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Accounting as an information system

Accounting as an information system

Accounting as an information system provides the predetermined result (preparation of financial statements) through a consecutive process in performing the several functions. Now a days accounting stands for a system of providing information.

A system is a unified group of interacting part that function together to achieve objective and purpose. This is working through a sequential order so that raw data become in meaningful information i.e information refer to meaningful facts or figures useful for decisions Accounting as an information system.

Information System

Fig I.P.O relationship in accounting information system

Accounting information system (AIS) is an organizational component that accumulates, classifies, processes, analyses and communicates relevant financial parties. The process of AIS is interlinked with each other to prepare the statutory report fir achieving two basic purposes as:

  •  External reporting i.e. transparency to gain accountability
  •  Compliance to rules and regulation.
  •  Accounting as an information system

AIS is a coherent system to interpret the infra-structural elements in providing information which are in conformity with the recognized rules and regulation e.g general accepted accounting principles (GAAP), International accounting standard (IAS). The Basic element of AIS are interlinked with each other to prepare the statutory report as follows:

Accounting information systel

Fig: Accounting Information System

To produce information, the AIS must perform the following tasks:

  • Collects transaction and other date and enter them in records
  • Processes the data
  • Stores the data for future use
  • provides users with information they need by producing a report, or allow users to query the data stored in the AIS
  • Controls the whole process so that the information produced is accurate and reliable.
  • AIS can be a very simple paper and pen based manual system, a very complex system using the very latest in computers and information technology (IT).

Accounting system, profit measurement and management

A Greek restaurant owner in Canada had his own system of accounting, He kept his accounts payable in a cigar box on the left hand side of his cash register, his daily cash receipts for paid bills in another cigar box on the right.
When his youngest son graduated as an accountant, he was applied by his father’s primitive methods. “i don’t know how you can run a business that way,’ he said “How do you know what your profits are?”
“Well, son, the father replied, “when i got off the boat from Greece, I had nothing but the pant I was wearing. Today, your brother is a doctor, You are an accountant. Your sister is a speech therapist. Your mother and i have a nice car and city hours, a country home. We have a good business and everything is paid for…”
“So you add all that together, subtract the pants, and there’s your profit!”Source: Warren, Carl S. & Fees, Philip E., financial & Managerial Accounting South-Western Publishing Co (1992),3rd edition, P.220

Accounting as an information system

Accounting as an information system

 

 

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