TUTORIAL: Financial Statements
Components of an Accounting Information System
Accounting information systems generally consist of six main parts: people, procedures and instructions, data, software, information technology infrastructure and internal controls. Let's look at each component in detail.
The people in an AIS are simply the system users. Professionals who may need to use an organization's AIS include accountants, consultants, business analysts, managers, chief financial officers and auditors. (Learn more in What does a chief financial officer Do?)
An AIS helps the different departments within a company work together. For example, management can establish sales goals for which staff can then order the appropriate amount of inventory. The inventory order notifies the accounting department of a new payable. When sales are made, sales people can enter customer orders, accounting can invoice customers, the warehouse can assemble the order, the shipping department can send it off, and the accounting department gets notified of a new receivable. The customer service department can then track customer shipments and the system can create sales reports for management. Managers can also see inventory costs, shipping costs, manufacturing costs and so on.
With a well-designed AIS, everyone within an organization who is authorized to do so can access the same system and get the same information. An AIS also simplifies getting information to people outside of the organization when necessary. For example, consultants might use the information in an AIS to analyze the effectiveness of the company's pricing structure by looking at cost data, sales data and revenue. Also, auditors can use the data to assess a company's internal controls, financial condition and compliance with the Sarbanes-Oxley Act (SOX). (Find out more on accounting regulations; check out Financial History: The Rise of Modern Accounting.)
The AIS should be designed to meet the needs of the people who will be using it. The system should also be easy to use and should improve, not hinder, efficiency.
Procedure and Instructions
The procedure and instructions of an AIS are the methods it uses for collecting, storing, retrieving and processing data. These methods will be both manual and automated, and the data can come from both internal sources (e.g., employees) and external sources (e.g., customers' online orders). Procedures and instructions will be coded into AIS software; they should also be "coded" into employees through documentation and training. Procedures and instructions must be followed consistently to be effective.
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To store information, an AIS must have a database structure such as structured query language (SQL), a computer language commonly used for databases. The AIS will also need various input screens for the different types of system users and different types of data entry, as well as different output formats to meet the needs of different users and different types of information. (Does a job as a financial sleuth sound interesting to you? Learn more in Uncovering A Career In Forensic Accounting.)
The data contained in an AIS is all the financial information pertinent to the organization's...