The Four Elements Of The Accounting Information System

According to Romney and Steibart (2012), accounting information system is a collection of processes to collect, record, store, and process accounting data and other data to generate information for decision-makers. Picture 2.9 Accounting Information System process flow

There are 6 elements to build a accounting information system :

1. People who use the system

2. The procedures and instructions used to collect, process, and store data

3. Data in the organization and business processes

4. IT Infrastructure

5. Internal control and security issues for accounting information systems data security

In the accounting information system are five cycles:

1. Revenue cycle

2. Expenditure cycle

3. Production cycle

4. Human resource management and payroll

Billing

The third basic activity in the revenue cycle involves billing customers. This activity is closely related to tasks of invoicing and updating accounts receivable.

4. Cash collections

Collecting and processing payments from customers is the final step for revenue cycle.

2.3.3.2. Expenditure Cycle

The expenditure cycle is a recurring set of business and related information processing operations associated with the purchase of and payment for goods and services. The expenditure cycle was focused on the acquisition of raw materials, finished goods, supplies, and services.

1. Ordering materials, supplies and services

This activity was focused in ordering inventory, supplies, or services that involves identifying what, when, and how much to purchase, and then choosing from which supplier to purchase

2. Receiving

Receipt and storage of ordered items is the second major business activity in the expenditure cycle.

3. Approving supplier invoices

The third activity is approving supplier invoices for payment.

4. Cash disbursements

The final activity was paying the supplier for the item that we orders and receive.

2.3.3.3. Production

Cost accounting

There are three principal objectives of the cost accounting system:

1. Provide information for planning, controlling, and evaluating the performance of production operations

2. Provide accurate cost data about products for use in pricing and products mix decisions

3. Collect and process the information used to calculate the inventory and cost of good sold values

2.3.3.4. Human Resources Management/ Payroll Cycle

Payroll cycle ia a set of business activities and related data processing operations associated with effectively managing the employees work force. The more important tasks include the following :

1. Recruting and hiring new employees

2. Training

3. Job assigment

4. Compensation

5. Performance evaluation

6. Discharge of employee due to voluntary or involuntary termination

2.3.3.5. General Ledger and Reporting System

This general ledger and reporting system focused to updating the general ledger and preparing reports that summarize the result of and organization activities. This activity plays a central role in a company accounting information