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What is Accounting Information System(AIS) - Basic Introduction

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2021-11-15 17:51:57 • Filed to: Accounting • Proven solutions

Modern companies need current, rapid, high-quality information about their internal conditions for the purpose of making strategic decisions. This can be accomplished by an Accounting Information System (AIS). This is a computerized method of recording and maintaining the accounting processes of a business. This system leverages Information Technology (IT) tools for this purpose. It collects, stores, processes, and presents accounting information so that it can be utilized by the decision-makers in a business. Prior to investing in an Accounting Information System, it is important to know its purpose, components, and capability. Here is more on this

What is Accounting Information System

This is a software tool that can be used to identify, record, organize, qualify, interpret, present and store accounting information. By using customized, intelligent, built-in formulas, the accounting information system is capable of displaying the profitability of a business for a specific period of operation. It is also capable of revealing the overall state of an enterprise by assessing its assets, liabilities and considering the owners' equity. Accounting Information Systems are highly versatile. Therefore, they can be used by a wide range of professionals. Examples of these are accountants, managers, analysts, consultants, Chief Financial Officers (CFOs), regulators, and tax agencies too.

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The Basic Components of Accounting Information System

An Accounting Information System (AIS) operates upon a foundation of five basic principles. They include the principles of Control as well as Relevance. It also operates upon Compatibility, Flexibility, and Cost-benefit principles. By doing so, it fulfills the Generally Accepted Accounting Principles (GAAPs). In addition to that, this specialized system has 5 unique components.

Source Documents

This is one of the components of an accounting system. It refers to the documents which contain the records of business transactions. They are tangible evidence of commercial activity. Some examples of these documents include purchase orders, invoices and receipts. Often created at the end of a business process or the completion of a transaction, they serve as indicators of business activity and keep records of transaction details. Source documents can be tangible or digital in nature.

Devices to Capture Input Data

This is a major component of this system. Input devices are used to capture transaction information for accounting purposes. By using specialized mechanisms of operation, they capture data accurately and allow for its processing or storage. Often used by employees, they help to enter these details into accounting information systems. Examples of input devices include keyboards, scanners, touchpads, modems, and bar code scanners.

Processing Devices for Information

This component of the Accounting Information System (AIS) is usually connected to the input devices. It receives raw data from them, processes it and then saves it in digital storage files such as ledgers, reports, and journals. Examples of these processors are software and digital tools. Their ultimate objective is to transform accounting data into information that decision makers can utilize successfully. Modern processors are able to process bulky accounting information in seconds.

Storage Devices for Information

This is a component of accounting systems that are used to store the ledgers and reports that are generated from processed accounting data. Traditionally, file cabinets were used as storage devices. However, many Accounting Information Systems are based on computers today. Therefore, the storage is performed in hard disks, flash drives, memory cards and Cloud infrastructure. This component is used for life as well as backup storage of this information. Furthermore, the accounting information is often stored in such a way that it can support shared access.

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Output Media

Accounting Information Systems process data into information, so that they may guide the decision-makers in an organization. This information is presented through the output media component of the Accounting Information System (AIS). Examples of output media include monitors, projectors, and printers as well. These devices work to provide accounting information in a legible, clear, and useful way.

An Accounting Information System (AIS) is an excellent way to manage the financial operations and records of your business. It leverages computing power to streamline business accounting today. Its components make this possible. One of the most reliable and effective systems for this purpose is FreshBooks. You can implement it in your business to experience power, automation, and convenience.


FreshBooks - Software for Accounting Information System

There are various types of accounting software. An ideal example is FreshBooks. This specific Accounting Information System (AIS) is built on Cloud infrastructure. Furthermore, it is an accounting system for small businesses. By using the built-in tools within FreshBooks, accountants can manage invoices, track the periods of accounting, manage receipts, including credit card payments, and keep track of expenses as well Moreover, this software follows the required basic accounting principles. You can use this digital tool at no cost for a 30 day period. For further use, you have to purchase it FreshBooks is a great long-term investment for small businesses today.

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