ACC103 Information Technology in Accounting Assignment 1 Answer
Answer the following questions:
1. “Accounting is an information-providing activity, so accountants need to understand how the system that provides that information is designed, implemented and used”. What are the components of Information Technology IT in accounting system? Give examples? (5 Marks)
Information Technology In accounting System is known as Accounting Information System (AIS). This system helps the business in managing their accounting information. There are six components of the IT in accounting system. These are as follows:
- AIS people: People are the users of the information system and are very important component. The people belongs to the various departments and have different roles in the AIS. The people include the professional developing the AIS, the accountants that use the system to enter the data into the system and generate information for the business, the managers of the business who use the information to make decisions, the auditors and accounting professionals who check the data to prepare the formal financial statements and reports. For example the internal control team of the business are the people associated with AIS as they evaluate the system for required controls over the system.
- Procedures and policies: These are instruction and procedures to be followed while using the AIS. The procedures can be automated like generation of reports by the system or manual like entering the data by the accounts manager. The procedures and instruction of the AIS are made aware to the people through training. These should be followed in order to make the system work properly. For example the procedure to be followed to update the inventory records in the system.
- Data: Data is the one of most important component of AIS. The data is stored and interpreted using some structured database like the SQL language. The data base makes it possible to collect and save the data and retrieve it whenever required. The example of data is the sales invoices, purchase orders, inventory records stored in the AIS. This data is used to prepare various reports.
- AIS software: This is the computer program that is used to enter the data, process and analyze the financial information of the business. The software can be general like the Tally, QuickBooks, sage 50 accounting. They can be also customized according to the specific needs of the business like the specific ERP of the organization.
- Infrastructure: AIS infrastructure involves all the hardware and devices which are required to operate the AIS. The examples of infrastructure are the computers, printers, servers, secondary storage devise (CDS and pen drives), routers, etc. The hardware affects the speed of the system, the ability to store data, compatibility with other AIS, etc.
- Internal controls: these are the measures that are taken for the safety and security of the AIS. The controls protect the system from authorized access and malicious use of the information. The example of internal controls is the use of passwords for logging into the system or using specific codes for performing any transaction.
2. What is the meaning of system, data, and information? (3 Marks)
System - the combination of all the components of Information technology of the accounting system like the people, data, software, instructions, infrastructure and internal controls is known as the system. The various components are integrated to achieve a common goal and form a complete system.
Data- Data is the collection of raw facts, figures and transactions of the accounting of the business which needs to be recorded and analysed to use in the business. The data is processed by the AIS.
Information – this the valuable analysis that is derived from the data after the AIS processes the data. The information is generated after the data entered into the information system is classified, grouped and analysed. The information is the useful facts that helps the business in better decision making and planning of the business activities.
3. What is the role of the accounting system in the value chain? (2 Marks)
The objective of every business is to provide value to the customers or add value to the work performed. The value is created by a series of activities that form part of the value chain. The accounting information system (AIS) helps in creating and adding that value by being part of the value chain. For example, the AIS helps in sorting and presenting the sale made in a particular period so that the free product services can be provided by the business to its customers in due time; adding value to the customer satisfaction.