Overview of Accounting Information System (AIS)

Summary

The video explains the role of the Accounting Information System (AIS) in business operations. It covers how AIS collects, processes, and distributes data to support day-to-day tasks, management decisions, and stewardship functions. The system can be manual or computer-based and consists of three major subsystems: Transaction Processing System (TPS), General Ledger Financial Reporting System (GLFRS), and Management Reporting System (MRS). These subsystems help with various business processes, including financial transactions, compliance reports, and internal management reports. The video also highlights the difference between AIS and the Management Information System (MIS), which handles broader organizational data.

Takeaways

• 😀 The Accounting Information System (AIS) is a set of formal procedures used by businesses to collect, process, and distribute information to support daily operations, decision-making, and management functions.
• 😀 AIS includes components such as people, policies, procedures, and technology working together to process data and transform it into useful information for users.
• 😀 The objective of AIS is to support business operations, management decision-making, and the organization's stewardship function.
• 😀 An example of AIS in action is a bank teller verifying a client's account before accepting a deposit, which helps ensure accuracy in the transaction.
• 😀 Another example is a purchasing manager using AIS to gather information on suppliers, including pricing and performance, to make informed decisions on raw material purchases.
• 😀 AIS also supports management's stewardship by providing information about the company's performance, such as net profit, and comparing actual results with budgeted reports.
• 😀 AIS can be either manual or computer-based. Manual systems use traditional methods like pre-printed forms and file cabinets, while computer-based systems use hardware, software, and communication technologies like the internet.
• 😀 AIS consists of three major subsystems: the Transaction Processing System (TPS), the General Ledger and Financial Reporting System (GLFRS), and the Management Reporting System (MRS).
• 😀 The Transaction Processing System (TPS) is considered the heart of AIS as it processes all transactions before the data flows into the general ledger and financial reports.
• 😀 The Management Reporting System (MRS) is designed for internal users and helps management with customized financial reports and information for decision-making, such as budgets, sales reports, and responsibility reports.
• 😀 The Management Information System (MIS) processes information beyond the capabilities of AIS, including data like employee job skills and market analysis, supporting broader business management needs.

Q & A

What is the purpose of an Accounting Information System (AIS)?

The purpose of an AIS is to collect, process, and distribute information to users in order to support the organization's daily operations, management's decision-making, and stewardship functions.

How does a bank teller use an AIS in their daily tasks?

A bank teller uses an AIS to confirm that a client's account exists in the system before accepting a deposit. The system checks the account number provided on the deposit slip and informs the teller if the account is valid or needs to be corrected.

How does a purchasing manager benefit from the AIS?

A purchasing manager uses the AIS to gather important information, such as current prices and vendor performance, to make informed decisions on which supplier to buy raw materials from.

What role does AIS play in management's stewardship function?

AIS helps management assess whether the company met its financial goals by comparing the actual results, such as net profit from the income statement, with the budgeted targets.

What is the difference between manual and computer-based AIS?

A manual AIS uses traditional methods like pre-printed forms, handwriting, and file cabinets to collect and store data. A computer-based AIS uses computer hardware, software, and telecommunication channels like the internet to process and communicate information.

What are the three major components of an AIS?

The three major components of an AIS are the Transaction Processing System (TPS), the General Ledger and Financial Reporting System (GLFRS), and the Management Reporting System (MRS).

Why is the Transaction Processing System (TPS) considered the heart of an AIS?

The TPS is considered the heart of an AIS because it processes all transactions and generates reports that support the organization's daily business operations before the data flows into other systems like the general ledger or financial reporting system.

What does the General Ledger and Financial Reporting System (GLFRS) do?

The GLFRS processes summaries of transactions, such as sales and purchases, and generates financial statements like the balance sheet and income statement. It also handles compliance reports, such as tax returns.

What information does the Management Reporting System (MRS) provide?

The MRS provides internal management with customized financial reports and information needed for decision-making, such as budget variance reports, sales reports, and responsibility reports.

How does the Management Information System (MIS) differ from the AIS?

The MIS processes information beyond the capabilities of AIS, such as employee job skills, market data, and market analysis, which are not directly related to financial transactions.