Accounting Information Systems

Learning Objectives
Explain what an accounting
information system (AIS) is and
describe the basic functions it
performs.
Discuss why studying the design and
management of an AIS is important.

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Learning Objectives What Is An AIS?

Explain the role played by the AIS in a A system is a set of two or more
company’s value chain and discuss ways interrelated components that interact to
that the AIS can add value to a business. achieve a goal.
Describe and contrast the basic strategies Systems are almost always composed of
and strategic positions that a business can smaller subsystems, each performing a
adopt. specific function supportive of the larger
system.

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What is an AIS? What is an AIS?

An AIS is an information system An Accounting Information System is a
which identifies, collects, processes, and unified structure that employs physical
communicates economic information about resources and components to
an entity to a wide variety of people
regardless of the technology transform economic data into
captures and records the financial effects of accounting information for external
the firm’s transactions and internal users.
distributes transaction information to
operations personnel to coordinate many key
tasks

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What Is An AIS? What Is An AIS?
An accounting information system (AIS) What important functions does the
consists of: AIS perform in an organization?
People It collects and stores data about
Procedures activities and transactions.
Data It processes data into information that is
Software useful for making decisions.
Information technology infrastructure It provides adequate controls to
safeguard the organization’s assets.

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AIS vs. MIS?

AIS vs. MIS
Accounting Information Systems (AISs) process
financial (e.g., sale of goods) and nonfinancial IS

transactions (e.g., addition of newly approved

vendor) that directly affect the processing of
financial transactions. AIS MIS

Management Information Systems (MISs)

process nonfinancial transactions that are not
normally processed by traditional AISs (e.g., GLS/FRS TPS MRS Finance Marketing Production HRS Distribution

tracking customer complaints).

AIS Subsystems The General AIS Model

Transaction processing system (TPS)
supports daily business operations
General Ledger/ Financial Reporting System
(GL/FRS)
produces financial statements and reports
Management Reporting System (MRS)
produces special-purpose reports for internal
use

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Data Sources Data Sources
Data sources are financial transactions that Internal financial transactions involve the
enter the information system from internal exchange or movement of resources
and external sources. within the organization.
External financial transactions are the E.g., movement of raw materials into
most common source of data for most work-in-process (WIP), application of
organizations. labor and overhead to WIP, transfer of
E.g., sale of goods and services, purchase WIP into finished goods inventory, and
of inventory, receipt of cash, and depreciation of equipment
disbursement of cash (including payroll)

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Transforming the Data into Information

Functions for transforming data into
1. Data Collection
information according to the general AIS Capturing transaction data
Recording data onto forms
model:
Validating and editing the data
1. data Collection
2. data Processing
3. data Management
4. information Generation

2. Data Processing 3. Data Management

Classifying
Storing
Transcribing
Retrieving
Sorting
Deleting
Batching
Merging
Calculating
Summarizing
Comparing

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4. Information Generation Organizational Structure
Compiling The structure of an organization helps to
Arranging allocate
Formatting responsibility
Presenting authority
accountability
Segmenting by business function is a very
common method of organizing.

Accounting Independence
Functional Areas Information reliability requires accounting
Inventory/Materials Management
purchasing, receiving and stores
independence:
Production Accounting activities must be separate and
production planning, quality control, and independent of the functional areas maintaining
maintenance resources.
Marketing
Accounting supports these functions with
Distribution
information but does not actively participate.
Personnel
Finance Decisions-makers in these functions require that
Accounting such vital information be supplied by an
Computer Services independent source to ensure its integrity.

WHY STUDY ACCOUNTING INFORMATION

SYSTEMS?
Why Study AIS?
To understand how the accounting
It’s fundamental to accounting. system works.
Accounting is an information-providing How to collect data about an organization’s
activity, so accountants need to understand: activities and transactions
How the system that provides that How to transform that data into
information is designed, implemented, information that management can use to
and used. run the organization
How to ensure the availability, reliability,
How financial information is reported.
and accuracy of that information
How information is used to make
decisions.
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Why Study AIS? Why Study AIS?
Auditors need to understand the
The AIS course complements other systems
systems that are used to produce a
courses.
company’s financial statements.
• Other systems courses focus on design and
Tax professionals need to understand implementation of information systems,
enough about the client’s AIS to be databases, expert systems, and
confident that the information used for telecommunications.
tax planning and compliance work is • AIS courses focus on accountability and
complete and accurate. control.

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