects to ensure appropriate systems
design.
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Accountants as System
Designers
• The accountant function is responsible for the
conceptual system, while the programmer function is
responsible for the physical system.
• The conceptual system determines the nature of the
information required, its sources, its destination, and the
accounting rules that must be applied.
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Accountants as System
Auditors
• Form opinions based on a systematic process.
• To evaluate selected components of the accounting
information system to establish their degree of
compliance with organizational objectives and
internal control standard.
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Comparisons Manual Vs
Computer Based System
1. Accounting records
2. Processing
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1. Accounting record:
Manual Vs Computer Based Systems
Manual system Computer based system
Paper base document: Paperless/softcopy:
i. Document i. Master file
ii. Journal ii. Transaction file
iii. Ledgers iii. Reference file
iv. Archive file
* Provide audit trail for * Audit trail is embedded in
tracing transactions the system
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Manual System Accounting
Records
• Journals - a record of chronological entry
o special journals - specific classes of transactions that
occur in high frequency
o general journal - nonrecurring, infrequent, and
dissimilar transactions
• Ledger - a book of financial accounts
o general ledger - shows activity for each account listed
on the chart of accounts
o subsidiary ledger - shows activity by detail for each
account type
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Manual System Accounting
Records
• Source Documents - used to capture and formalize
transaction data needed for transaction processing
• Product Documents - the result of transaction
processing
• Turnaround Documents - a product document of one
system that becomes a source document for another
system
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Computer Files
• Master File - generally contains account data. Data values in
master files are updated from transactions. (e.g., general ledger
and subsidiary file)
• Transaction File - a temporary file holding transaction records that
will be used to update data in a master file. (e.g: Sales orders,
inventory receipts, and cash receipts.)
• Reference File - stores data that are used as standards for
processing transactions. (e.g: the payroll program may refer to a
tax table to calculate the proper amount of withholding taxes for
payroll transactions, Price lists used to prepare customer invoices,
lists of authorized suppliers and customer credit files for approving
credit sales.)
• Archive File - An archive file contains records of past transactions
that are retained for future references. (e.g: journals, prior-period
payroll information, list of former employees, records of accounts
written off, etc.)
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Audit Trail
Source General Financial
Journal
Document Ledger Statements
Financial General Source
Statements Journal Document
Ledger
Accountants should be able to trace in both directions.
Sampling and confirmation are two common techniques.
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2. Accounting processing:
Manual Vs Computer Based Systems
Manual Computer based systems
S1:Source document i. Batch system
S2:Journal Assemble transaction into groups for
processing.
S3:Ledger - Time lags.
S4:Trial balance - E.g. payroll system
S5:Financial statement ii. Real time system
Transaction are processed as the
* All done manually economic events occurred.
- E.g. Sales system
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Computer based system:
Batch System Vs Real Time System
Distinguish Data processing methods
characteristic
Batch system Real time system
Information time frame Lag exists between time when Processing take place
the economic events occurs and when the economic
when it is recorded events occurred
Resources (hardware, Fewer resources required More resources are
programming & required
training)
Certain records are processed All records pertaining to
Operational efficiency after the events to avoid the events are
operational delay processed immediately
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Sources:
i. http://highered.mcgrawhill.com/sites/0074711407/stud
ent_view0/powerpoint_slides.html
ii. http://www.swlearning.com/accounting/hall_01/hall_01
.html
iii. http://www.wiley.com/college/acc/wilkinson253529/site
/index.html
iv. http://wps.prenhall.com/bp_romney_ais_9/2/608/1558
41.cw/index.html
v. http://wps.prenhall.com/bp_romney_ais_11/86/22157/
5672205.cw/-/t/index.html
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