DAVID, SHAIRA MAE

DE GUZMAN, MARVER PAUL

MACABANTI, CHEESCA
SERRANA, MARY JANE

ACCOUNTING INFORMATION SYSTEM

CONTENT

 DEFINITION
 HISTORY OR EVOLUTION

What is ACCOUNTING INFORMATION SYSTEM?

 Accounting is an information system.

 It identifies, collects, processes, and communicates economic information about a firm
using a wide variety of technologies.
 It captures and records the financial effects of the firm's transactions.
 It distributes transaction information to operations personnel to coordinate many key
tasks.
 The goal behind AIS is to gather, store, and the process of the accounting financial data.
Therefore, it delivers instructive reports that will give insight to managers and directors
in on decision making (Horngren, 2006).

Accounting is an information system.

Information system is the set of formal procedures by which data are collected, processed into
information, and distributed to users.

WHY DO BUSINESSES USE AIS?

AIS ensures the highest level of accuracy with the company's financial transactions and record-
keeping. It also allows specific employees to access the information they need while limiting
sensitive information to others and protecting the overall security of company data. An AIS
increases a company's ability to detect fraud and helps it ensure that its finances are running
smoothly. A well-designed AIS allows everyone within the company to access the same system
and retrieve the same information.

Functions of an AIS
There are three basic functions of AIS:
Efficient and effective collection and storage of financial data: An AIS can collect transaction
data from source documents, record transactions in journals and post to ledgers.
Supplying information for decision-making: An AIS can produce managerial reports and
financial statements for managers, chief financial officers (CFO) and other key decision-makers.
Putting controls in place: An AIS can put controls in place to record and process data
accurately.

AIS COMPONENTS
Accounting information systems comprise six parts that keep them running efficiently
and fluidly:

1. People
This includes anyone who uses the information system. It could include accountants,
managers, CFOs and other C-suite executives, financial analysts and auditors. AIS helps
different departments work together effectively. For example, to streamline operations,
management can set sales goals, which can then inform staff about the amount of
inventory available to meet those goals. Salespeople can enter their customer orders into
the AIS, which alerts accounting to send invoices, tell warehouse employees to package
orders and the shipping department to mail them.
2. Procedures and instructions
AIS uses procedures and instructions to regulate how companies collect, store, process
and distribute financial information, helping employees complete training on these
procedures. These methods are both manual and automated and can come from internal
sources like employees or external sources like online orders placed by customers.
Procedures and instructions coded into the AIS software and implemented with
employees through training and documentation are most effective when professionals
follow them consistently.
3. AIS data
For convenient record-keeping and reporting, the AIS often has a database structure that
stores information in one central location. The structure, like Microsoft's structured query
 language (SQL), allows data in the AIS to be sorted and retrieved for reporting. The AIS
stores any information relevant to the organization's business practices that could affect
its finances.
Any business data that affect the company's finances go into the AIS. While the data may
vary depending on the business, it typically includes:
 Inventory data
 Tax information
 Check registers
 General ledger
 Customer billing statements
 Sales orders
 Purchase requisitions
 Vendor invoices
 Sales analysis reports
 Payroll information
 Timekeeping information

Data that doesn't go into the AIS includes things like manuals, memos and
correspondence. While these things can be related to a company's finances, they aren't
considered part of financial record keeping
4. AIS software
The AIS has a software component that's essential to store, retrieve, process and analyze
financial data for the company. Though AIS used to be a manual-based system,
companies today use customized software programs to meet the needs of each business.
For publicly traded companies, the structure of the AIS is to some extent dictated by
Sarbanes-Oxley Act regulations.
5. IT infrastructure
IT infrastructure refers to the hardware that's used to operate the AIS and includes things
like computers, servers, routers and other components most businesses already have. An
optimized IT infrastructure requires compatibility with the software selected for the AIS
and the ability to run efficiently for other software the company may be using. The
infrastructure also includes contingency plans for things like power outages, hardware
failure and anything else that could affect the ability of the system to run as designed.
6. Internal controls
Internal controls refer to the security measures used to protect data stored within the AIS.
Internal controls include everything from passwords to biometric verification methods to
encryption methods. It filters out sensitive data for employees without verified access
while still making the information readily available for those with full access. Internal
controls are an essential component of the AIS, as the AIS usually contains sensitive
 employee and customer information like credit cards and Social Security numbers and the
company's financial data.

AIS Subsystems

• Transaction processing system (TPS)- supports daily business operations

• General Ledger / Financial Reporting System (GL/FRS)- produces financial

statements and reports

• Management Reporting System (MRS)- produces special-purpose reports for internal

use

AIS versus MIS

• Accounting Information Systems (AIS) process- financial transactions; e.g., sale of goods
and nonfinancial transactions that directly affect the processing of financial transactions; e.g.,
addition of newly approved vendors
• Management Information Systems (MIS) process- nonfinancial transactions that are not
normally processed by traditional AIS; e.g., tracking customer complaints

HISTORY/ EVOLUTION OF ACCOUNTING INFORMATION SYSTEM

 The Evolution of Accounting Information System

Manual Process Model
The manual process model is the oldest and most traditional form of accounting systems.
Manual systems constitute the physical events, resources, and personnel that characterize
many business processes. It includes order-taking, warehousing, materials,
 manufacturing goods for sale, shipping goods to customers, and placing orders
with vendors. It also includes the physical task of record keeping.

Flat File Model

It is based on Legacy Model of computers. Large mainframe systems that were
implemented in the late 1960s through the 1980s are used for Flat File Model.
Organizations today still use these systems extensively. Eventually, modern database
management systems will replace them, but in the meantime accountants must continue
to deal with legacy system technologies.

Database Model
An organization can overcome the problems associated with flat files by implementing
the database model to data management DBMS (Database management system).
However the DBMS is a special software system that is programmed to know
which data elements each user is authorized to access. Moreover DBMS validates
and authorizes access to the database in accordance with the user’s level. He or she is not
authorized to access, the request is denied. Clearly, the organization’s procedures for
assigning user authority are an important control issue for auditors to consider.

The REA Model

This model is also based on modern database technology but with different viewpoint of
implementation. However REA is an accounting framework based resources, events, and
agents (REA) and the relationships between them. Moreover both accounting and non-
accounting data about REA identified, captured, and stored in a relational database.
And then different user views are constructed that meet the needs of all users in the
organization. The REA model was proposed in 1982 as a theoretical model for
accounting. Advances in database technology have focused renewed attention on REA as
a practical alternative to the classical accounting framework.

 The evolution of accounting information systems (AIS) can be traced back to the early
days of manual bookkeeping systems, which relied on paper ledgers and journals to
time record financial transactions. Over, technological advancements have led to the
development of more sophisticated AIS, including computerized systems and
enterprise resource planning (ERP) systems.
 In the 1970s and 1980s, the introduction of computers and accounting software
revolutionized the way businesses managed their financial information. These systems
automated many of the manual tasks associated with bookkeeping, including data
entry, record keeping, and financial reporting. As a result, businesses could more easily
track their financial performance and make informed decisions based on real-time data.
  In the 1990s, the development of ERP systems marked another milestone in the evolution
of AIS. These integrated software solutions allowed businesses to manage multiple
functions, including accounting, human resources, inventory management, and
customer relationship management, within a single platform. This streamlined
approach helped businesses to reduce costs, increase efficiency, and improve decision-
making.
 Today, AIS continue to evolve, with cloud-based software solutions becoming
increasingly popular. These systems provide businesses with access to real-time financial
data from anywhere, at any time, and can be easily integrated with other business
applications.
 Additionally, advancements in artificial intelligence and machine learning are
opening up new possibilities for the use of AIS in areas such as fraud detection, financial
forecasting, and data analysis.
 Overall, the evolution of AIS has had a significant impact on the way businesses manage
their financial information, and will likely continue to do so in the future

Reference:
https://www.slideshare.net/ShanelleCamral/aischapter1ppt
https://www.indeed.com/career-advice/career-development/accounting-information-system
https://www.studocu.com/ph/document/laguna-state-polytechnic-university/accountancy/the-
evolution-of-accounting-information-system/83287166?origin=organic-success-document-
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