Accounting Information System
What Is a System?
A System is an entity consisting of interacting parts that are coordinated to
achieve one or more common objectives, such as producing information.
Functional Steps in Transforming Data into Information:
•
Data collection
- capturing, recording, validating and editing data for
completeness and accuracy
• Data Maintenance/Processing - classifying, sorting, calculating data
• Data Management - storing, maintaining and retrieving data
•
Data Control - safeguarding and securing data and ensuring the accuracy and
completeness of the same
• Information Generation - interpreting, reporting, and communicating
information
Accounting Information System:

An accounting information system (AIS) involves collecting and
processing data and disseminating financial information to interested
parties.

AIS may either be manual or computerized.

It evolves over time and becomes more formalized as a firm grows and
becomes more complex.

Firms depend on information systems in order to survive and stay
competitive
Principles of an efficient and effective Accounting Information
System:
1. Cost effectiveness.
2. Usefulness.
3. Flexibility.
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1.
Cost effectiveness.
The accounting system must be cost effective. Benefits of information must
outweigh the cost of providing it.
2. Usefulness (useful output).
To be useful, information must be understandable, relevant, reliable, timely, and
accurate. {Designer of accounting system must be consider the needs and
knowledge of various users}.
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3. Flexibility.
The accounting system should accommodate a variety of users and changing
information needs.
PHASES IN THE DEVELOPMENT OF AN ACCOUNTING
SYSTEM:
• Planning and
identifying
information
needs and
sources
• Evaluating and
monitoring
effectiveness and
efficiency and
correcting any
weaknesses
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• Creating forms,
documents,
procedures, job
descriptions, and
reports
Analysis
Design
Follow up
Implementation
• Installing the
system, training
personnel, and
making the system
operational
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Relationship of AIS & MIS:
MIS
Finance
Sales/Marketing
Production
AIS
Personnel
Sales
A.Rec./Cash receipts
Purchasing/A. Pay./Cash disb
Inventory
Payroll
General ledger
Subsidiary ledger
.
A subsidiary ledger is a group of accounts with a common characteristic,( such
as customer accounts).
The subsidiary ledger is assembled to facilitate the recording process by freeing
the general ledger from details concerning individual balances.
Two common subsidiary ledgers are:
1- The Accounts Receivable Ledger.
2- The Accounts Payable Ledger.
Control Account
The general ledger account that summarizes subsidiary ledger data is called a
control account.
Each general ledger control account balance must equal the composite balance
of the individual accounts in the subsidiary ledger.
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Relationship of genral ledger and subsidiary ledgers:
Control accounts
General
Accounts
Accounts
Owners
Payable
Capital
Cash
Receivable
ledger
subsidery
ledger
Note:


Accounts receivable controls a subsidiary ledger of many different
customers.
Accounts payable controls a subsidiary ledger of many different creditors.
Advantages of using subsidiary ledgers:
1. Show transactions affecting one customer or one creditor in a single account.
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2. Free the general ledger of excessive details.
3. Help locate errors in individual accounts by reducing the number of accounts
combined in one ledger and by using controlling accounts.
4. Create a division of labour in posting by allowing one employee to post to the
general ledger and a different employee to post to the subsidiary ledger.
Special journals

.
Special journals are used to group (record) similar types of
transactions.

If a transaction cannot be recorded in a special journal, it is recorded in
the general journal.

Special journals permit greater division of labour and reduce time
necessary to complete the posting process.

Use of special journals and the general journal:
sales
Journal
• Used for:
• All sales of
merchandise on
account
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cash Receipts
Journal
• Used for:
• All cash
received
(including cash
sales)
purchases
Journal
• Used for:
• All purchases of
merchandise on
account
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cash payments
Journal
• Used for:
• All cash paid(including
cash purchases)
General journal
• Used for:
• Transaction that cannot
be entered in a special
journal,including
correcting,adjusting,and
closing entries
The types of special journals used depend largely on the types of
transactions that occur frequently in a business enterprise.
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