Accounting Information System:
Accounting system not properly set up to meet the requirement of the business due to badly programmed or inappropriate software or hardware or personnel problems can caused more havoc and
Danger of computer fraud if proper level of control and security whether internal and external are not properly been instituted.
An accounting information system (AIS) is a system of collection, storage and processing of financial and data that is used by. An accounting information system is generally a computer-based method for tracking accounting activity in conjunction with information technology resources. The resulting statistical can be used internally by management or externally by other interested parties including and tax authorities. The actual physical devices and systems that allows the AIS to operate and perform its functions
Internal controls and security measures: what is implemented to safeguard the data
Model Base Managemen
History:
Initially, accounting information systems were predominantly developed “in-house” as. Such solutions were difficult to develop and expensive to maintain. Today, accounting information systems are more commonly sold as prebuilt software packages from vendors such as and where it is configured and customized to match the organization’s business processes. As the need for connectivity and consolidation between other business systems increased, accounting information systems were merged with larger, more centralized systems known as (ERP). Before, with separate applications to manage different business functions, organizations had to develop complex interfaces for the systems to communicate with each other. In ERP, a system such as accounting information system is built as a module integrated into a suite of applications that can include manufacturing, supply chain, human resources. These modules are integrated together and are able to access the same data and execute complex business processes. With the ubiquity of ERP for businesses, the term “accounting information system” has become much less about pure accounting (financial or managerial) and more about tracking processes across all domains of business.
Software architecture of a modern AIS:
A modern AIS typically follows a separating the presentation to the user, application processing and data management in distinct layers. The presentation layer manages how the information is displayed to and viewed by functional users of the system (through mobile devices, web browsers or client application). The entire system is backed by a centralized database that stores all of the data. This can include transactional data generated from the core business processes (purchasing, inventory, accounting) or static, that is referenced when processing data (employee and customer
account records and configuration settings). As transaction occur, the data is collected from the business events and stored into the system’s database where it can be retrieved and processed into information that is useful for making decisions. The application layer retrieves the raw data held in the layer, processes it based on the configured business logic and passes it onto the presentation layer to display to the users. For example, consider the accounts payable department when processing an invoice. With an accounting information system, an clerk enters the, provided by a, into the system where it is then stored in the database. When goods from the vendor are received, a receipt is created and also entered into the AIS. Before the accounts payable department pays the vendor, the system’s application processing tier performs a three-way matching where it automatically matches the amounts on the invoice against the amounts on the receipt and the initial purchase order. Once the match is complete, an email is sent to an accounts payable manager for approval. From here a can be created and the vendor can ultimately be paid.aa
How to effectively implement AIS:
As stated above,accounting information systems are composed of six main components: When an AIS is initially implemented or converted from an existing system, organizations sometimes make the mistake of not considering each of these six components and treating them equally in the implementation process. This results in a system being "built 3 times" rather than once because the initial system is not designed to meet the needs of the organization, the organization then tries to get the system to work, and ultimately, the organization begins again, following the appropriate process.
Following a proven process that works, as follows, results in optimal deployment time, the least amount of frustration, and overall success. Most organizations, even larger ones, hire outside consultants, either from the software publisher or consultants who understand the organization and who work to help the organization select and implement the ideal configuration, taking all components into consideration. Certified Public Accountants (CPAs) with careers dedicated to information systems work with small and large companies to implement accounting information systems that follow a proven process. Many of these CPAs also hold a certificate that is awarded by the American Institute of CPAs—the Certified Information Technology Professional (CITP). CITPs often serve as co-project managers with an organization's project manager representing the information technology department. In smaller organizations, a co-project manager may be an outsourced information technology specialist who manages the implementation of the information technology infrastructure.
The steps necessary to implement a successful accounting information system are as follows:
Detailed Requirements Analysis
where all individuals involved in the system are interviewed. The current system is thoroughly understood, including problems, and complete documentation of the current system—transactions, reports, and questions that need to be answered are gathered. What the users need that is not in the current system is outlined and documented. Users include everyone, from top management to data entry. The requirements analysis not only provides the developer with the specific needs, it also helps users accept the change. Users who have the opportunity to ask questions and provide input are much more confident and receptive of the change, than those who sit back and don't express their concerns.
Systems Design (synthesis)
The analysis is thoroughly reviewed and a new system is created. The system that surrounds the system is often the most important. What data needs to go into the system and how is this going to be handled? What information needs to come out of the system, and how is it going to be formatted? If we know what needs to come out, we know what we need to put into the system, and the program we select will need to appropriately handle the process. The system is built with control files, sample master records, and the ability to perform processes on a test basis. The system is designed to include appropriate internal controls and to provide management with the information needed to make decisions. It is a goal of an accounting information system to provide information that is relevant, meaningful, reliable, useful, and current. To achieve this, the system is designed so that transactions are entered as the occur (either manually or electronically) and information is immediately available on-line for management to use.
Once the system is designed, an RFP is created detailing the requirements and fundamental design. Vendors are asked to respond to the proposal and to provide demonstrations of the product and to specifically respond to the needs of the organization. Ideally, the vendor will input control files, sample master records, and be able to show how various transactions are processed that result in the information that management needs to make decisions. An RFP for the information technology infrastructure follows the selection of the software product because the software product generally has specific requirements for infrastructure. Sometimes, the software and the infrastructure is selected from the same vendor. If not, the organization must ensure that both vendors will work together without "pointing fingers" when there is an issue with either the software or the infrastructure.
Documentation
As the system is being designed, it is documented. The documentation includes vendor documentation of the system and, more importantly, the procedures, or detailed instructions that help users handle each process specific to the organization. Most
documentation and procedures are on-line and it is helpful if organizations can add to the help instructions provided by the software vendor. Documentation and procedures tend to be an afterthought, but is the insurance policy and the tool that is used during testing and training—prior to launch. The documentation is tested during the training so that when the system is launched, there is no question that it works and that the users are confident with the change.
Testing
Prior to launch, all processes are tested from input through output, using the documentation as a tool to ensure that all processes are thoroughly documented and that users can easily follow the procedures so that you know it works and that the procedures will be followed consistently by all users. The reports are reviewed and verified, so that there’s not a garbage in-garbage out. This is all done in a test system not yet fully populated with live data. Unfortunately, most organizations launch systems prior to thorough testing, adding to the end-user frustration when processes don't work. The documentation and procedures may be modified during this process. All identified transactions must be tested during this step in the process. All reports and on-line information must be verified and traced through the "audit trail" so that management is ensured that transactions will be handled consistently and that the information can be relied upon to make decisions.
Training
Prior to launch, all users need to be trained, with procedures. This means, a trainer using the procedures to show each end user how to handle a procedures. The procedures often need to be updated during training as users describe their unique circumstances and the "design" is modified with this additional information. The end user then performs the procedure with the trainer and the documentation. The end user then performs the procedure with the documentation alone. The end-user is then on his or her own with the support, either in person or by phone, of the trainer or other support person.
Data Conversion
Tools are developed to convert the data from the current system (which was documented in the requirements analysis) to the new system. The data is mapped from one system to the other and datafiles are created that will work with the tools that are developed. The conversion is thoroughly tested and verified prior to final conversion. Of course, there’s a backup so that it can be restarted, if necessary.
Launch
The system is implemented only AFTER all of the above is completed. The entire organization is aware of the launch date. Ideally, the current system is retained and oftentimes run in "parallel" until the new system is in full operation and deemed to be working properly. With the current "mass-market" software used by thousands of companies and fundamentally proven to work, the "parallel" run that is mandatory with software tailor-made to a company is generally not done. This is only true, however, when the above process is followed and the system is thoroughly documented and tested and users are trained PRIOR to launch.
Tools
Online resources are available to assist with strategic planning of accounting information systems. Information Systems and Financial Forms aid in determining the specific needs of each organization, as well as assign responsibility to principles involved.
Support
The end-users and managers have ongoing support available at all times. System upgrades follow a similar process and all users are thoroughly appraised of changes, upgraded in an efficient manner, and trained.
Many organizations chose to limit the amount of time and money spent on the analysis, design, documentation, and training, and move right into software selection and implementation. It is a proven fact that if a detailed requirements analysis is performed with adequate time being spent on the analysis, that the implementation and ongoing support will be minimal. Organizations who skip the steps necessary to ensure the system meets the needs of the organization are often left with frustrated end users, costly support, and information that is not current or correct. Worse yet, these organizations build the system 3 times instead of once.
Some Benefits of an in Accounting Information System(AIS):
Information systems changed forever the way accounting tasks are processed. The days of green paper pads are gone, and instead businesses have a centralized place where all accounting transactions are entered and saved. No more looking for paper journals or adding up long columns--computer software does that for you, error-free. Thanks to reasonably priced hardware and software, even small businesses can benefit from computerized accounting.
Speed
The main benefit of information systems in accounting is the speed of processing tasks. Data is entered once and can then be used and reused in compiling reports by literally pressing a button. If a transaction needs correction, it is easily done, with reports generated afterward at speeds never possible with manual accounting systems.
Classification
When data is entered in an accounting system, manual or computerized, an accountant needs to classify it in a detailed fashion. For example, a transaction could be a sales revenue or an interest revenue. Using information systems, this classification process is easily accomplished with a drop-down menu from which you choose the proper category. You can also quickly generate reports involving classifications. With a manual system, this process takes much more time.
Safety
Once data is entered into a computer, it is safe. The chances of losing data are remote, especially when you perform regular system backups. In manual systems, paper pads can be lost or damaged more easily. You can save data on the Internet, where it will not only be accessible anytime you need it but will also still be secure even if your computer is lost or damaged.
Some Disadvantage of AIS:
Learning the System
· Learning an accounting information system can often be difficult and time-consuming. Individuals must be trained on a system, and this can cause a disadvantage to companies in terms of time and manpower. An accounting information system is made up of many different components, and almost all systems are computerized. Because of their complexity, some people may find them hard to use. It can take weeks or months for a person to understand an accounting system, and usually the individual still does not understand completely what the system is capable of. If the employee quits working at the organization, it can take weeks or months, once again, to train another employee.
Loss of Information
· Accounting information systems are usually computerized. Because of this, there is always a risk of losing information through power outages or system crashes. When this happens, there is a chance that all the information in the system could be lost. Companies take precautions for this problem by backing up their files regularly and performing standard maintenance on all computer systems. They also install anti-virus software as another precaution. Still, none of these steps eliminates the potential problem that may occur. Accounting information systems store a company's financial information for years. If a system crash occurs, it causes a major disadvantage to the company. All, or some, information is lost, and there's a chance it may never be recovered.
Re-evaluation
· Companies often change their way of doing business to keep up with the latest trends. To keep up in a demanding business world, these changes may impact an accounting system. An accounting information system is difficult to set up because every company is unique in its own way. In order to keep up with changes, accounting information systems must be re-evaluated often. Changes often need to be made in a system in order to process information efficiently. This can be a disadvantage to companies because it takes time for the re-evaluation, and it costs money.
Others problems:
Power failure, computer viruses and hackers are the inherent problems of using computerized systems;
Once data been input into the system, automatically the output are obtained hence the data being input needs to be validated for accuracy and completeness, we should not forget concept of GIGO (Garbage In(Input) Garbage out ( Output) and
Internal controls and security measures: what is implemented to safeguard the data
Model Base Managemen
History:
Initially, accounting information systems were predominantly developed “in-house” as. Such solutions were difficult to develop and expensive to maintain. Today, accounting information systems are more commonly sold as prebuilt software packages from vendors such as and where it is configured and customized to match the organization’s business processes. As the need for connectivity and consolidation between other business systems increased, accounting information systems were merged with larger, more centralized systems known as (ERP). Before, with separate applications to manage different business functions, organizations had to develop complex interfaces for the systems to communicate with each other. In ERP, a system such as accounting information system is built as a module integrated into a suite of applications that can include manufacturing, supply chain, human resources. These modules are integrated together and are able to access the same data and execute complex business processes. With the ubiquity of ERP for businesses, the term “accounting information system” has become much less about pure accounting (financial or managerial) and more about tracking processes across all domains of business.
Software architecture of a modern AIS:
A modern AIS typically follows a separating the presentation to the user, application processing and data management in distinct layers. The presentation layer manages how the information is displayed to and viewed by functional users of the system (through mobile devices, web browsers or client application). The entire system is backed by a centralized database that stores all of the data. This can include transactional data generated from the core business processes (purchasing, inventory, accounting) or static, that is referenced when processing data (employee and customer
account records and configuration settings). As transaction occur, the data is collected from the business events and stored into the system’s database where it can be retrieved and processed into information that is useful for making decisions. The application layer retrieves the raw data held in the layer, processes it based on the configured business logic and passes it onto the presentation layer to display to the users. For example, consider the accounts payable department when processing an invoice. With an accounting information system, an clerk enters the, provided by a, into the system where it is then stored in the database. When goods from the vendor are received, a receipt is created and also entered into the AIS. Before the accounts payable department pays the vendor, the system’s application processing tier performs a three-way matching where it automatically matches the amounts on the invoice against the amounts on the receipt and the initial purchase order. Once the match is complete, an email is sent to an accounts payable manager for approval. From here a can be created and the vendor can ultimately be paid.aa
How to effectively implement AIS:
As stated above,accounting information systems are composed of six main components: When an AIS is initially implemented or converted from an existing system, organizations sometimes make the mistake of not considering each of these six components and treating them equally in the implementation process. This results in a system being "built 3 times" rather than once because the initial system is not designed to meet the needs of the organization, the organization then tries to get the system to work, and ultimately, the organization begins again, following the appropriate process.
Following a proven process that works, as follows, results in optimal deployment time, the least amount of frustration, and overall success. Most organizations, even larger ones, hire outside consultants, either from the software publisher or consultants who understand the organization and who work to help the organization select and implement the ideal configuration, taking all components into consideration. Certified Public Accountants (CPAs) with careers dedicated to information systems work with small and large companies to implement accounting information systems that follow a proven process. Many of these CPAs also hold a certificate that is awarded by the American Institute of CPAs—the Certified Information Technology Professional (CITP). CITPs often serve as co-project managers with an organization's project manager representing the information technology department. In smaller organizations, a co-project manager may be an outsourced information technology specialist who manages the implementation of the information technology infrastructure.
The steps necessary to implement a successful accounting information system are as follows:
Detailed Requirements Analysis
where all individuals involved in the system are interviewed. The current system is thoroughly understood, including problems, and complete documentation of the current system—transactions, reports, and questions that need to be answered are gathered. What the users need that is not in the current system is outlined and documented. Users include everyone, from top management to data entry. The requirements analysis not only provides the developer with the specific needs, it also helps users accept the change. Users who have the opportunity to ask questions and provide input are much more confident and receptive of the change, than those who sit back and don't express their concerns.
Systems Design (synthesis)
The analysis is thoroughly reviewed and a new system is created. The system that surrounds the system is often the most important. What data needs to go into the system and how is this going to be handled? What information needs to come out of the system, and how is it going to be formatted? If we know what needs to come out, we know what we need to put into the system, and the program we select will need to appropriately handle the process. The system is built with control files, sample master records, and the ability to perform processes on a test basis. The system is designed to include appropriate internal controls and to provide management with the information needed to make decisions. It is a goal of an accounting information system to provide information that is relevant, meaningful, reliable, useful, and current. To achieve this, the system is designed so that transactions are entered as the occur (either manually or electronically) and information is immediately available on-line for management to use.
Once the system is designed, an RFP is created detailing the requirements and fundamental design. Vendors are asked to respond to the proposal and to provide demonstrations of the product and to specifically respond to the needs of the organization. Ideally, the vendor will input control files, sample master records, and be able to show how various transactions are processed that result in the information that management needs to make decisions. An RFP for the information technology infrastructure follows the selection of the software product because the software product generally has specific requirements for infrastructure. Sometimes, the software and the infrastructure is selected from the same vendor. If not, the organization must ensure that both vendors will work together without "pointing fingers" when there is an issue with either the software or the infrastructure.
Documentation
As the system is being designed, it is documented. The documentation includes vendor documentation of the system and, more importantly, the procedures, or detailed instructions that help users handle each process specific to the organization. Most
documentation and procedures are on-line and it is helpful if organizations can add to the help instructions provided by the software vendor. Documentation and procedures tend to be an afterthought, but is the insurance policy and the tool that is used during testing and training—prior to launch. The documentation is tested during the training so that when the system is launched, there is no question that it works and that the users are confident with the change.
Testing
Prior to launch, all processes are tested from input through output, using the documentation as a tool to ensure that all processes are thoroughly documented and that users can easily follow the procedures so that you know it works and that the procedures will be followed consistently by all users. The reports are reviewed and verified, so that there’s not a garbage in-garbage out. This is all done in a test system not yet fully populated with live data. Unfortunately, most organizations launch systems prior to thorough testing, adding to the end-user frustration when processes don't work. The documentation and procedures may be modified during this process. All identified transactions must be tested during this step in the process. All reports and on-line information must be verified and traced through the "audit trail" so that management is ensured that transactions will be handled consistently and that the information can be relied upon to make decisions.
Training
Prior to launch, all users need to be trained, with procedures. This means, a trainer using the procedures to show each end user how to handle a procedures. The procedures often need to be updated during training as users describe their unique circumstances and the "design" is modified with this additional information. The end user then performs the procedure with the trainer and the documentation. The end user then performs the procedure with the documentation alone. The end-user is then on his or her own with the support, either in person or by phone, of the trainer or other support person.
Data Conversion
Tools are developed to convert the data from the current system (which was documented in the requirements analysis) to the new system. The data is mapped from one system to the other and datafiles are created that will work with the tools that are developed. The conversion is thoroughly tested and verified prior to final conversion. Of course, there’s a backup so that it can be restarted, if necessary.
Launch
The system is implemented only AFTER all of the above is completed. The entire organization is aware of the launch date. Ideally, the current system is retained and oftentimes run in "parallel" until the new system is in full operation and deemed to be working properly. With the current "mass-market" software used by thousands of companies and fundamentally proven to work, the "parallel" run that is mandatory with software tailor-made to a company is generally not done. This is only true, however, when the above process is followed and the system is thoroughly documented and tested and users are trained PRIOR to launch.
Tools
Online resources are available to assist with strategic planning of accounting information systems. Information Systems and Financial Forms aid in determining the specific needs of each organization, as well as assign responsibility to principles involved.
Support
The end-users and managers have ongoing support available at all times. System upgrades follow a similar process and all users are thoroughly appraised of changes, upgraded in an efficient manner, and trained.
Many organizations chose to limit the amount of time and money spent on the analysis, design, documentation, and training, and move right into software selection and implementation. It is a proven fact that if a detailed requirements analysis is performed with adequate time being spent on the analysis, that the implementation and ongoing support will be minimal. Organizations who skip the steps necessary to ensure the system meets the needs of the organization are often left with frustrated end users, costly support, and information that is not current or correct. Worse yet, these organizations build the system 3 times instead of once.
Some Benefits of an in Accounting Information System(AIS):
Information systems changed forever the way accounting tasks are processed. The days of green paper pads are gone, and instead businesses have a centralized place where all accounting transactions are entered and saved. No more looking for paper journals or adding up long columns--computer software does that for you, error-free. Thanks to reasonably priced hardware and software, even small businesses can benefit from computerized accounting.
Speed
The main benefit of information systems in accounting is the speed of processing tasks. Data is entered once and can then be used and reused in compiling reports by literally pressing a button. If a transaction needs correction, it is easily done, with reports generated afterward at speeds never possible with manual accounting systems.
Classification
When data is entered in an accounting system, manual or computerized, an accountant needs to classify it in a detailed fashion. For example, a transaction could be a sales revenue or an interest revenue. Using information systems, this classification process is easily accomplished with a drop-down menu from which you choose the proper category. You can also quickly generate reports involving classifications. With a manual system, this process takes much more time.
Safety
Once data is entered into a computer, it is safe. The chances of losing data are remote, especially when you perform regular system backups. In manual systems, paper pads can be lost or damaged more easily. You can save data on the Internet, where it will not only be accessible anytime you need it but will also still be secure even if your computer is lost or damaged.
Some Disadvantage of AIS:
Learning the System
· Learning an accounting information system can often be difficult and time-consuming. Individuals must be trained on a system, and this can cause a disadvantage to companies in terms of time and manpower. An accounting information system is made up of many different components, and almost all systems are computerized. Because of their complexity, some people may find them hard to use. It can take weeks or months for a person to understand an accounting system, and usually the individual still does not understand completely what the system is capable of. If the employee quits working at the organization, it can take weeks or months, once again, to train another employee.
Loss of Information
· Accounting information systems are usually computerized. Because of this, there is always a risk of losing information through power outages or system crashes. When this happens, there is a chance that all the information in the system could be lost. Companies take precautions for this problem by backing up their files regularly and performing standard maintenance on all computer systems. They also install anti-virus software as another precaution. Still, none of these steps eliminates the potential problem that may occur. Accounting information systems store a company's financial information for years. If a system crash occurs, it causes a major disadvantage to the company. All, or some, information is lost, and there's a chance it may never be recovered.
Re-evaluation
· Companies often change their way of doing business to keep up with the latest trends. To keep up in a demanding business world, these changes may impact an accounting system. An accounting information system is difficult to set up because every company is unique in its own way. In order to keep up with changes, accounting information systems must be re-evaluated often. Changes often need to be made in a system in order to process information efficiently. This can be a disadvantage to companies because it takes time for the re-evaluation, and it costs money.
Others problems:
Power failure, computer viruses and hackers are the inherent problems of using computerized systems;
Once data been input into the system, automatically the output are obtained hence the data being input needs to be validated for accuracy and completeness, we should not forget concept of GIGO (Garbage In(Input) Garbage out ( Output) and
Accounting system not properly set up to meet the requirement of the business due to badly programmed or inappropriate software or hardware or personnel problems can caused more havoc and
Danger of computer fraud if proper level of control and security whether internal and external are not properly been instituted.
* * *
Thanks for sharing and it was very informative..I need more tips from your side..I am working in Erp Development Company In India
ReplyDeletenice post.I am impressed by the quality of information on this website.Thanks for sharing this post
ReplyDeleteTrading erp software in chennai