Use of Accounting Information System: Overview with two examples
Accounting information system is a software system that is used by business organizations for collecting, managing, storing and data processing. This data is mainly used by the consultants, business analyst, accountants and business managers for efficient decision making. The aim of the report is to analyze the use of accounting information system (AIS) in business (Lim 2013). AIS can be put to use for innovation in business. The report will be evaluating the use of AIS with two examples and will further discuss the impacts of certain internal and external factors of AIS enabled innovation.
Accounting information system can rightly be used for business innovation. Innovation is seen to positively affect the capability of the firm in competing successfully in a global market. Innovation increases the productivity and efficiency of the company. Innovation is the success actor of increase in use of accounting information system in business.
One example associated with the use of AIS in innovation includes changes in business reality. Accounting information systems have allowed the businesses to have an integrated system that enabled the managers in easier decision making. The use of AIS has driven a change in collection, measurement, analysis and communication of the information associated with the organization thus driving the business innovation (Laudon and Laudon 2015). This type of accounting information system is known as decision support system. Accurate business decisions can be taken with the implementation of AIS which is a significant advantage as well. Thus the use of accounting information system helps in business innovation and therefore the use of accounting information system has been increasing ever since.
Another example of use of AIS in business innovation includes performance management in organization. With the help of AIS, performance measurement of various business operations associated with the business organization is possible (Simkin, Norman and Rose 2014). One of the most common uses of AIS is generation of financial statements that helps in easier business review. The reports generated by the accounting information systems along with the financial statements that are generated by the accounting information system act as leading indicators for comparison with the other companies. This helps the organization in keeping up with the competitive advantage of the company. This type of accounting information system is called transaction processing system.
In the previous section, two types of accounting information system have been identified. These two information system includes the decision support system and transaction processing system (Collier 2015). Leading business organization makes use of this type of accounting information system for business innovation. For example, the Lion Company of Australia, or Curtis Australia make use of these accounting information system in their daily business processes. The detailed description of these two accounting information system is discussed in the following sections.
The decision support system that is a part of accounting information system mainly helps on cost accounting. One of the most critical factors associated with the performance measurement of any organization is having the financial analytics right so that effective decision can be taken (Demski 2013). This type of accounting information system helps in streamlining the costing and accounting process. This data helps in identifying the opportunities of improving costs and quality outcomes associated with the business needs.
Description of AIS used: Challenges and Benefits
One advantage of this type of accounting information system is that it presents the organization with the necessary information that is needed for effective management of the different business processes associated with and organization (Mancini, Vaassen and Dameri 2013). These are the significant business advantages associated with thmaking use of accounting information system. However, there are certain challenges associated with the use of this type of AIS which are discussed as follows-
- The initial cost of implementation of the system is quite high.
- Training the employees is another significant challenge associated with the implementation of this type of accounting system.
Apart from the benefits and the challenges related to the use of accounting information system. There are certain impacts of the internal and external factors on the successful use of accounting information systems (Accorsi, Manzini and Maranesi 2014). One of the basic criteria for ensuring successful implementation of the information system is providing training to the employees of the organization. This is an internal factor that has a huge impact on the successful implementation of decision support system within the organization (Hla and Teru 2015). The external factors having a huge impact on the successful implementation of the decision support system in the organization include the economic factors. The decision support system helps in easier management easier management of the accounting decision which gives the organization an economic benefit (Bonczek, Holsapple and Whinston 2014). Thus this external factor has a positively impacted the organization on the use an implementation of decision support system.
Another accounting information system that is most commonly used for innovation is the transaction processing system (Demirkan and Delen 2013). The transaction processing system is an accounting system that is used for managing the different transactions associated with the organization (Sauter 2014). The transaction processing system helps in real time processing of the data which is a significant advantage. The benefits and the issues associated with the transaction processing system are discussed in the following section.
The transaction processing system is an information processing system that is used by the business organizations for managing the transactions associated with the system. The use of transaction processing system includes performance, reliability and information retrieval in real time (Lee et al. 2013). This system mainly consists of a hardware and software in a transaction oriented application. The transaction processing system is one of the most widely used transaction processing system as it helps in managing the sales, order entry, reservations and payroll along with the employee records. Thus it helps in easier management of the financial transactions in an organization. The transactional processing system mainly serves the operational level of the organization (Dulebohn, James and Richard 2013). This type of information system is mainly used for supporting and recording a certain number of transactions. Thus the transaction process system is a type of accounting information system that act as a backbone for majority of the organizations. There are certain significant benefits of making use of transaction processing system, which are as follows-
- One of the major benefits of making use of the transaction processing system is that it is able to handle a large number of transactions simultaneously. It is observed that a good transaction processing system is able to manage and coordinate thousands of purchases, sales at once (Belfo and Trigo 2013). With the benefit of easier operations handling, it is possible to manage the business transaction in an effective manner.
- The use of transaction processing system in an organization facilitates online transactions (Petter, DeLone and McLean 2013). This type of system is efficient and has an excellent response time. The online processing system helps in easier management of the transaction related issues which is one of the significant advantages for the business organizations.
- The transaction processing system provides real time data to the business managers thus increasing the business benefits. With real time data availability, the business managers are able to effectively manage the different processes in the business.
The above discussed point gives an idea of the benefits that implementation of the said accounting information system can bring to the organization. However, there are certain issues and challenges associated with the use of transaction processing system in the business organization. The challenges associated with the implementation of this type of accounting information system are as follows.
- The implementation and the processing cost of this system are significantly high (Shibl, Lawley and Debuse 2013).
- The implementation of this system in business is time consuming as well.
- Problems can be faced while moving the existing data to a new system. ‘
- The handling of the system is complex and for that proper users’ training is required. This is one of the significant issues associated with the transaction processing system.
Decision Support System
Apart from that, certain internal and external factors have a large efffects on the implementation of the transaction processing system (Al-Mamary, Shamsuddin and Abdul Hamid 2014). The smooth operation of the transaction processing system largely depends on the management factors and process in the organization (Lipaj and Davidaviciene 2013). For successful implementation of the transaction processing system, the organization should ensure appropriate business management.
The external factor that has a huge impact on the smooth business operation includes the social and economic environment of the organization (Gottschlich and Hinz 2014). The social and the economic environment of the organization need to be strong in order to ensure successful implementation of the transaction processing system.
In order to ensure successful implementation of accounting information system for business innovation, the organization should follow a planned approach. Proper planning of the implementation is needed for ensuring that the accounting information system software is implemented without any issue (Qrunfleh and Tarafdar 2014). The recommendations that will help the organization in become successful in making use of accounting information system in business innovation are as follows-
- The accounting information system that is to be implemented in the organization should be designed according to the requirements of the organization. The development of a plan for successful implementation of the project will ensure that the organization is making use of a structured approach in successful implementation of the project.
- It is recommended that before the go live of the designed software, accurate testing of the software is needed to be ensures. This will help in identifying the bugs in the system. Furthermore, before the go live of the accounting information system, it is recommended that the legacy data is migrated to the new system.
- The accounting information system implemented within an organization should be subjected to regular maintenance that will help in easier identification and management of the different issues linked with making use of accounting information systems.
Conclusion
The report gives an overview the use of accounting information system in business innovation. The use of accounting information system has increased over the years mainly because of the business advantages and benefits it provides. Two most commonly used accounting information system, which are transaction processing system and decision support system is discussed in the report. The report discusses the business benefits and the issues linked with the use and implementation of transaction processing and decision support system in business organizations. One issue linked with the implementation of accounting information system is its cost of implementation. The report concludes with certain recommendations for easier implementation of accounting information system in business organization.
References
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