Accounting Information System and Statutory Reuirements
ACCOUNTING INFORMATION SYSTEM AND STATUTORY REQUIREMENTS
Accounting is a process of communication, measurement and identification of economic and financial information of a business organisation. The Accountant is a practitioner of accounting information, who extracts the financial information which can help the users for making conversant decision making (AccountingEdu 2018). In accounting, there are different subsections introduced, such as cost accounting, financial accounting and management accenting. An accountant’s duty is to measure, analysis, collect and provide reliable transparent and correct financial data to the users. The accountant is responsible for creating the correct form of information and communication over financial records of the entity with its users.
The business environment is rapidly changing with increasing new scopes and challenges. For introducing efficient decision making in this changing environment, the management requires some potential information (Onaolapo and Odetayo 2012). This information is extracted and understood through the implication of accounting information system (AIS). In this system, the financial and other economic information of the business organisation is recorded, measured analysed and communicated with the potential users. The accounting information gathered through the system helps the management to effectively manage their operational and production activities to meet the distinctive financial targets and goals of the firm.
The information technology benefits in accounting information system:
- Security: The introduction of the information technologies helps to secure confidential, valuable and important financial data of the business. The accounting information is protected by information technologies from any unauthorised, third party sources (Sajady et al. 2008). The password protection, biometric devices are some of the tools and methods used by the IT for protecting the accounting information.
- Internet: The introduction of the internet has been made by information technology, the usage of internet can help the management to gather, access, transfer and record and transfer financial data more easily outside the organisation.
- Cloud: The usage of information technology helps the organisation to engage accounting information system without making a huge investment for the acquisition of AIS software (Roska and Bubic 2018). The IT also helps to introduce cloud computing, which is an online platform for handling, storing and maintaining the huge database.
The accounting information system has six major components:
- Procedures: Indicates methods and procedure of storing, processing and collecting economic data of the organisation
- People: Indicates individuals who handle, operates and manages accounting information of a firm
- Software: Indicates an application which is used for processing the data and information of an organisation (Hall 2012)
- Data: Indicates the financial, economic and non-financial information of the business
- Security measures and internal controls: The method used for safeguarding and protecting data and information of an organisation
The AIS provides necessary and important information which highlights the financial of the business; this information helps to add value to the effective decision making (Soudani 2012). The errors, misinterpretation and miscalculation of the financial data can be avoided with the use of an accounting information system. It provides learning about artificial intelligence and increases the performance of the employees with the help of experts advisory. The usage of AIS includes fast and quick access, processing, recording and analysis of the real-time financial information.
The value chain of the products could be increased with the usage of AIS; the system provides useful data and information for increasing quality aspects of the products within low costs. The use of AIS allows direct access to the inventory system, provides scheduling and time management for sales orders system so that most of the crucial work is covered by the system more efficiently than marketing and sales department (Lim 2013). The usage of the system helps to make quick order placement and reduces the labour costs so that low-cost product values can help the entity to satisfy their customers.
- Reliable: The reliability, accuracy and verification of the information must be sustained and maintained, it should be consistent with its information.
- Understandable: A proper format, mode and source should be used to present the information
- Updated: The information must contain factors related to the current time, market and situations (Onaolapo and Odetayo 2012)
- Concise: The information must be introduced in a summarised manner which is easily understandable without using non-materialistic details.
- Complete: The information must contain all the materials, learning and knowledge that can help management to make a decision and solve issues.
- Relevant: The information provided must relate with the functions, roles, responsibilities and decision-making capabilities of the users. The information must not be irrelevant.
An accounting information system is a procedure of providing a variant of the required information, which is used by the managers of organisation form making economic and financial decision making (Lim 2013). The accounting information system is introduced by the usage of information technology. The function of an accounting information system is to measure, identify and record the accounting information so that management of the entity can create different accounting and financial records of the business. In the processing under the accounting information system, the business transactions such as purchases, sales and inventory management are analysed and measured (Salehi et al. 2010). For example- The usage of accounting information system helps to understand amount due, amount collected, customer names and sales per unit of the firm in a specific year.
The use of accounting information system software includes obtaining and maintenance cost analytical options for obtaining reliable financial information of the business. The information on costs provided by AIS is the costs which are used for training of the user's ad acquisition of the software’s and hardware’s on a regular basis (Roska and Bubic 2018). Thus, the cost of this information is usually quantified. Though, the AIS is beneficial for making appropriate estimations and assumptions. Therefore, the reliability and accuracy of assumptions of the information are based on quantification and measurement of the AIS approach. The value of the AIS approach is defined by the relevancy and usefulness of such information.
The efficiency and performance of a business organisation can be increased by the introduction of different software's, hardware's and computer system; this process is known as an integrated enterprise system. With the usage of this system, the management of the organisation can be able to effectively operate and manage their organisational activities and performance (Hall 2012). In the case of small grocery business Mom and Pop, the introduction of integrated enterprise system will help to boost its growth and performance in the market. The system has the potentiality to maintain records of the economic and financial transactions effectively and accurately. It is a cost-effective system, which will provide proper information on the business transaction that might help the manager for performing effective decisions to grow the organisation.
Information supply: The function of accounting information server is to provide accurate and relevant information which can be used for potential decision making.
Processing: The accounting information server process and record data and extract useful financial information for the users
Storage: The accounting information server function is to store and secure data and information of an entity
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Onaolapo, A.A. and Odetayo, T.A., 2012. Effect of Accounting Information System on Organisational Effectiveness: A Case Study of Selected Construction Companies in Ibadan, Nigeria. American Journal of Business and Management, 1(4), pp.183-189.
Roska, V. and Bubic, J., n.d. Accounting Information Systems for Management Decisions: Empirical Research In Croatia (a). Available at :< https://bib.irb.hr/datoteka/805635.ACCOUNTINGINFORMATIONSYSTEM.pdf> Accessed on 25-01-2018.
Sajady, H., Dastgir, M. and Nejad, H.H., 2008. Evaluation of the effectiveness of accounting information systems. International journal of information science and technology, 6(2).
Salehi, M., Rostami, V. and Mogadam, A., 2010. Usefulness of accounting information system in emerging economy: Empirical evidence of Iran. International Journal of Economics and Finance, 2(2), p.186.