Question

Your friend Tom Smith after opening Smith Sales Company realizes that he needs some assistance in setting up a better accounting system. He requests your assistance in developing a new accounting system.

Explain to Tom what an accounting information system is and describe an effective system in more than 200 words.

Answer 1

"An accounting information system (AIS) is a structure that a business uses to collect, store, manage, process, retrieve and report its financial data so it can be used by accountants, consultants, business analysts, management officers, auditors, regulators, and tax agencies, or other interested parties to make business decisions. Although an AIS can be a manual system, today most accounting information systems are computer-based."

"An AIS is said to be effective if it has the following features:

• Reliable: As it provides such valuable business information, reliability is very important. An AIS should be able to store, process and yield the information and reports securely, by maintaining the privacy and integrity of data
• Efficient: It should be able to handle large volumes of data efficiently, without making errors
• Control: It should be able to yield information and results in such fashion that it empowers the decision maker in the process of his analysis
• Comparability: The information yielded by the AIS should be capable of being compared to the past records to be able understand the trends and progressions
• Flexibility: it must be capable of adapting to the changes in the business environment and therefore be able to yield custom reports that suit the needs of the user for that time
• Cost benefit relationship: The cost incurred to implement and maintain the AIS should be positively compensated by the ease and reliability of information provided by it."