What Is an Accounting Information System?

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

Understanding Accounting Information System (AIS)

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 accounting information system 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.

In addition, accounting information systems are often highly secured platforms with preventative measures taken against viruses, hackers and other external sources attempting to collected information.

Data Storage and Recall

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 accounting information system has numerous fields to input data as well as edit previously stored data.

Data Output

The various outputs of an accounting information system show the versatility of its data manipulation capabilities. An accounting information system 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 system because these items are not directly related to a company’s financial reporting and bookkeeping.

Relationships Across Departments

An accounting information system strives to cut across different departments. Within the system, the sales department can upload the sales budget. This information is used by the inventory management team to conduct inventory and purchase materials. Upon the purchase of inventory, the system can notify the accounts payable department of the new invoice. An accounting information system can also share information about a new order so that the manufacturing, shipping and customer service departments are aware of the sale.

Internal Controls

An integral part of accounting information systems relates to internal controls. Policies and procedures can be placed within the system to ensure that sensitive customer, vendor, and business information is maintained within a company. Through the use of physical access denial, login requirements, access logs, authorization and segregation of duties, users can be limited to only the relevant information necessary to perform their business function.