What is Accounting Information System?

Accounting Information System

Accounting Information System (AIS) is an assemblage of activities prepared in a business organization done by business staff for inspection of the business each department such as:

  • Collection of purchase and sales reports
  • Scan the business expenses such as bills, rent.
  • Survey of revenue earned from sales
  • Check the usable stock, inventory for sale process
  • Engage an analyst for taking out market information
  • Documentation of account receivable and account payables.
  • Records business tax

You can take this as an accounting platform where every transaction of business is entered. In simple words, it a platform for recording financial and accounting statements for future valuation which are connected with advanced technology such as:

  • Generally Accepted Accounting Principles (GAAP)
  • Accounting tools or Accounting software
  • Hardware and software data
  • Enterprise Resource Planning (ERP) software

Why is the accounting information system prepared?

An Accounting Information System (AIS) is prepared for an accounting process that is done in business daily. We all know accounting procedure is calculating work that should be done in a very smooth way so that business can’t bear any silly errors or mistakes that damage all the accounting records because one mistake in accounting harms all the accounting statements.

It is considered as a computer accounting or electronic accounting system which is preferred by the companies to store all the financial information related to the business daily transactions such as expense, sales, and purchase project, sales and purchase invoices, business materials, and stock such as inventories. With all these, business runs and without missing any transaction we can’t make an accounting information system because the accounting system itself means that all the business data should be present inside it for future judgment.

It is a place of business financial data which is split into multiple transactions such as expense, sales, purchase, invoices. Accounting Information System includes components:

  • Hardware 
  • Software
  • Networks which are mandatory for network connections in the system.

An accounting Information System is mainly made ready for a business discussion with crucial members of the organization and each of them has different roles in business activities and unique style to summarize financial data in AIS.

Who analyzes the accounting information system?

An Accounting Information System analyzed by many crucial members count as a foundation of the company and the company is surviving only because of those members.

AIS is a system of collecting data for future evaluation by investors, creditors, business analysts, lenders, and shareholders so that they can summarize all the accounting and financial data with each receipt of sales and purchase, bills, and invoices of sales and purchase. Even they make financial decisions for getting the reality of the company and also support the company in its financial crises. They also act as an internal controller of the company who handles the internal financial matters after judging the financial statements such as Profit & Loss Statement, Cash Flow Statement, Income Statement, and Balance Sheet.

Investors

Investors can be known as well as the unknown. Investors can be the shareholders of other organizations who want to invest money in our company for getting a shareholder position. Otherwise, Investors can choose from mainly investors markets or investor companies who have big investment companies for small as well as big organizations.

They have a right to involve each decision of financial matters so that they can simply secure investment there to get a secure and reputed position in the company. 

Creditors

Creditors haven’t the right to interfere with a company’s financial matters but they have the right to analyze the company’s financial reports for measuring conditions and reliability to run the business effectively so that they can give money to the business owners.

Creditors can be the bank and other financial institutions who judge financial reports before giving limited amounts of capital on interest monthly or annually to the organization. Creditors come for the survey process to know the financial reality through the accounting information system.

Creditors can be the lenders such as family or friends to invest money on the interest which is known as lending.

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Shareholders

Shareholders can be the business owners, investors who have equal output according to the investment to get the stakeholder position who have a major right to take all decisions related to business matters with other shareholders.

Government

Businesses need to file taxes such as income tax, sales tax, purchase tax, occupation tax, employees tax, and other tax so that they also need to show the financial reports through AIS to the government so that the government can calculate all the taxes that match with all transactions.

Every organization builds with some laws which contain so many taxes that need to be paid by business owners on time from a company’s income. It is a confirmation policy of every entrepreneur to deal with this because the government has its policy, rules, and regulations.

Financial advisors

Financial advisors are the professional advisors who have a financing company and known for their profession who offers financial services as well as advising services to the other commercial company that how to invest in the right place to get valuable outcomes in less time.

Financial analysts have a virtuous ability to magistrate the AIS to get out the truth of the status of the company as compared with the other commercial organization in the market.

Market analyst

Market analysts are the professional market advisors hired by the organization based on a contract to tell the market financial condition. It’s the responsibility to update business owners about the financial value of their company in the market.

They have equated like other analysts to summarize the AIS for measuring the running condition in the financial market. 

Mainly AIS is more observed by outsiders like we said above because above all are the pillars of every organization. The special motive to verify AIS is to calculate the financial ratio analysis to check the liquidity of the business.

On the other hand, internal controllers of the company also check the accuracy of financial reports through AIS so that they can put extra effort. An internal analyst can be:

Managers

 Managers can check the financial reports to manage resources and guide employees.

Customers

 Customers who check the purchases receipts or transactions in AIS.

Accountants

Analyzing and summarizing the financial reports prepared by bookkeepers. Accountants verify the AIS for the accounting process.

Bookkeepers

Record all financial reports according to daily business transactions. It is known as Bookkeeping and bookkeepers utilize the AIS for bookkeeping.

Vendors

 To check dealings with business owners related to business materials.

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