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8. The objectives of AIS

These six components enable an AIS to fulfill three important business functions:

1. Collect and store data about organizational activities, resources, and personnel.
Organizations have a number of business processes, such as making a sale or purchasing
raw materials, which are repeated frequently. That is, AIS provides information useful for
decision making.
2. Transform data into information so management can plan, execute, control, and evaluate
activities, resources, and personnel.
3. Provide adequate controls to safeguard the organization’s assets and data.

9. Uses of AIS
Accounting Information System has the following uses:
1. Support day-to-day operations
2. Support Internal Decision-Making
3. Help fulfill Stewardship Role

10. Principles of Accounting Information Systems

Efficient and effective accounting information systems are based on certain basic principles. In
other words, the basic principles are used in developing an accounting information system. These
principles, as described in figure 1-3, are (1) cost-effectiveness (2) usefulness, and (3) flexibility.

Figure 1-3 Principles of Accounting Information Systems

If the accounting system is cost-effective, provides useful output, and has the flexibility to meet
future needs, it can contribute to both individual and organizational goals.

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11. The Role of Accountants in Accounting Information System

Roles of accountants with respect to an Accounting Information System include:

1) Financial accountants: prepare financial information for external decision-making in

accordance with GAAP.
2) Managerial accountants: prepare financial information for internal decision-making.
3) Auditors: evaluate internal controls and attest to the fairness of the financial statements.
4) Consultants: devise specifications for the AIS.
Since accounting data comes from an AIS, AIS knowledge and skills are critical to an accountant’s
career success. Interacting with an AIS is one of the most important activities that accountants
perform. Other important AIS-related activities include designing information systems and
business process improvements. Therefore, accountants will be users, auditors, and developers of
Accounting Information System.
Self-Assessment Questions

Instruction: Choose the Correct answer.

1. Data differ from information in which way?

A. Data are output, and information is input.

B. Information is output, and data are input.
C. Data are meaningful bits of information.
D. There is no difference.

2. Which of the following is NOT a characteristic that makes information useful?

A. It is reliable.
B. It is timely.
C. It is inexpensive.
D. It is relevant.

3. Which transaction cycle includes interactions between an organization and its suppliers?

A. Revenue cycle
B. Expenditure cycle
C. Human resources/payroll cycle
D. General ledger and reporting system

4. Which of the following is a function of an AIS?

A. Recruiting competent employees

B. Transforming data into useful information
C. Allocating organizational resources
D. Automating all decision making

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5. Which of the following is most likely to be a general ledger control account?

A. Accounts receivable
B. Petty cash
C. Prepaid rent
D. Retained earnings

6. Which of the following is LEAST likely to be a specialized journal?

A. Sales journal
B. Cash receipts journal
C. Prepaid insurance journal
D. Cash disbursements journal

7. How does the chart of accounts list general ledger accounts?

A. Alphabetical order
B. Chronological order
C. Size order
D. The order in which they appear in financial statements

8. Recording and processing information about a transaction at the time it takes place is referred to as
which of the following?

A. Batch processing
B. Real-time processing
C. Captured transaction processing
D. Chart of accounts processing

9. The basic principles of an accounting information system include all of the following except:

A. Cost-effectiveness.
B. Useful output.
C. Flexibility.
D. Periodicity.

10. Which of the following is not an advantage of computerized accounting systems?

A. Data is entered only once in computerized accounting systems.

B. Computerized accounting systems provide up-to-date information
C. Computerized accounting systems eliminate entering of transaction information.
D. Computerized accounting systems eliminate many errors resulting from human intervention.

PREPARED BY: SAMSON WORKU TESHOME (MBA) 6