Korbel Foundation College, Inc.

Purok Spring, Brgy. Morales, City of Koronadal

Tel Number 877-2051/0228-1996

Overview of Accounting
Information System(AIS)
Subject Code: IT 2
Descriptive Title: Accounting Information System

Prepared by:
Ipril Joy R. Naquita, CPA, MBM

KFCI-Module 1
 Learning Objectives:
At the end of the presentation, the learner must be able to

• Understand the primary information flow within the

business environment
• Understand the difference between financial and non-
financial transactions
• Identify the basic commercial software
• Differentiate Accounting Information System and
Management Information System
• Identify the key elements of the general model for Information
System
• Differentiate distributed data processing from centralized data
processing
• Explain how the organization structure influence the AIS
application
 Content

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Objective 1:
Understand the primary
information flow within the
business environment

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Information System(IS)
- Is a set of formal procedures that suggest the use of computer technology in an
organization

Accounting Information System

- collects data and transform it into information
- this transformation performs manual and computerized environment

Financial Transactions
Information
Information
User Decisions
System

Non Financial Transactions

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Transactions
- Is an economic event that
affects or is of interest to the
organization and is processed
by its information system as a
unit of work.

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Objective 2: Understand the difference between financial

and non-financial transactions

Financial Transactions
- Economic events that affects the assets and equities of the organization and is
measured in monetary terms. Examples are sale of products to customers,
purchase of raw materials, and payment of liabilities.

Non-Financial Transactions
- All other events not included in the financial transactions and processed in the
IS. Examples are adding new valid supplier to list of suppliers record and adding
employee’s name to employee rosters which are not quantifiable.

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How to embed Information System(IS) in your organization?

 Develop customized system from in-house system development activities

 Purchase preprogrammed commercial systems from software vendors

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Objective 3: Identify basic types of commercial software

 Turnkey System

 Backbone Systems

 Vendor-Supported Systems

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Information
System
Accounting Management
Information Information
System(AIS) System(MIS)

General Transaction Human

Management Financial
Ledger/Financial Processing Marketing Distribution Resource
Reporting System Management
Reporting System System System System System
System

Revenue Cycle Expenditure Cycle Conversion Cycle

Sales processing Cost Accounting

System Purchase System
System

Production
Cash Receipts Cash Disbursement
System Planning and
System
Control System
Payroll Processing
System
Information System Framework
Fixed Asset System
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AIS Subsystems
 Transaction Processing System(TPS) - supports the daily activities
of firm
 General Ledge/Financial Reporting System(GL/FRS)- produces
financial statements and reports

 Management Reporting System(MRS)-produces special purpose

reports for internal use

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Objective 4: Why is it important to distinguish

AIS from MIS

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Accounting Management
Information System VS
Information System

 process financial transaction besides non-  process non- financial transaction

financial data
 AIS provides information for other external
users so that it has more users.

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Objective 5: Identify the key elements of the AIS model

General Model for AIS

 A model for designing the system that applies to all
information systems of the business regardless of
their technological architecture.

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Key Elements of AIS Model

1. Data Sources
 This refers to financial transactions that enter into the
system

Internal Sources-include exchange or movement of

resources within the organization

External Sources-most common sources data

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Key Elements of AIS Model

2. Data Collection
• The first operational stage in the information system. In
this stage, it captures, record, edit and validate the data
before entering into the system.

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Key Elements of AIS Model

3. Data Processing
• Data that is process into the system. The processing
include classifying, transcribing, sorting, batching,
merging, calculating, comparing and summarizing data.

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Key Elements of AIS Model

4. Data Management
• The physical repository for financial and non-financial
information (Database). Its tasks is to stores, retrieve and
delete database

5. Information Generation
• Process of compiling, arranging, formatting, and presenting
information to users
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Key Elements of AIS Model

6. Feedback
• It is a form of output that evaluates the usefulness of
information.

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Key Elements of AIS Model

7. End Users
Examples
• Creditors, stockholders, potential
External End Users investors, regulatory agencies, tax
authorities, suppliers, and customers

• Management at all levels of the

Internal End Users organization and operations personnel

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Key Elements of
AIS Model
 Data Sources
 Data Collection
 Data processing
 Data Management
 Information Generation
 End Users
 Feedback

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Characteristics of Useful Information:

 T-imeliness
 R-elevance
 A-ccuracy
 C-ompleteness
 S-ummarization

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Organization Structure
- Is a system that outlines the business activities of the
organization. The structures include authority, responsibility
and accountability.
- Segmentation is the most common way to organize a
business function.

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Functional areas of a
business organization

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IT Function is organize into small

processing units that are distributed to
end users and place under their control

All data processing is performed by a

large computer housed at a central site
that serve users throughout the
organization

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Objective 6: Differentiate Centralized Data Processing and

Distributed Data Processing

CENTRALIZED DATA PROCESSING DISTRIBUTED DATA PROCESSING

ADVANTAGES Fast access, no duplication of data, and Reduce cost, high availability, share
little reorganization required workload, improved user satisfaction and
back up
DISADVANTAGES High cost, reliability issues and single Data replication, inefficiency use of
point of failure resources, destruction of audit trails,
inadequate segregation of duties and
incompatibility of hardware and software

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Objective 7: How Organizational Structure influence the

AIS Application?

- The organizational structure reflects the distribution of

responsibility, authority, and accountability throughout the
organization. Analyzing the information needs of the client is
significant in designing the AIS. The size and line of business
among industry with simple to complex transactions varies its
application.

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Quick Check…
1. The following are subsystems of the Accounting Information System except
a) Transaction Processing System
b) Human Resources System
c) General Ledger/Financial Reporting System
d) Management Reporting System?

2. Which of the following is a not financial transaction?

a) Purchase of products
b) Cash Receipts
c) Update valid vendor file
d) Sale of Inventory

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 Highlight Summary

 In learning AIS course, the information is recognized as a business resource and is vital
to the business organization. The entity must be able to analyze and understand the
internal and external flow of information of the entity.
 The first section introduced the basic system concepts of information system and
presented the framework that distinguished the difference between AIS from MIS
 Entity may purchase software based on the system needs of the entity such as turnkey
system, back-bone system, and vendor supported system.
 AIS process financial transaction while MIS process non-financial transactions
 In designing the system the key elements of the General Model for Accounting
Information includes Data Sources, Data Collection, Data processing, Data
Management, Information Generation, End Users and Feedback

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 Data collected will be processed into the system and generated as information resources
which is needed by the decision makers. Data can be processed in the IT function through
data distributed processing or centralized data processing.
 Centralized data processing is performed by a large computer house at a central site that
serve users throughout the organization while distributed data processing function is
organize into small processing units.
 AIS application of the organization vary on the size and line of business. It also consider
the needs and complexity of the business transactions. There are commercially available
software that can be purchased from vendors or they can in-house their own system to
suit the specific needs of their organization.

REFERENCE:
Accounting Information System by James A. Hall, 2008

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