Description of AIS Used in the Two Given Examples with Benefits and Challenges
Accounting information system or AIS is the system to collect, store and process the accounting as well as financial data, which are to be utilized by the various decision makers. This type of system is usually computerized system or method that helps in tracking the accounting activities after combining with the resources of information technology. The accounting information system is responsible for bringing various changes and innovation in the organizational processes that is using it. The following report outlines a brief description of the impact of accounting information system and the strategic utilization of AIS for the successful achievement of information system or information technology enabled innovation.
The accounting information system is the structure that helps in the proper management of financial data by the various people of accounting or finance department (Simkin, Norman and Rose 2014). There are six important components of this accounting information system, which are people, data, infrastructure of information technology, software, instructions and procedures and internal controls. The two distinct examples of this accounting information system are Point of Sale system or POS system and Electronic Data Processing System or EDP system.
The internal factors like organizational, management and individual factors have a strong impact on the point of sale system. There are various environments of point of sale systems (Hilton and Platt 2013). It is the time or place where the specific retain transaction is being completed. For the external factors like technological, social, economic, industry and political or policy based factors have also a major impact on POS system.
The internal factors like management, organizational and individual factors also have a stronger impact on the electronic data processing system. This system is responsible for handling all the steps in the process of accounting right from recording the financial transactions to the preparation of financial statements (Laudon and Laudon 2016). Since, the businesses can improve the system technology; the external factors like economic, technological and social also have an impact on EDP.
The two examples of accounting information system are point of sale or POS system and electronic data processing or EDP system. The descriptions of these two examples are given below:
- I) Point of Sale System: The POS or point of sale system can be defined as the specific place and time, in which any particular retail transaction is being completed (Prasad and Green 2015). At the point of sale, the respective merchant evaluates the amount that is owned by the clients, indicates the amount that is required for preparing an invoice for the client and indicates the alternatives for the clients for making the payments. The point of sale is also that specific point where the customer makes the respective payment to the merchant for exchanging of goods and service provisions. The merchant even issues a receipt for this transaction, when he gets the payment. The payment receipt is then printed electronically for both the merchant and the customer (Libby 2017). For the purpose of calculating the amount that is owned by the customer, this merchant utilizes several devices like the barcode scanners, cash registers, weighing scales and many more. For making the payments, the touch screens and the payment terminals are also available. This particular example of AIS is even referred to as point of service since it is not only point of sale by also the point of return. The significant features or aspects for the extra functionalities are also included in POS like customer relationship management or CRM, warehousing, financials and inventory management (Collier 2015). The most obvious reason for the business adopting this accounting information system is that the accounting information is well managed here.
- i) The various benefits of the point of sale system are as follows:
- a) Easy Communication: The first and the foremost advantage of the point of sale system is that it helps in effective communication of messages. When any member or staff is unable to communicate easily, the messages could be conveyed to the browsing of computers through point of sale system.
- b) Inventory Control: The second important and significant benefit of the point of sale system is the control of inventory. Whenever this point of sale system is being integrated with the system, a purchase order is being generated and the items that are reordered when it is started for running low (Schaltegger and Burritt 2017). This automated system of POS could easily minimize the amount of work as well as expenses that are associated with the running of business and hence turning to boost the profit margins and profits.
- c) Easier Selection of Products: Another important and noteworthy advantage of the point of sale system for any specific company is that it helps in easier selection of products and services (Maskell, Baggaley and Grasso 2016). The managers could easily run the reports, which show not only the amount of items sold, but also the most popular and significant items. The respective sales information is easily stored here and this information is extremely valuable whenever the time arrives for restocking the shelves or ordering the newer supplies.
- ii) In spite of having such advantages, some of the major disadvantages or challenges are also present in point of sale system. They are as follows:
- a) High Security Risks: The first and the most significant challenge in a specific point of sale system is the presence of higher security risks. This particular software gets connected with the registers within the store after connecting with the centralized network and this type of connectivity is extremely vulnerable to the various types of network security risks (Rainer et al. 2013). The data breach is a common phenomenon here and the highly sensitive and confidential data are often theft by the attackers with the core purpose of data breaching. Hence, counter measures for these risks are mandatory to be present.
- b) Regular Updates: Another important challenge of the point of sale system is that this particular software needs regular or periodical updates. This type of update is required for making the system work properly. The maintenance cost of this system is also high.
- II) Electronic Data Processing System: The next popular example of the accounting information system is EDP or electronic data processing system. This is the utilization of automatic methods for the purpose processing the confidential data (Romney et al. 2013). This particular system uses the simple and the repetitive activities for processing the larger volume of similar information. The stock updates that are being applied to the inventory or the banking transactions applied to any account are easily done with this particular system.
- i) The various benefits of the electronic data processing system are as follows:
- a) High Efficiency: This particular system is extremely efficient and hence is being utilized all the organizations for easy processing of their data. The invoices or the statements are easily generated through EDP system (Demski 2013).
- b) Higher Speed: Another important benefit of this system is that it is extremely speedy and can execute the processes easily.
- ii) The most significant disadvantages of electronic data processing system are as follows:
- a) Control of Accuracy: This particular system cannot control the accuracy and the data is often erroneous (Lim 2013). Hence, the users often face major issues due to this type of system.
- b) High Expensive: the electronic data processing system is extremely expensive and hence could not be afforded by everyone. Moreover, the data security is also weak here.
The two recommendations or guidelines for helping the organizations in succeeding in the efforts for embarking the usage of accounting information system to bring innovation in their businesses are as follows:
- i) Using Micros RES POS System: The first and the foremost recommendation for the organizations using point of sale systems is the significant usage of Micros RES POS system. This is one of the most leading products in the market that helps in allowing the quicker, clear and detailed overview of each and every component for running any successful restaurant business. The interface of this point of sale system is absolutely user friendly and it comprises of several functionalities, easier access and detailed information. Micros RES POS system is the most approachable software in the market and consists of several benefits.
- ii) Using Punched Paper Tape: The second important recommendation for the organizations using accounting information system is the respective utilization of punched paper tape. The data should be given as input and this input data requires intermediate processing through punched card or punched paper tape and hence separating the inputs to the repetitive and labour intensive tasks and removed from the error prone areas or users’ control. This particular feature is present in electronic data processing system and hence is a major recommendation for the users.
Conclusion
Therefore, from the above report, it can be concluded that accounting information system or AIS is being utilized by all organizations to deal with their accounting data and transactions. The financial reports could be utilized internally by the respective management of even externally by various interested parties like tax authorities, creditors and investors. The above report has properly explained the combination of information technology with accounting information system for providing various competitive advantages to the organization that is using it and even bringing out major innovations within the business processes. Two examples are provided in this report about internal and external uses of AIS with relevant recommendations.
References
Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons.
Demski, J., 2013. Managerial uses of accounting information. Springer Science & Business Media.
Hilton, R.W. and Platt, D.E., 2013. Managerial accounting: creating value in a dynamic business environment. McGraw-Hill Education.
Laudon, K.C. and Laudon, J.P., 2016. Management information system. Pearson Education India.
Libby, R., 2017. Accounting and human information processing. In The Routledge Companion to Behavioural Accounting Research (pp. 42-54). Routledge.
Lim, F.P.C., 2013. Impact of information technology on accounting systems. Asia-pacific Journal of Multimedia Services Convergent with Art, Humanities, and Sociology, 3(2), pp.93-106.
Maskell, B.H., Baggaley, B. and Grasso, L., 2016. Practical lean accounting: a proven system for measuring and managing the lean enterprise. Productivity Press.
Prasad, A. and Green, P., 2015. Organizational competencies and dynamic accounting information system capability: impact on AIS processes and firm performance. Journal of Information Systems, 29(3), pp.123-149.
Rainer, R.K., Cegielski, C.G., Splettstoesser-Hogeterp, I. and Sanchez-Rodriguez, C., 2013. Introduction to information systems. John Wiley & Sons.
Romney, M.B., Steinbart, P.J., Mula, J.M., McNamara, R. and Tonkin, T., 2013. Accounting Information Systems [1st Australasian edition]. Pearson Australia.
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts and practice. Routledge.
Simkin, M.G., Norman, C.S. and Rose, J.M., 2014. Core concepts of accounting information systems. John Wiley & Sons.
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