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Karnataka Class 12 Commerce Accountancy Types of Information

Karnataka Class 12 Commerce Accountancy Types of Information

Karnataka Class 12 Commerce Accountancy Types of Information

Karnataka Class 12 Commerce Accountancy Types of Information : Accounting information systems collect and process transaction data and communicate the financial information to interested parties. There are many types of accounting information systems and, as a result, they vary greatly. A number of factors influence these systems such as the type of business, the size of the business, the volume of data, the type of data management needs, and other factors.

An accounting information system (AIS) is a structure that a business uses to collect, store, manage, process, retrieve and report its financial data so that it can be used by accountants, consultants, business analysts, managers, chief financial officers (CFOs), auditors and regulatory and tax agencies. In particular, specially trained accountants work with AIS to ensure the highest level of accuracy in a company’s financial transactions and recordkeeping and to make financial data easily available to those who legitimately need access to it, all while keeping data intact and secure. This article will describe the primary components of an AIS and some of its real-life applications.

Karnataka Class 12 Commerce Accountancy Types of Information

Electronic Data Processing (EDP) Systems

Most businesses, except for the smallest, use computerized systems, also called electronic data processing (EDP) systems.

 These systems handle every step in the accounting process from recording the financial transaction to preparing the financial statements. Businesses are constantly improving their systems technology in order to remain competitive and to stay in compliance.

Karnataka Class 12 Commerce Accountancy Types of Information

Basics of Business Transactions and Business Processes

In order to understand how these accounting information systems work, you have to understand the basic accounting terms “business transactions” and “business processes.” Most importantly, you need to understand how business transactions and processes come together to generate financial reports. With regard to accounting information systems, business transactions can be divided into several types of business processes:

1. Revenue and return processes, systems, and controls

The business transactions that fall under these business processes are large volumes of daily sales, returns, and cash inflow transactions.

2. Expenditure and return processes, systems, and controls

The business transactions that fall under these business processes are large volumes of expenditure, returns, and cash outflow transactions. Payroll and fixed asset purchase transaction are also in this category.

3. Conversion processes, systems, and controls

 The business transactions under this category are raw materials and work-in-progress transactions.

4. Administrative processes, systems, and controls

The business transactions that are administrative are investments, borrowing, and capital transactions.

All of these business transactions result in T-accounts set up in the General Ledgerprocesses, systems, and controls. From the general ledger, both internal and external financial statements are developed. Internal financial reports might be an aging schedule for accounts receivable or a sales inventory status report. External financial reports would be the income statement, balance sheet, and statement of cash flows.

Karnataka Class 12 Commerce Accountancy Types of Information

Types of Accounting Information Systems

There are multiple types or categories of accounting information systems. What a business firm uses depends on the type of business, the size of the business, the needs of the business, and the sophistication of the business:

Manual systems

Manual accounting information systems are used mostly by very small businesses and home-based businesses. If a system is entirely manual, it would require the following: source documents, general ledger, general journal, and special journals or subsidiary journals you might need. 

Legacy systems

Legacy systems are often in existing business firms and were used before information technology got as sophisticated as it is today. Even though legacy systems may appear to be old-fashioned, they have some definite advantages to the firm. They contain valuable historical data about the firm. The firm personnel tend to know how to use the system and understand it. A legacy system has usually been customized to the specific needs of an individual firm. You won’t find this kind of customization in generic accounting software packages.

Unfortunately, legacy systems also have significant disadvantages. Often, they have no documentation. It is usually hard to find replacement parts because hardware and software may become obsolete. Even the computer language that legacy systems use is usually an older language.

Most legacy systems have been built from scratch.

Karnataka Class 12 Commerce Accountancy Types of Information

Replacement of Legacy Systems

You can completely replace your legacy system with a new, up-to-date system. That is quite an expensive solution. You can also update your legacy system. You can use a procedure called screen scraping, which is a technique that takes the data displayed on the computer screen and translates it so a newer application can read it. You can also set up an enterprise application integration system. This type of system networks the different applications in your legacy system, such as inventory, payroll, and others.

If you are an SMB, unless you are the smallest, hone-based variety, you will want your accounting information system to be up-to-date in order to keep you competitive within your industry. There are many options to choose from.

Karnataka Class 12 Commerce Accountancy Types of Information

Management Information System and Accounting Information System

In order to remain competitive, organisations depend heavily on Information Systems. Management Information System (MIS) is used the most common form of information system. A management information system (MIS) is a system that provides the information necessary to take decisions and manage an organisation effectively. MIS is supportive of the institution’s long-term strategic goals and objectives.

MIS is viewed and used at many levels by management: Operational, Tactical and Strategic. Accounting Information System (AIS) identifies, collects, processes, and communicates economic information about an entity to a wide variety of users. Such information is organised in a manner that correct decisions can be based on it. Every accounting system is essentially a part of the Accounting Information System (AIS) which, in turn is a part of the broader system, viz. the organisation’s Management Information System.

An organisation operates in a given environment surrounded by the suppliers and customers. The informational needs emerge from the business processes stratified into functional areas where accounting is one of them. The accounting information system (AIS) receives and provides information to the various sub-systems of the institutional/ integrated MIS.

Accounting Information System (AIS) is a collection of resources (people and equipment), designed to transform financial and other data into information. This information is communicated to a wide variety of decision-makers. Accepting information systems performs this transformation whether they are essentially manual systems or thoroughly computerised.

Conventionally, MIS was also perceived as day-to-day financial accounting systems that are used to ensure basic control is maintained over financial record keeping activities, but now it is widely recognised as a broader concept and accounting system is a sub component. The reports generated by the accounting system are disseminated to the various users – internal and external to the organisation.

The external parties include the proprietors, investors, creditors, financiers, government suppliers and vendors and the society at large. The reports used by these parties are more of routine nature. However, the internal parties – the employees, managers, etc. use the accounting information for decision making and control.

Accounting information system is important component of the organisational MIS in an organisation. It receives information and provides information to the other functional MIS.

Karnataka Class 12 Commerce Accountancy Types of Information

The following examples illustrate the relationship and data interface between the various sub-components of MIS.

Accounting Information System,

Manufacturing Information System and

Human Resource Information System

The manufacturing department receives the list of workers from the Human Resource (HR) department. It sends the details of production achieved by the workers on the basis of which the HR department to the finance and accounts(F&A) department to pay the wages. The details of the wages paid and statutory dues are also send by the F & A department to the production department also to the HR department to monitor the performance of workers. The HR department communicates to the other departments about the good/bad performance on the basis decision on various operational matters may be taken.

Karnataka Class 12 Commerce Accountancy Types of Information

AIS and Marketing Information System

Consider the business process in the Marketing and Sales department involving the following activities :

• inquiry

• contact creation

• entry of orders

• dispatch of goods

• billing to customers

The accounting sub-system’s transaction cycle include the processing of sales orders, credit authorisation, custody of the goods, inventory position, shipping information, receivables, etc. It also keeps a track of the customer accounts, e.g. Aging Report, which should be generated by the system.

Karnataka Class 12 Commerce Accountancy Types of Information

AIS and Manufacturing Information System

Similarly, business process in the production department may involve the following activities :

• preparation of plans and schedules • issue of material requisition forms and job cards

• issue of inventory • issue of orders for procurement of raw materials

• handling of vendors invoices

• payments to vendors

The accounting sub-system transaction cycle would therefore include the processing of purchase orders, advance to suppliers/vendors, inventory status updation, account payable, etc. All of this information has to share with the other MIS in the organisation.

Hence, the computerised accounting system as a sub component of the accounting information system transforms the financial data into meaningful information and communicates the information to the decision-makers. The report demanded may be routine or specific ones.

for more details On Karnataka Class 12 Commerce Accountancy Types of Information  check here Accountancy Syllabus

Karnataka Class 12 Commerce Accountancy Types of Information

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Karnataka Class 12 Commerce Accountancy Types of Information Books to downloadDownload Link
  • Class 12 Accountancy Text book
  • Need for Maintaining of Accounts books by Non Profit Organisation
 

  • Accounting book 1
 

  • Accounting book 2
  • Accounting book 3

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