An accounting information system is one that accumulates, stores, and processes financial and accounting information. The system generates reports that are used to make decisions regarding how an organization is to be run. These reports are also used by outsiders to evaluate lending and investment opportunities with the firm. The key components of the system are:
- The policies and procedures governing how information is collected.
- The internal controls used to ensure that information is recorded correctly.
- The training employed to ensure that users operate the system correctly.
- The software and integrated database used to store and process information.
- The hardware on which the software and database is stored.
An accounting information system is usually run using electronic data processing equipment, but can be operated less efficiently with a manual bookkeeping system. Using a computer-based system is highly advantageous, since it automates many accounting processes and thereby reduces transactional error rates. It can also produce reports much more quickly than a manual system.
An accounting information system is typically comprised of several modules, each of which is designed to handle certain types of transactions. These modules include:
- Accounts payable
- Accounts receivable
- General ledger
The baseline set of modules may be expanded to include ancillary functions, such as purchasing, production scheduling, warehousing, and human resources.