Accounting Information System | 4 mins read

The Core Functions of Accounting Information Systems

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Lauren Christiansen

By Lauren Christiansen

The Major Functions of Accounting Information Systems

The vast majority of companies have more than one information system to manage all of their data. This is particularly true if a business has several different departments, which all have various data requirements. One of the more critical processes within an organization is business accounting. There is usually an accounting department that handles everything from resource planning to budgeting to cash flow management. To ensure all sensitive data is handled properly, they use accounting software or accounting information systems.

Accounting information systems are types of management information systems. Organizations use AIS software to gather, store, handle, and process all financial information. This enables analysts, accountants, consultants, and regulators to use this data and conduct financial reporting.

Above all, accounting programs must contain high-quality, accurate data to maintain compliance and optimize record-keeping. Authorized individuals must access relevant data at the right times to perform their jobs. A good AIS infrastructure facilitates this process. Read ahead to learn the core functions of accounting information systems.

1. Accounting Information System People

The stakeholders who use accounting information systems AIS are those who interact with the system. Different business units within use these computer systems to collaborate on tasks. Employees who might access accounting software include managers, auditors, certified public accountants, and business analysts.

Each individual interacts with a customized version of the system to complete their portion of a task. The next user then accesses the system to finish an assigned task, and so on. Effective management information systems facilitate this process by enabling everyone to access the same system. Furthermore, they can all view the same data.

  • The accounting workforce is made up of 1.9 million people
  • Technology can replace roughly 94% of current accountants and auditors
  • 83% of accountants believe client demands have increased
  • 94% of accountants have adopted cloud-based accounting

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2. Accounting Information System Procedures and Instructions

The next component of AIS software is procedures and instructions. These are the various methods used to gather, store, retrieve, and process information. Methods may either be manual or automated, depending on company requirements.

Data sources come internally from departments in the supply chain, or externally from customers/vendors. All instructions are coded by an IT specialist and put into the AIS. Employees still need to be trained on how to use a financial accounting system to ensure the process is effective.

3. Accounting Information System Data

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Information technology must have an infrastructure that can store data. This requires SQL or computer language that is commonly employed for these databases. This allows users to manipulate and retrieve data to generate reports. Input screens are required for data entry, while output formats are required for all of the stakeholders and different data.

Financial data is all the information relevant to a company's business procedures. This may include sales orders, purchase requisitions, vendor invoices, payroll data, timekeeping data, and tax data. This information is utilized to generate reports and facilitate record-keeping to maintain compliance. Non-AIS data includes correspondences, manuals, and memos. While the latter may relate to financial statements, it is not a part of an organization's cash flow records.

  • Audit data protection practices
  • Ensure clients know about email security practices
  • Don't disregard physical security measures
  • Make sure wifi is secure
  • Prohibit employees from accessing client data on personal computers
  • Encourage clients to take an active role in monitoring the security of their data

4. Accounting Information Systems Software

Software is the computer systems that store, extract, process, and assess all business data. Most companies used manual-based systems before AIS's, but now the majority use some form of software. Examples include QuickBooks or Sage's Sage 50 Accounting.

Larger organizations typically employ more advanced systems with better security features. Examples include Microsoft's Dynamics GP or Epicor Financial Management. Good software must be high-quality, reliable, and secure.

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5. Accounting Information Systems IT Infrastructure

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IT infrastructure is simply the hardware that enables accounting systems to operate. Examples of business-related hardware include computers, mobile devices, servers, printers, routers, and more. Cost, speed, and storage capabilities are critical things to consider when investing in AIS-related hardware. All hardware should integrate with any software.

It helps to purchase a turnkey system that encompasses both the hardware and software to ensure compatibility. There should also be a plan to maintain, service, replace, and upgrade any parts of the hardware. This will ensure that no sensitive financial data gets lost or destroyed.

  • Shut down, then power off the system before changing any plug or part
  • Use an anti-static mat or wrist strap
  • Be firm but gentle with seating boards, chips, connectors, etc.
  • Keep everything clean, particularly air filters and ventilation paths
  • Don't eat or drink anything around machinery

6. Accounting Information Systems Internal Controls

Internal controls of an accounting information system are any security metrics put in place to guard sensitive information. Examples include passwords, fingerprint identification, or facial recognition. Internal controls prevent unauthorized individuals from accessing critical financial data. This includes some employees within an organization; not just hackers.

An AIS should also mitigate unauthorized file access by employees who can only view certain portions of the AIS. Examples of critical information include social security data, credit card data, vendor information, or financial reporting stats. Internal controls should also protect against viruses and natural disasters that result in data loss.

Key Takeaways for Accounting Information Systems

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In conclusion, here are the six elements of an accounting information system -

  • People are all of the individuals who interact with a management accounting system. Procedures and instructions are the various methods used to gather, store, and process financial data.
  • Data includes all of the internal and external data sources that relate to a company's financial information. Software is all of the computer systems that analyze and extract business data.
  • IT infrastructure is all of the hardware used to house an accounting information system AIS. This includes computers, mobile devices, servers, printers, and routers.
  • Internal controls are all the security measures put in place to protect sensitive financial information.

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