1.

Functions of an Accounting Information System

Accounting information systems have three basic functions:

a. The first function of an AIS is the efficient and effective collection and storage of data
concerning an organization’s financial activities, including getting the transaction data from
source documents, recording the transactions in journals, and posting data from journals to
ledgers. In the collection phase of an accounting information system, accountants or
bookkeepers gather and record data from cash sales, receivables, cash purchases, payables and
payroll, among other transactions. In computerized systems, the software program processes all
the debits and credits into a complete information management database.

b. The second function of an AIS is to supply information useful for making decisions, including
producing managerial reports and financial statements. Accounting personnel distribute reports
to decision-makers within the organization, such as sales and marketing managers, production
managers, financial managers and all department heads.

c. The third function of an AIS is to make sure controls are in place to accurately record and
process data.

2. How an AIS Can Add Value to an Organization:

a. Improving the quality and reducing the costs of products and services
 Reduces the amount of wasted materials and the costs of having to rework anything
b. Improving efficiency
 Providing more timely information
c. Sharing knowledge
 Improving operations and even providing a competitive edge4.Improving the
efficiency and effectiveness of its supply chain
 Can reduce the cost of sales and marketing activities5.Improving the internal control
structure
 Can protect systems from problems such as fraud, errors, equipment and software
failures, and natural and political disasters6.Improving decision making
 Identifies situations requiring management action
 Provides a basis for choosing among alternative actions by reducing uncertainty
 Information about the results of previous decisions provides valuable feedback that
can be used to improve future decisions
 Information about the results of previous decisions provides valuable feedback that
can be used to improve future decisions
 Providing accurate information in a timely manner

3. Subsystem of Accounting Information Systems (AIS) are:

a. The Revenue Circle includes sales and revenue in the form of cash.
b. The Expenditure Cycle purchasing activities and payment with cash.
c. The Human Resources / payroll cycle includes the activities of contract and hire employees
 d. The production cycles the process of changing raw materials into finished material
e. The financing cycle includes activities to get data from investors, as well as their payments
again.
4. What role does the AIS play in helping organizations objectives?
a. Data collection about each activity
b. Transforming data into information that can be used by management to coordinate
those activities
5. What internal control an organization adopts to safeguard the accounting information.
Controlling the environment
The control environment is the basis of other elements of all other components of the internal
control system. Moral values, managerial skills, the honesty of employees and managerial
direction, etc. are included in the controlling environment.

Risk assessment
After setting up the objective of business, external and internal risks are to be assessed. The
management determines risk controlling means after examining the risks related to every
objective.

Control activities
The management establishes a controlling activities system to prevent risk associated with every
objective. These controlling activities include all those measures that are to be followed by the
employees.

Information and communication

Relevant information for taking decision are to be collected and reported in proper time. The
events that yield data may originate from internal or external sources.

Communication is very important for achieving management goals. The employees are to realize
what is expected of them and how their responsibilities are related to the activities of others.
Communication of the owners with outside parties’ like’s suppliers is also very important.

Monitoring
When the internal control system is in practice, the organization monitors its effectiveness so
that necessary changes can be brought if any serious problem arises.