Question

1. How can an AIS add value to an organization (e.g., decisions, strategy, and goals)?

2. Understand the data processing cycle (i.e., input, process, storage, and output) and the corresponding attributes (e.g., source documents, coding schemes, queries and reports). How do these concepts relate to accounting and accounting concepts or elements?

3. What is an enterprise resource planning system?

4. Where are inputs obtained? What are examples of inputs?

Answer 1

1. How does AIS add value to an organization :

AIS which stands for Accounting Information system is a system used by the organisation/accountants in storing & processing information and also for reporting such financial information. It adds value to the organization in following ways :

-> Improving the efficiency and effectiveness of data collection and analysis.

-> Improving the efficiency of operations & improving decision-making ability.

-> Improving internal control structure and effectiveness of its supply chain.

2. How is data process cycle related to accounting system/concepts :

First of all let's understand what a data process cycle is : It is a set of operations which is performed to convert any information into useful and reliable data. It generally involves gathering, arranging & relating the data in such a way which gives reliable and accurate information for decision-making process.

Now let's understand how these concepts relate to accounting system/concepts :

a) Input of Data : Generally, the accounting information relating to a transaction is collated in a document known as a "voucher". Then the accounting data processed in the vouchers is input into the system which are known as ERPs (Enterprise resource planning software) such as SAP or Tally or Oracle. Generally the structure of voucher is in such a manner that it is readable by the ERP and you just have to input the voucher into ERP, rest everything is performed by ERP on it's own.

b) Processing of Data : As stated above, when you input an voucher into ERP in the standardised format, it processes all the information present in the voucher into the system and you could see the information processed into the various fields in ERP. On basis of such information accountants can pass the entries in the books of accounts.

c) Data Storage : Appropriate data storage structure is required to store the processed data. For example : Every account such as Cash account or Accounts Payable account will have it's own unique code and the entries passed in system and other information stored in the information will be processed in such codes and will be stored there.

d) Output of Data : Now various accounting documents such as Trial Balance, ledgers, Balance Sheet & Income statements are prepared in a pre-standardised format in the system on the basis of the various information processed by the system during the year.

3. What is ERP?

Enterprise Resource planning system is a business management software system which is used by the companies to integrate and manage the most important parts of the business such as Accounts Receivables, Accounts Payable etc. It helps an organization to use a system of inter-related applications to automate many back-end functions such as Human Resources, services and technology. It is often used by large organisations to manage their humongous data in a systematic and accurate manner.

Some examples of famous ERPs in the modern world include SAP, NetSuite, Oracle etc.

4. Where are inputs obtained? What are examples of inputs?

(Note : It is not clear as to whether inputs here refer to accounting inputs or some other kind of input, hence we have assumed it to be accounting inputs and answered accordingly)

For an ERP or an accounting system, inputs refer to the economic transactions undertaken by the organization for carrying out their business activities. Hence accounting inputs are obtained out of the transactions carried out by the entities. Some examples of such inputs are as follows :

-> Purchase of goods/raw materials

-> Sale of finished goods

-> Purchasing bank deposits

-> Payment of bank loan etc.

These transactions serve as input for the accounting system which are then processed into the system as journal entries and whole process flows thereto - Journal entries -> Ledger -> Trial Balance -> Balance Sheet & Income Statement.