Accounti
ng
Informati
on
System
(AIS)
Ta b l e
of
Conten
t 01 Meaning & Scope of AIS
02 Components of
AIS 03
Reliability of AIS 04
01
Meaning &
Scope of
AIS
The Central focus of
AIS is information.
Like other business resources of
raw materials, capital, and
labor; information is vital to the
survival of the contemporary
business organization.
System
Group of two or more
interrelated components or
sub-systems that serve a
common purpose.
Information
System
Set of formal procedures by
which data are collected, stored,
processed into information
and distributed to users.
Accounting
Information
Structure that a business
System
uses to collect, store,
manage, process, retrieve and
report both financial and non-
financial data to enable users
make informed decisions.
Accounting
Information
Accounting Information
System
System could be manual,
computerized or hybrid.
Accounting
Information Manual: use of paper, pen and
System other tangible equipment like
filing cabinets. Computerized:
use of computers and other
electronic devices.
Hybrid: combination of both
manual and computerized
components.
WHAT IS AN AIS?
What important functions does the AIS perform in
an organization?
1. It collects and stores data about activities
and transactions.
2. It processes data into information that is useful
for making decisions.
3. It provides adequate controls to safeguard the
organization’s assets.
WHY STUDY AIS?
Because :
Accounting is defined as an information system.
The primary objective of accounting is to provide
information useful to decision makers.
Accounting is about information identification,
development, measurement, and communication
process, and...
Financial information reporting.
WHY STUDY AIS?
To understand how the accounting system
works.
How to collect data about an organization’s
activities and
transactions
How to transform that data into information that
management can use to run the organization
How to ensure the availability, reliability, and
accuracy of
WHY STUDY AIS?
Auditors need to understand the systems that
are used to produce a company’s financial
statements.
Tax professionals need to understand enough
about the client’s AIS to be confident that the
information used for tax planning and compliance
work is complete and accurate.
A survey conducted by the Institute of
Management Accountants (IMA) indicates that
work relating to accounting systems was the single
most important activity performed by corporate
Users of AIS
INTERNAL EXTERNAL
USERS USERS
E.g. Accountants E.g. Business
& Managers analysts &
Regulators
Qualitative Characteristics of Accounting
Information
• AIS only as valuable as the quality
is of it is able to
information
provide.
• The framework of the IASB
conceptual
(International Accounting Board)
Standards
prescribes certain criteria for
judging the quality of accounting
information.
RELEVANCE Fundamental
Characteristics
FAITHFUL REPRESENTATION
COMPARABILITY
IASB QUALITATIVE Enhancing
CHARACTERISTICS OF TIMELINESS Characteristics
ACCOUNTING
INFORMATION UNDERSTANDABILITY
Read VERIFIABILITY
more….
AIS SUB-SYSTEMS
Transaction General Ledger/ Management
Processing Financial Reporting Reporting
System (TPS) System (GL/FRS) System (MRS)
AIS SUB-SYSTEMS: TPS
• Supports daily operations by Capturing
and converting economic events
into financial transactions for recording in
the books of account.
• Handles transactions that are routine by
nature.
• Consists of the expenditure cycle,
AIS SUB-SYSTEMS: GLFRS
• Receives data input from the TPS and
other sources.
• Updates the general ledger, posts
adjusting entries and prepares financial
statements (income statement, cash flow
statement, statement of financial position,
Etc.)
AIS SUB-SYSTEMS: MRS
• Generates internal reports to
meet reporting and decision
making needs of managers.
• Examples of internal reports include
budgets, investment analyses, variance
analyses, Etc.
02
Components of
AIS
Components of AIS
Peopl Data IT
e Infrastructure
Procedures Softwar Intern
& e al
Components of AIS
People: Users of the system such as
accountants, managers, analysts, Etc.
Procedures and Instructions: Processes and
methods used to collect, store, process and
retrieve data.
Data: Financial and related non-financial
events captured by the system, including
Components of AIS
Software: Computer programs deployed to
collect, store, process and retrieve data.
IT Infrastructure: Computer hardware
used in conjunction with software to
power the AIS.
Internal Controls: Security measures put in
place to protect the integrity of the AIS.
03
Reliability of
AIS
Reliability factors of
AIS
Confidentiali Privac
ty y Processin
g
integrity
Securit
y AIS
Availabili
Read
ty
more….
03
Discussion
Questions
1. What challenges could an organization face in developing its
AIS ? How can it go about resolving such issues?
2. What are the salient differences between data and
information?
3. What is your preference - manual, computerized or hybrid AIS?
THANK YOU
Accounting Information System (AIS)
© 2021
