Accounting Information Systems Explained
Accounting information systems are designed for collecting, storing, recording and processing of data to provide valuable information to decision makers of businesses. Almost all accounting information systems comprise of a number of interconnected systems, which interact to realize goals. An accounting information system may incorporate use of computers or it could just consist of pen and paper or a combination of both. Technology is used only for creating, improving and maintaining a system. Accounting information systems affect and convey the culture and strategy of the company.
An accounting information system adds value to company by facilitating it to extract data for its planned growth. Though the term “value addition” is frequently used for referring to the means and ways adopted for enhancing the value of a product, in fact it could mean making the product faster, more dependable, offering better service or product or making it as per the precise specifications of the buyer or improving its features. Value addition is achieved by carrying out a chain of activities called value chain, comprising of support activities and primary activities. The former are also called “staff activities” while the latter are called as “line” activities.
Information technology plays a very significant role in enhancing the effectiveness of the activities mentioned above. An organization can take steps to connect its value chain to those of its buyers, distributors and vendors.
Accounting information systems are designed for:
- Collection and storage of data pertaining to agents, resources and events.
- Transforming that data to information that the management can utilize for making decisions concerning agents, resources and events.
- Providing sufficient controls that ensure company’s resources and data are true, reliable and accessible whenever required.
Accounting information systems form the very basis of capturing, processing and reporting of accounting information. These days it is achieved by employing computers and appropriate software. Understanding business, business practices, accounting and technology to some extent, are essentially needed for designing an effective system.
The design of subsystems needs to be such that it helps the organization in achieving maximum goals. For instance, the manufacturing department of a unit may be required to do without its goal of remaining within the prescribed budget to fulfill the company’s objective of making deliveries in time.
It is not difficult to understand that goal conflicts are bound to arise if the on-goings of one subsystem are not aligned with the goals of the organization. Unless all the subsystems are synchronized, it will be almost impossible to achieve goals. System integration refers to minimizing of duplication of activities like recording, storing and processing. Data is not the same as information. Data means facts that have been collected and stored for processing by an information system. Businesses gather data concerning events that take place and affect the resources of business and participants of those events. Information, on the other hand is data processed and prepared for interpretation of the users. It is realized that accurate and more information helps making better decisions. At the same time, if the available information is more than what you may be able to comprehend, you’ll endure overload of information. On reaching that level of load, you are unable to take first class decisions whereas the expense for generating that information goes up.