Accounting information systems and applications

Accounting Information

The revolution in information technology is touching every aspect of one's life. Whether one is making an airline reservation, tracking a shipment of merchandise, or accessing our account at an Automatic Teller Machine, one is relying on computerized information systems. Based on changes in which business is being conducted, the marketplace is demanding more complex, real-time financial advice and accounting services, thus presenting unlimited opportunities for accountants who specialize in information systems.

All businesses, irrespective of their size, are conducting business in a world of commerce that is global, technological, and instantaneous. The leadership that businesses demand requires new insights and new skills that accountants of the new millennium are expected to provide. The accounting profession has been changing; revenues from core businesses such as auditing and accounting services have been declining, whereas revenues from consulting services have been increasing.

The forces of information technology continue to produce dramatic changes. In a modern view of accounting, accounting means a system for capturing all relevant information about business processes and storing it in one integrated repository. This organizational repository stores a multitude of financial and non-financial information about the significant events occurring within the business. The traditional role of the accounting professional is "bookkeeping" view of accounting is thrown by the wayside. In the new view, the accountant's focus is on the design, control, and use of the enterprise-wide repository of data. The ultimate goal is for the accounting professional to serve as the provider of information within the organization.

Accounting involves processing raw data in some manner to convert it into information that must then be communicated to interested parties. In its most general sense, a system accepts inputs, performs some processing, and generates meaningful outputs. Accounting takes business transactions as data inputs and ultimately generates a variety of financial reports as information outputs.

It is also important to note that the paper annual report is slowly becoming obsolete, with almost all publicly traded companies making their annual report available on their web site. No longer are these customers satisfied with periodic reports that are cumbersome to obtain, frequently irrelevant, and often plagued by errors. Users are realizing the power and capabilities of present day information technology. Some of these users often create their own personal information systems to supplant the organization's systems.

Periodic, not real-time Accounting has traditionally had a historical focus in terms of reporting about what occurred during the year or quarter or week. Financial reports were generated at predetermined intervals and reflected the results of operations for some elapsed period of time. A major reason for this periodic reporting was that in a manual accounting environment the compilation of financial statements took a significant amount of time. It was not possible for users to generate an income statement on demand. In contrast, an automated accounting system facilitates the generation of financial statements "on the fly."

Internal users are no longer be restricted to periodic reports of financial performance. Thus, a manager could execute a program that would display the current status of revenues and/or expenses updated to that very minute. In effect, the accounting system can provide perpetual rather than periodic reports. Of course, a number of accounting mechanisms such as depreciation, amortization, and allowances would have to be considered in generating real-time financial reports.

Even the smallest of "mom and pop" operations can afford to invest in some level of computer-based accounting. A business can acquire a basic personal computer with software such as QuickBooks, tax-filling, or Microsoft Money software (low-end accounting software packages). In the early days of computer-based accounting (the '60s and early '70s), the typical approach was to develop custom transaction processing applications using COBOL. Although COBOL is quite a powerful language, it requires considerable programming skill to handle all the transaction processing needs in an organization. Modifications to these programs are typically not easy to perform. In the late '70s, a popular alternative emerged -- to use an off-the-shelf accounting software package, such as Microsoft Excel and Access that can be used to record the accounting data. An accounting software package has a pre-defined user interface, chart of accounts system, transaction-processing options, and report generators.