January 26, 2022

SB-Accounting

Accounting + Finance Blog

Components that make up an Accounting Information System

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An organizational Accounting Information System can be manual, such as in the days of using pen and papers. Or digitally, as in modern times. In any case, the AIS component or structure is well organized. In the digital world, as it were right now a good AIS components are made up of six parts. If all the parts are at optimal use, it definitely yields an optimal result for an enterprise.

6 components of an optimal AIS

Humans:

Humans are an important part of an Accounting Information System. A lack of this means the digital system won’t work. Some people may argue that an AIS with Artificial Intelligence and Machine Learning may not need human actions for it to perform its job.

Although such a system is not commercially viable right now, such an AI system will only course a shift in employment called structural unemployment. However, humans will still be needed to ensure the safeguard and control of such AIS.

The AIS people include salespersons, market analysts, accountants, auditors, the management and directors of the entity. Also, consultants who ensure the safety of the system are part of an AIS.

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Procedures and Instructions:

An optimal AIS has algorithms that set out the procedures and instructions of data collections to processing and usage of the information for decision making.

A set of algorithms are coded into the AIS to ensure that the organization’s data are collected, stored, retrieved and processed to bring out information that is relevant and useful to management in a timely manner.

AIS data

This part of a company’s AIS aids the management and security of data. Data are captured either manually or automatically from both internal and external sources to the firm.

As a result of the importance of data, the entity will secure its data. Knowledge of Structured Query Language, SQL is useful in this regard.

However, not all data collected by an organization are safeguarded in the business AIS. Data from memos, correspondence, presentations, and manuals are not stored in a firm’s AIS. A reason for this is that such data are not financial records.

IT Infrastructure

An optimal AIS must have an optimal Information Technology Infrastructure. This simply means all the hardware in place must suit the needs of the organization effectively and efficiently. This hardware includes computers, mobile devices if necessary, servers, routers, printers, surge protectors, hard drive for storage, and back-up power supply.

AIS software

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This is the primary part of the AIS components. Without the software, humans, AIS data, IT infrastructure, internal controls; and procedures and instructions will be useless.

Various application software exists that can be used by small businesses. Intuit Quickbook is one of the implies AIS software available and also affordable. There is accounting software available on Google stores and Apple Play which can be used with a mobile phone.

Sage’s Sage 50 is a powerful small business AIS that is highly recommended, but it is quite expensive. Later companies may build their own AIS through Enterprise Resource Planning. Or may use a larger ERP made by Sage (Sage group MAS 90 or MAS 200), Oracle’s PeopleSoft, Microsoft Dynamics GP or Epicor Financial Management.

Internal control

The internal control component ensures that every aspect of the AIS compiles with laid down standards such as the Sarbanes-Oxley Act. Internal control pertains to the security of the AIS. Each user of the system must have a password. Also, the system must be secured from authorized users.

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In a good AIS, it is easy to trace every activity done with the system. Every user is given access to only what he or she is required to do with the system and denied access to other areas. There should be a super administrator who oversees all the activities that took place in an AIS.

With respect to data, all of it must be encrypted to avoid hackers from stealing sensitive information such as customers’ debit or credit cards.

The components of the AIS work together to achieve the organization’s goal. In the next lesson, we will learn the differences between an AIS and Management Information System (MIS).

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