Question

Respond to the following in a minimum of 175 words:

• Accounting information systems are designed to collect and process transaction data and communicate the financial information to concerned parties. The design of a number of types of accounting information systems vary significantly. A number of factors influence the design of these systems, such as the size of the business, the type of business, the volume of data, the type of data management needs, and other factors.
• Discuss three broad categories of AIS.
• List and discuss at least three fundamental principles of AIS.

Answer 1

Accounting Information System (AIS)

An accounting as an information system (AIS) is a system of collecting, storing and processing financial and accounting data that are used by decision makers. AIS is generally a computer based method of accounting with information technology resources.These financial reports can used by management ,creditors,tax authorities investors etc.

The three broad categories of AIS

They are :

1 Processing Mode AIS

This is a system by which data is processed and entered in information system either daily or weekly.This is done by using accounting softwares.Data entered in the software is interpreted and comunicated to the stakeholders at the end of the accounting year.

2 Entity Objectives AIS

It is a process for assuring achievement of an organization's objectives in operational effectiveness and efficiency by reliable financial reporting, and compliance with laws, regulations and policies.This is achieved by risk assesment,control actvities, monitoring , by communication etc.

3 Time based AIS

Many organisations tries to limit the time and money spend on analysis design etc

Fundamental principles of AIS

Control Principle

From the first five principles first one is control principle.There should be a proper internal control in all accounting information systems.Controls are procedures and practices adopted.This procedures include bank reconciliation, controlling passwords on software and computers and thereby secure the secret informations.

Relevence

This is the second one and the main motive of this principle is to provide the right information in right manner and right time.The faster it is available more useful it will be.If the management needs selected data they can see summarised  reports.

Flexibility

This principle means that a system should be such flexible that it can deal easily with the changing technologies and taste and regulation of the consumers and it should be flexible enough to handle the competition pressure. The system should be such that it can adapt to changes that will happen in the future.