Most people invest their savings in mutual funds, meaning mutual funds management companies handle hundreds of billions of dollars from millions of clients. It is not possible to run this kind of business without accurately recording information. When a client calls her investment company to find out her balance, the company must be able to give her accurate information instantly. Companies rely on advanced information systems to store data accurately.
Accounting Information Systems
To run a business, a company needs to store its financial information accurately. In accounting, information systems plays that role. It involves financial reporting of normal business transactions to expenditure and financial planning. Financial records have to be stored accurately for the benefit of the firm as well as its shareholders. Transaction data is collected and processed into financial information, which in turn is disseminated to shareholders, management and other interested parties. The system used to process all that is called "accounting information system."
Data and Information
Information systems in accounting involve the collection of data and transformation of that data into information that is then used to make accounting decisions. Data is basically raw facts that need processing to turn the facts into usable information by those who need it to make financial decisions. Accounting information systems play that role.
Recording accounting information must include evidence a transaction occurred. Abstract information is not admissible in accounting. Documents such as receipts and purchase orders must be provided as proof of the transaction. Other documents required in accounting information systems are trial balances, financial statements and worksheets that result from the process. In years past, it was common to use manual accounting information systems, which involved recording of information on a hard copy balance sheet, for example. But increasingly, almost all financial records are electronic; however, there are companies that maintain both electronic and manual information systems.
The standard personal computer is the most commonly used input device in accounting. Devices used for information input include the keyboard, scanners and electronic communication instruments such as electronic data interchange. Output devices include printers. Every day, ordinary people participate in the input of data into various businesses' information systems. At a supermarket where you scan your own items and make payment, you are inputting data into the business's information system, which will be used for accounting purposes.
Building an Information System
Information systems vary from company to company. Each organization must build an information system that is relevant to its goals. Information technology companies are able to build customized and comprehensive software that fits specific needs of individual companies.
Developing an effective accounting information system requires great effort. The main objective for designing an effective information system is that it is able to provide simple, relevant, timely and reliable information to people who need to act on it more efficiently. These people might be management or shareholders or other interested parties such as organizations that provide accounting oversight.
Once the system is designed and developed, it needs monitoring to ensure it is functioning properly. Changes must be made according to the organization's needs.
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