Accounting Information Systems: Past, Present, and Future - Essay Example

ACCOUNTING INFORMATION SYSTEM of the of the Table of Contents 3 Introduction 4 Accounting information system at present 5 Accounting Information System in future 7 Conclusion 8 References 10 Abstract The purpose of this research paper is to provide an insight into the Accounting Information System (AIS). For this purpose, detailed information relating to the past, present and future of AIS is mentioned in this paper. It provides knowledge about how AIS have been developed from a cumbersome system with modules needed for performance of each business operation to the introduction of ERP system and its amalgamation with AIS. The merger only helped to increase efficiency of the AIS. It made work of the management easier. So, the research paper gives a complete explanation of the transformation that took place in AIS and adaptation of the same by business houses for increasing their efficiency. It also highlights detail about the future AIS and introduction of cloud computing for advancement of the same. The report will thoroughly provide the necessary information about Accounting Information System and make the study interesting. Introduction Accounting Information System (AIS) is the structure followed by management to collect, store and process data. There are different types of accounting information system, which varies extensively. “A number of factors shape these systems such as the size, type of the business, volume of data, and type of data management needs” (Romney & Steinbart, 2011). Besides that, “AIS are a computer based system that is used for tracking accounting activity in conjunction with information technology resources” (Romney & Steinbart, 2011). A big advantage of computer-based accounting information systems is that they automate and streamline reporting. The AIS pulls information from a central database and processes, transforms and finally, generates a summary of the information or data, which can be used for the purpose of analysis by decision makers, analysts and management. This system is responsible for maintaining updated reports, so that decision makers do not waste their time by considering an irrelevant data. In the AIS, data is generally in a consolidated form and hence, people need to go through a huge number of transactions. Therefore, the basic objectives of AIS are: 1) Provide information useful to decision makers; 2) Identification, development, measurement and communication of information; 3) Financial information reporting; 4) Ensure availability, reliability and accuracy of the information, among others. After a number of corporate scandals of established companies, like, WorldCom, Tyco International and Enron, major emphasis was put on the implementation of certain effective control on the transactions of public companies. When Sarbanes Oxley Act of 2002 was passed, it became legally important for public companies to adapt to strong internal control. These scandals were mostly related to the companies’ accounting practices; therefore, Sarbanes Oxley Act emphasized on adaptation of Accounting Information System by companies. This is primarily how the AIS came into existence in organizations. Nowadays, AIS vendors take greatest care in their risk management, compliance features and governance, so as to ensure that business processes are strong and protected and the enterprises’ data are secured. ERP system is also responsible for growth and protection of the AIS as well as other systems related to different departments of the organization. It has a major role to play in proper maintenance of the AIS. Every enterprise has benefitted from introduction of the ERP system for maintaining their accounting information till date. Accounting Information System in past: In the past, accounting information system was developed in-house as legacy systems. But such solutions were hard to devise and quite expensive to maintain. Earlier, there were separate applications for maintaining the functions of different business. So, organizations had to come up with complex interfaces for systems to interact with each other. There were separate modules for the operations of each department. They were not interlinked and cross-functional. The necessity to prepare separate modules for performing each operation of the business reduced efficiency of the organizations and made their work cumbersome. The system was not as advanced then. To find a solution to this complex problem, Accounting Information System was amalgamated with Enterprise Resource Planning (ERP). With increase in need of consolidation and connectivity between the systems of several businesses, ERP system was introduced and merged with the AIS. In 1990s, ERP systems were widely implemented in multinational corporations to integrate diverse and complex corporate operations, but the system was not adequately integrated and innovative then. Introduction of ERP system helped in tracking process for finance as well as other business domains. ERP systems successfully provided all necessary information to the organization, making it more flexible. The management of the AIS, thus, became easier after introduction of the ERP system. The management got a good hold of gathering, processing and dissipating information. Accounting related mistakes were avoided due to the ERP system. It enhanced fluidity of work and sharing of information. Data needed were received and shared by managers instantly. Accounting information system at present The past accounting information system forms the nucleus of the modern day AIS. Introduction of the advanced ERP system was a boost to the traditional one. The contemporary ERP systems are more integrated and cross-functional. It contains few, selected software modules, which helps to address various range of operational activities, such as, human resources, accounting and finance, sales, distribution and manufacturing. ERP systems are now commercially available, packaged business software, which helps an organization to effectively manage products, services, resources, capital assets and personnel. This system bears the virtue of an integrated and complete application to support the need of information processing in an organization. AIS, presently, is a typical architecture, which is multitier. It separates presentation to the user, application processing and data management in different layers (Considine, Parkes, Olesen, Blount & Speer, 2012). The first layer, which is the presentation layer, manages display of information to the users. There is a centralized database, which backs the total system. This can include data related to the transaction from business processes, like, purchasing, accounting, inventory or any master data, which is used as a reference for processing data such as, records of employees and customers. During any transaction, data is collected from the events that had taken place in business and stored into the database of the system, from where is retrieved and processed into useful information for making decisions (Tidd & Bessant, 2011). The second layer is the application layer, which retrieves raw data from the database layer; then, based on the configured logic, processes it; and finally, passes it onto the presentation layer for being displayed to users. An example of the accounts department can be considered for this purpose. With help of AIS, a clerk related to the accounts department, while receiving any invoice from a vendor, can enter the same into the system; from where, it is then stored into the database. Similarly, at the time of receiving goods from the vendor, a receipt is created and entered into the AIS. The application processing tier carries out three ways processing and matching of amounts on the invoice against that on the receipt and purchase order, which were initially prepared. After completion of the entire process of matching and verification, the accounts payable manager receives an email for approval. Finally, the vendor is paid by a voucher by the respective department. ERP system now has the required ubiquity for the purpose of business (Daoud & Triki, 2013). AIS are sold in prebuilt packages of software. Vendors like, Microsoft, Oracle, SAP and Sage Group, sells AIS as prebuilt software packages, which are customized and configured as per business processes of the organization. The managers benefit from quick availability of information. This system considerably helps to accelerate the pace of work and make operations easier. It allows access to diverse functional areas of the organization (Hall, 2012). Motivation for the adaptation of this system typically includes factors like, upgrading legacy systems, regulatory compliance, integration of operations, business process reengineering and management decision support. For every firm, ERP system is considered the most vital, largest and demanding information system, necessary for smooth running of the operations. For IT organizations, it is the largest and much needed investment, which affects the greatest number of individuals related. ERP system is considered the broadest, in terms of scope, by these firms (Tsai, 2003). Also, the present day ERP system, simultaneously, demands various important skills from individuals. They need to have more business knowledge and broader set of information in execution of their task. As a result, this sometimes restricts flexibility in tasks related to their job and reduces their level of satisfaction from the same. This system interlinks activities and operations of different departments of an organization, which is fruitful for the management as they can avail right information at the right time. The ERP system is always beneficial as it provides accounting information to all departments equally and the management can share any vital data instantly with the subordinates. This links all computers, thereby making the sharing of accounting information easier. Information updated in one master computer enables other computers to share the same, equally and effectively. This makes work easier for the management as well as other departments, besides consolidating and updating the information. The present day ERP system helps to rejuvenate the Accounting Information System in an adequate manner. Accounting Information System in future The AIS of the future is expected to be more advanced and flexible in its usage. Incorporation of cloud computing by vendors, like, Amazon, Google and Microsoft, will make the AIS stronger. Users will be able to access the necessary information from the huge amount of data available. This will enhance workflow of the organization (Hall, 2012). This is the easiest way of doing business on Web. The cloud applications will be designed for Web deployment; as a result, there will be no need for distributed traditional servers within premise of the organization. They will be delivered by a single vendor to a number of customers. The share processing space and power will be managed by the vendor (Tidd & Bessant, 2011). Different kinds of applications will be available, ranging from the payroll, tax software to full enterprise resource planning (ERP) system. They will have the option of leasing or subscription, instead of the need to purchase them. With the usage of cloud computing, there will be more storage space for information relating to any department of an organization. The information related to departments like, human resource, finance, operation, marketing and supply chain, will be easily available in abundance. It will make the AIS more advanced with huge databases, consisting of accounting information of past as well as present. In addition, the management will be able to share any accounting information within least time. This is going to be a revolution within a few years; thus, creating a necessity for everybody to adapt to this technological change for organizational development. Cloud computing will make the AIS more progressed by increasing its storage space, providing bundle of information and options to choose the best from and saving a lot of time of organizations (Turner & Weickgenannt, 2008). The implementation of the system can, hence, lower cost of the organization (Lin & Huang, 2011). The adaptation of cloud computing has more strengths than any weakness. It is the future of the management of accounting information in all probabilities (Arnold & Sutton, 2001). Conclusion The accounting system in the past was quite fractious in its usage, as there were separate applications for maintaining different functions of organizations. They were also not interlinked and cross-functional. Organizations developed complex interfaces for systems in order to interact with each other. With introduction of multitier AIS and integration with the ERP system, managing accounting databases has become easier. This has helped thoroughly to maintain a smooth level of usage of accounting information in organizations. As of now, the level of usage has not dripped down and has only added to the efficiency of enterprises by providing a huge database to select the needed data from (Tapings, Dyson & Meadows, 2005). The integration helped to interlink the accounting information available to different departments as well as successfully rendered the system more advanced, relevant, transparent and strong. By far, the accounting information system has helped organizations to eliminate all problems faced in the past. The introduction of cloud computing in the management of Accounting Information System will bring in a renaissance in the present system for all organizations. It will help to store billions of data, which in turn will make functioning of organizations easier (Gelinas, Dull & Wheeler, 2011). The decision makers, managers as well as analysts will be able to grab thousands of information within an appropriate time. Enterprise will gain enormously, if they adapt this system of maintaining their database. It will be least costly to adapt AIS for maintaining their accounting information. There will be options for leasing the server from vendors, thereby eliminating the extra cost of organizations required for implementing costly servers in their premises. The organizations need to adapt to this new technological change in order to be more competitive and sound. Huge accounting data will be easier to wield, store and retrieve by following this technology (Tsai, 2003). Cloud computing is rightly the future of Accounting Information System and will make the usage of AIS more effective and protective. References Arnold, V. & Sutton, S.G. (2001). The future of behavioral accounting (information systems) research (4th ed.). Bingley: Emerald Group Publishing Limited. Considine, B., Parkes, A., Olesen, K., Blount, Y., & Speer, D. (2012). Accounting Information Systems: Understanding Business Processes (4th.ed.). New Jersey: John Wiley & Sons Australia. Daoud, H. & Triki, M. (2013). Accounting Information Systems in an ERP Environment and Tunisian Firm Performance, 13, 1-35. Gelinas, U., Dull, R. & Wheeler, P. (2011). Accounting Information Systems (9th ed.). Connecticut: Cengage Learning. Hall, J. (2012). Accounting Information Systems (8th ed.). Connecticut: Cengage Learning Hall, J.A. (2012). Guide for: Accounting Information Systems (7th ed.). Cram101Textbook Reviews. Lin, S. & Huang X. (2011). Advances in Computer Science, Environment, Ecoinformatics, and Education. Berlin: Springer Romney, M.B. & Steinbart, J.P. (2011). Accounting Information Systems (12 ed.). New Jersey: Hall PTR. Tapings, E., Dyson, R. G. & Meadows, M. (2005). The impact of performance measurement in strategic planning. International Journal of Productivity and Performance Management, 54 (5), 370-384. Tidd, J. & Bessant, J. (2011). Managing innovation: Integrating technological, market and organizational change (4th ed.). New Jersey: John Wiley & Sons. Tsai, H. (2003). Information technology and business process reengineering: new perspectives and strategies. West Port: Greenwood Publishing Group. Turner, L. & Weickgenannt, A. (2008). Accounting Information Systems: Controls and Processes. New Jersey: John Wiley & Sons. Read More