January 26, 2022

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Accounting Information System: Definition and Explanations

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The world has achieved its objective of becoming a global village. People around the world can now reach out to each other without seeing themselves. This is aided by information and digital system. Thanks to computers. The digital world had also encroached the accounting field. With modern IT infrastructure, accountants can easily process financial data with ease. This has led to a new subject matter of accounting referred to as an accounting information system.

What is the accounting information system?

It is a subset of a company’s information system that processes business transactions and making it available to management and other end users.

Accounting Information System, AIS, can also be defined as a subsystem that processes a business’s financial and nonfinancial transaction to provide useful information to management and other users.

Key Explanations of AIS

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From the above definition, the following can be deduced.

Accounting Information System is a subset or a subsystem of a firm’s information system. In general, a business information system is made up of financial information and nonfinancial information. The financial part is processed by AIS while the other is processed by its management information system, MIS.

AIS is a process. A process is often regarded as a cycle. The process begins with transaction processing. Next, such transactions are entered into journals and financial reports. The final product is a report that is made available to management and other end users.

For example, the purchase of inventory is a transaction which is inputted into the AIS. Next, it is processed into the general journal along with other transactions. At the end of the period, the information is reported to management.

The information is reported to management. As in the general definition of accounting, the purpose of exerting efforts in carrying out the accounting task is to provide information for management and other users or stakeholders. An accounting information system is created for similar objectives. The end result of AIS is reported to management and other users, such as investors, auditors, tax authorities among other persons.

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Next, we will consider the subsystems of an AIS.

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