Question

Identify the basic concepts of an accounting information system and describe the nature and purpose of a subsidiary ledger.

Answer 1

Accounting information system:

Accounting information system (AIS) is a system that a business uses to collect, store, manage, process, retrieve and report its financial data so that it can be used by accountants, consultants, business analysts, managers, chief financial officers (CFOs), auditors, regulators and tax agencies.

The basic concepts of an accounting information system are:-

i. It can be manual or computerised.

ii. It collects and processes data.

iii. It disseminates financial information to the parties.

Subsidiary Ledger:

A subsidiary ledger contains the details to support a general ledger control account. For instance, the subsidiary ledger for accounts receivable contains all of the information on each of the credit sales to customers, each customer's remittance, return of merchandise, discounts, and so on. With these details in the subsidiary ledger, the Accounts Receivable account in the general ledger can be a control account. As a control account, it will simply report the aggregate amounts of the accounts receivable activity.
Subsidiary ledgers are groups of account with common feature

Details of subsidiary ledgers are summarized in general ledger control account.