Definition: An accounting information system consists of the people, records, and methods used to gather financial information about business events, record it, process it into a useful form, and communicate the information to end users and decision makers. In other words, an accounting system is everything and everyone involved in collecting, recording, and organizing financial transactions for the company.
What Does Accounting Information Systems Mean?
In essence, the goal of an accounting system is to record financial data and turn it into useful financial information.
There are many different parts and components to any accounting information system, but they can typically be broken up into five main categories: source documents, input devices, information processors, information storage, and output devices.
Source documents are the original business documents that are used to track business transactions. Documents like invoices, purchase orders, and receipts all track and keep a record of the original transaction.
Input devices are tools used to enter financial transaction information into the accounting system. Devices like bar code scanners, keyboards, and modems all help employees enter source documents into the system.
Information processors, like computers and software programs, take the raw data from the input devices and post it to ledgers, journals, and reports that can be used by decision makers.
Information storage is the component of the system that stores the reports and ledgers that the information processors create. Since most modern accounting systems are computer based, these usually consist of servers and hard drives, but file cabinets are still considered storage devices.
Output devices like monitors, printers, and projectors are any devices that take information from the system storage and display it in a useful way, so that it can be used.
As you can see, the accounting information system is much more than a computer with Quickbooks installed on it. It’s the entire system put in place to take financial data and turn it into usable financial information.