Accounting Information Systems

Accounting information systems 1

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Accounting information systems 2

Accounting information systems are computer-based systems that collect, record and

process data to facilitate decision making. They are designed to help the management to control

and manage a commercial financial area of the organization. Accounting information systems are

critical for all groups. AIS is used to record the financial transactions of a firm. AIS is designed

to suit the needs of a given company. The introduction of the latter has enhanced better

management of funds among many businesses. The systems aid the firm in the achievement of

some of its objectives especially the ones associated with the finance department. Such goals

include strategic budgeting, debt management, effective cash flow management, tax planning

and accurate record keeping. The AIS also aids firms to achieve the objective of effective

performance management.

AIS helps an organization’s finance department to achieve its goal of ensuring an

efficient strategic budgeting. To prepare a working budget, the group has to approximate correct

revenue levels based on a demand forecast (Taiwo 2016). To do this, the company retrieves

information on the annual budget projects from the AIS. The finance department staffs use the

AIS in the calculation of target profits and overhead and production costs that accompany the

anticipated benefit. The systems are also responsible for the production of monthly budget

variance analyses reports hence tracking the inflow of revenue and management of expenditure

thus making corrects early before a company goes enormous losses (Turner and Weickgenannt

2008). For example, a company that sells cars may get data on the number of vehicles sold in the

recent years hence a prediction of the sales of that could probably be made in the successive

years. Such information can be retrieved from the inventory control system which is a

component of the AIS. The inventory control system keeps data on the inflow and outflow of

stock. Maintaining records on inventory serves a significant role in ensuring that the possibility

Accounting information systems 3

of dead stock is eliminated. Adequate record keeping also provides that there is a constant supply

of products since the company replenishes its inventory on time.

Also necessary to note, AIS facilitates efficient cash flow management. According to

Gelinas (2014), the account payables and account receivable components of the Accounting

information systems are of use in this context. The account payable system keeps a record of

credit purchases hence showing the amount an organization owes other people. On the different

hand, account receivables system maintain the transactions of credits sales consequently provides

information on the amount the customers owe to their respective firms. Close track of both

systems ensures that a corporation has enough funds to pay its bills. The information from the

latter systems helps a company in the management of severe debts. The report from the AIS aid a

group in prior preparation of tax obligations (Turner and Weickgenannt 2008). Prior tax planning

facilitates the use of proactive strategies to reduce the tax burden. The AIS enhances accurate

record keeping of the financial data. Moreover, the system facilitates ease in the retrieval of

financial information required for external and internal audits hence such an organization

observes the legal requirements thus smooth running of the business.

Accounting information systems are critical organizational mechanisms that are

significant for the management to make effective decisions and efficiently control the

organization. Accounting information systems are one of the most significant in the firms that

have altered the capturing, processing, storing and distributing information. On the other hand,

performance management involves the activities that enhance effective and efficient achievement

of an organization’s goals. Accounting information systems influence the way performance

management is conducted and also affects the operations of across departments in a group. For

instance, the procurement department is combined with the finance department hence

Accounting information systems 4

determination of how much the company can buy and can afford due to their financial

capabilities. Performance management incorporates several activities which require high quality,

accurate and reliable information (Turner and Weickgenannt 2008). The quality of information

provides a competitive edge for an organization. The high-quality data is retrieved from the

Accounting information systems. The quality of information is very crucial to businesses in their

decision making. The support of decision making includes financial analysis from the

companies’ accounts. For example, data on financial ratios such liquidity ratios which measures

the ability of a firm to pay its short-term obligations help the management curb the possibility of

bankruptcy in the long run.

Equally important the function of management is to show the volume at which the set

goals and objectives are attained in an organization. This is done by merely analyzing the

existing information in the structure which are retrieved from the Accounting information

systems (Taiwo, 2016). The way resources such as funds are used, goal setting standards, net

incomes and many other activities involved are attended to. At times, some outcomes in the

organizational performance are opposite of the expectations. Managers have an obligation of

handling funds, keep financial records and evaluate them after a particular fiscal period. This is

to make them come up with accurate information on how the organization is run. They assess

their operation through the help of the internal control system which is the main control point of

the structure (Gelinas 2014). The success of an organization occurs typically due to a high level

of management involved. Information used by management to rate the performance of most

industrial organizations often comes from records kept by financial managers on how funds and

other resources are used in the company. These financial managers use AIS to keep distribute

information. Well-kept accounting records provide credible information for evaluating the

Accounting information systems 5

performance of an organization. This plays an essential role as a guide in making useful

decisions according to the goals and objective of the company thus boosting the results of the

organizational performance.

Conclusively, accounting information system has helped the management to control and

manage a commercial financial area of the organization. The AIS influences the achievement of

an organization’s objectives. This essay covers how the AIS helps a company meet its finance

department objectives. Such purposes include strategic budgeting, debt management, effective

cash flow management, tax planning and accurate record keeping. Also important to note AIS

facilitates effective and efficient performance management since the system provides credible

information useful in making management decisions.

Accounting information systems 6

References

Gelinas, U. J. (2014). Accounting information systems.

Taiwo, J.N., 2016. Effect of ICT on Accounting Information System and Organizational

Performance: The Application of Information and Communication Technology on

Accounting Information System. European Journal of Business and Social Sciences, 5(2),

pp.1-15.

Turner, L. and Weickgenannt, A.B., 2008. Accounting information systems: controls and

processes. John Wiley & Sons.

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