Objectives and Users of Accounting Information Systems
Wilkinson, et al. (2000) suggest that there are three specific objectives that can be identified which enable the primary aim of the accounting information system to come into motion.
The objectives of the accounting information system are to:
- Support day-to-day operations
- Support Internal Decision-Making
- Help fulfill Stewardship Role
Wilkinson, et al. (2000) write ‘Each objective is closely associated with specific categories of users of the AIS so both should be viewed together’
Supporting day-to-day operations
In order to operate from day to day, a business conducts a number of events called transactions (Wilkinson, et al. 2000). Wilkinson, et al. (2000) write
‘Accounting transactions include events or transactions that represent exchanges having economic value’.
An example of an accounting transaction could be simply buying/selling a computer. The accounting information system would record this for processing. Non-accounting transactions such as placing a purchase order for computers can lead to accounting transactions. An example of this would be, when the computers purchased are delivered, the accountant would record an accounting transaction. This could be something like an increase in sales (crediting the account) and increase in receivables (debiting the account). From this we can see why it is important to make records of non-accounting transactions.
Once a transaction is made it is recorded into the correct journal or ledger, it then has to be processed. The transactions processing is fairly standardized among firms for like transactions, such as credit sales. An example of this would be the billing of customers. The basic set of accounting transactions typical to most merchandising businesses include, sales of goods and services, purchase of goods and stationary, supplies, cash flow and payroll disbursements to employees (Wilkinson, et al. 2000).
Transaction processing systems
Transactions are processed by the means of transaction processing systems which are subsystems of the accounting information system (Wilkinson, et al. 2000). Each transaction processing system encompasses the steps for a particular type of transaction. For example the transaction processing system involving sales transactions is sub-divided into order taking, billing, and accounts receivable and so on. Being subsystems, the transaction processing systems of a business are closely interrelated as shown by figure 1.
Data Processing Activities Common to transaction processing systems
- Data collection
- Data editing
- Data correction
- Data manipulation
- Data storage
- Document production
(York University: PowerPoint n.d.)
Supporting Internal Decision-Making
Accounting information systems second objective is to provide information for decision making. Decisions such as controlling & planning business operations, these activities can broadly be labeled information processing (Wilkinson, et al. 2000). An example of this would be a business company using its accounting information system for vital information processing tasks such as projecting expected revenues for the coming year (Wilkinson, et al. 2000). The business company can then use this information to do necessary planning, for example it can decide on whether they can afford to take on more employees to carry out the added workload. The accounting information system would usually provide some information needed in such decision making through the transactions that it processes (Wilkinson, et al. 2000). The managers of a business are the primary decision makers who use the outputs from the information processing, secondary users such as costing department who influence buying or selling could also use this information (Wilkinson, et al. 2000). The manager may use some form of management information system that allows him to use the data from the accounting information system. The two systems maybe integrated using Enterprise Resource Planning.
Help fulfill Stewardship Role
Every business must carry out its legal responsibility, e.g. providing mandatory information to its users who are external to the firm (Wilkinson, et al. 2000). A business firm maybe required to provide information to stakeholders, who could be the owners, creditors, labor unions, regulatory commissions, financial analysts, industry associations and even the general public. The business firm would use the accounting information system to generate financial statements so that they could issue them to its owners. A business using the accounting information system could also generate payroll tax withholding reports and income tax with holding reports to the appropriate government agency.
Typical Accounting Information Systems packages
- Sage MAS 90 / Sage MAS 200
- SAP Business One
- Intacct - Financials and Accounting
- Peachtree Complete Accounting
- M.Y.O.B
- QuickBooks Pro
Accounting Information Systems software modules or subsystems
Accounting information systems typically comprise of the following series of software modules or subsystems: (Hickie, S. n.d.)
- General Ledger
- Accounts Receivable
- Accounts Payable
- Fixed Assets
- Sales Order Processing
- Purchase Order Processing
- Inventory Control
- Payroll
General Ledger
A general ledger contains the summary financial data concerning the status of all the asset, liability, owner equity, revenue, and expense accounts established by a firm (Wilkinson, et al. 2000).
Accounts receivable
A system that manages the cash flow of the company by keeping track of the money owed to the company on charges for goods sold and services performed (York University: PowerPoint n.d.).
Accounts Payable
The Accounts payable module can be used to prioritize payments, negotiate terms, and reduce bad debts. (2020software.com n.d.)
Fixed Assets
The fixed Asset module provides the ability to execute partial and whole transfers and disposals, conduct bulk disposals with automatic gain/loss calculations and track transfer activity. (2020software.com n.d.)
Sales Order Processing
This module holds the customer’s mailing and shipping addresses. It has to information on the availability of specific units in inventory, or alternate items if those ordered are out of stock. Additionally, it has item pricing, quantity pricing, specific customer pricing, costs, customer credit limits, credit card deposit information and much more. (2020software.com n.d.)
Purchase Order Processing
Every time the business orders goods from their vendors, the purchase order module helps keep accurate records of these important transactions. With every order, the user would need to specify (and keep track of) shipping method, date required and the name of the person with whom the order was placed. In addition, confirming the quantities ordered and price per item. This module updates and organizes the entire purchasing process. (2020software.com n.d.)
Inventory Control
This module provides data pertaining to the receipt of goods, the movement of goods within or between locations, the sale, removal or other disposition of goods, and the precise valuation and status of goods remaining in inventory at any point in time. (2020software.com n.d.)
Payroll
Payroll module applies earnings and deductions, automatically calculates employee and employer payroll taxes, and prints checks and vouchers complete with year-to-date earnings and tax information. Extensive information is maintained for each employee, including date of birth, emergency contacts, review dates and comments, marital and tax status, year-to-date earnings and deductions, as well as vacation, sick days and other benefit accruals. (2020software.com n.d.)
Accounting information systems may vary slightly from one package to another, they may have additional modules or subsystems, different user interfaces but more often then not, they will have the above mention modules or subsystems as these are essential to the accounting information system.
Conclusion
From the report carried out, many different aspects of accounting information systems have been explored including: the primary aim of accounting information systems, users of accounting information systems, the main objectives of an information system and how these objectives are beneficial to the accounting sector and to an organisation. It has been looked at how accounting & non-accounting transactions are recorded and processed using the accounting information system’s subsystem modules. From all the analysis of the accounting information system we can conclude that the benefits and uses of using an Accounting Information System are to:
- Process data generated by and about transactions
- Maintain a high degree of accuracy
- Ensure data and information integrity and accuracy
- Produce timely documents and reports
- Increase work efficiency
- Help provide increased and enhanced service
- Help build and maintain customer loyalty
- Achieve competitive advantage
(York University: PowerPoint n.d.)
References
2020software.com (n.d.) Sage MAS 90 / Sage MAS 200 - FAS Asset Accounting, 2020software.com [Online] Available at: < http://www.2020software.com/products/Sage_MAS_90_Sage_MAS_200_FAS_Asset_Accounting.asp> [Accessed 09 December 2009].
2020software.com (n.d.) Sage MAS 90 / Sage MAS 200 - Inventory Management, 2020software.com [Online] Available at: <http://www.2020software.com/products/Sage_MAS_90_Sage_MAS_200_Inventory_Management.asp> [Accessed 09 December 2009].
2020software.com (n.d.) Sage Sage MAS 90 / Sage MAS 200 - Accounts Payable, 2020software.com [Online] Available at: < http://www.2020software.com/products/Sage_MAS_90_Sage_MAS_200_Accounts_Payable.asp> [Accessed 09 December 2009].
2020software.com (n.d.) Sage MAS 90 / Sage MAS 200 - Payroll
, 2020software.com [Online] Available at: <http://www.2020software.com/products/Sage_MAS_90_Sage_MAS_200_Payroll.asp> [Accessed 09 December 2009].
2020software.com (n.d.) Sage MAS 90 / Sage MAS 200 - Purchase Order, 2020software.com [Online] Available at: < http://www.2020software.com/products/Sage_MAS_90_Sage_MAS_200_Purchase_Order.asp> [Accessed 09 December 2009].
2020software.com (n.d.) Sage MAS 90 / Sage MAS 200 - Sales Order, 2020software.com [Online] Available at: < http://www.2020software.com/products/Sage_MAS_90_Sage_MAS_200_Sales_Order.asp> [Accessed 09 December 2009].
Andersen, K. V. and Vendelø, M.T. (2004) The past and future of
information systems. Burlington, Elsevier Butterworth-Heinemann.
Hickie, S. (n.d.) Business Applications of Information Systems. PowerPoint: University of Derby, Udo
Stefanou, C.J (2006) The complexity and the research area of AIS, Journal of Enterprise Information Management Vol. 19 No. 1, 2006 pp. 9-12
Wilkson, J. W and others (2000) Accounting Information Systems – Essential Concepts & Applications. 4th Edition. New York: John Wiley and Sons.
York University (n.d.) Electronic Commerce and Transaction Processing Systems. Powerpoint Presentation: York University
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