Course Code: AE20

Course Title: Accounting Information System

Course Description:
This course establishes students to the systems that produce financial information for
organizations. Although discussions will cover information systems as a whole, particular
emphasis will be placed on financial transaction cycles and business processes in the accounting
information systems (AIS). It will also cover risks and controls involved in the processing of
financial transactions in an information technology environment. Once the overall
understanding of the theory and manual processing is accomplished, students will harness their
understanding in an automated environment using SAP, a widely-used financial application by
many local and international businesses to process their financial information.

Topic: Introduction to Accounting Information System and the business environment

 Identify the various definition of Accounting Information System and the functions and
definitions of the basic concepts in AIS
 Distinguish major differences of manual and computerized information system
 Define in layman’s term the basic concept in AIS

Lecture

What is an Accounting Information System

An accounting information system (AIS) involves the collection, storage, and processing of
financial and accounting data used by internal users to report information to investors,
creditors, and tax authorities. It is generally a computer-based method for tracking accounting
activity in conjunction with information technology resources. An AIS combines traditional
accounting practices, such as the use of Generally Accepted Accounting Principles (GAAP), with
modern information technology resources.

How an Accounting Information Systems (AIS) is Used

An accounting information system contains various elements important in the accounting cycle.
Although the information contained in a system varies among industries and business sizes, a
typical AIS includes data relating to revenue, expenses, customer information, employee
information, and tax information. Specific data includes sales orders and analysis reports,
purchase requisitions, invoices, check registers, inventory, payroll, ledger, trial balance, and
financial statement information.

An accounting information system must have a database structure to store information. This
database structure is typically programmed with query language that allows for table and data
manipulation. An AIS has numerous fields to input data as well as to edit previously stored data.
In addition, accounting information systems are often highly secured platforms with
preventative measures taken against viruses, hackers, and other external sources attempting to
collect information. Cybersecurity is increasingly important as more and more companies store
their data electronically.

The various outputs of an accounting information system exemplify the versatility of its data
manipulation capabilities. An AIS produces reports including accounts receivable aging reports
based on customer information, depreciation schedules for fixed assets, and trial balances for
financial reporting. Customer lists, taxation calculations, and inventory levels may also be
reproduced. However, correspondences, memos, or presentations are not included in the AIS
because these items are not directly related to a company’s financial reporting or bookkeeping.

Difference Between Manual and Computerized Accounting

In accounting, the financial transactions are recorded, processed and presented to generate
financial statements, that is useful to the readers, in making decisions. Traditionally, accounting
is done manually, by a trained accountant, with the use of registers, account books, vouchers
etc. But with the emerging technology, nowadays, computerized accounting is in vogue, due to
its accuracy, convenience and speed.

Both manual and computerized system is based on the same principles, conventions and
concept of accounting. However, they differ only in their mechanism, in the sense that manual
accounting uses pen and paper, to record transactions, whereas computerized accounting
makes use of computers and internet, to enter transactions electronically.

Key Differences Between Manual and Computerized Accounting

The difference between manual and computerized accounting is explained below in points:

1. Manual Accounting refers to the accounting method in which physical registers for
journal and ledger, vouchers and account books are used to keep a record of the
financial transactions. On the other hand, computerized accounting implies the method
of accounting, which uses an accounting software or package, to record the monetary
transactions, which happen to an organization.
 2. In manual accounting, recording of the transaction can be done through the book of
original entry, i.e. journal day book. Conversely, in computerized accounting, the
transactions are recorded in the form of data, in the customised database.
3. In manual accounting, all the calculations, i.e. addition, subtraction, etc. with respect to
the transactions are performed manually. In contrast, in computerized accounting, there
is no need to perform calculations, as the calculations are performed by the computer
automatically.
4. In manual accounting, a person remains involved all the time, with the accounts, to
enter and update transactions, which is tedious and time-consuming too. As against, in
computerized accounting, once the transaction is entered, it is automatically updated in
all the accounts to which it relates and thus, the process is comparatively faster.
5. In manual accounting method, if there occurs an error while entering and posting the
transaction in the books of accounts, then adjustment entries can be passed, for getting
accurate results. Moreover, adjustment entries are also made to comply with the
matching principle, i.e. the expenses of the accounting period should match the
respective revenues. On the other hand, in computerized accounting, to comply with the
matching principles journal and vouchers are prepared, but adjustments entries are not
passed for rectification of error unless the error is an error of principle.
6. One of the merits of computerized accounting which manual accounting lacks is that in
manual accounting there is no way to back up all the entries and financial statements,
but in computerized accounting, the accounting records can be saved and backed up.
7. In manual accounting, the trial balance is prepared only when it is required, whereas, in
computerized accounting, instant trial balance is provided on a daily basis.
8. In a manual accounting system, the financial statement is prepared at the end of the
period, i.e. financial year. On the contrary, the financial statement is provided at the click
of a button, in the computerized accounting system.

Conclusion
As the number of business transactions increases, it is difficult to manage accounts manually, as
it takes a lot of time to update a single transaction in all the accounts that it affects. In
computerized accounting, a number of limitations of the manual accounting have been
removed. Whenever the transactions occur, the entry is made and it is updated automatically in
all the accounts that it affects, in the computerized accounting.

References:
https://www.investopedia.com/terms/a/accounting-information-system-ais.asp
https://keydifferences.com/difference-between-manual-and-computerized-accounting.html?
fbclid=IwAR3CQhhJ8nTdXwBp1UvC8nzGM9EL5xzDdddSUekAWPP6ZRairJNTfUm9Sas

Prepared by:

REEZA R. SUAZO, MBM

Instructor, Program Chair - BSAIS