Introduction

Accounting information system (hereinafter referred as AIS) focused on the recording,

summarizing and validating of data about business financial transactions. Accounting systems
that were previously performed manually can now be performed with the help of computers.
Therefore, improvements in the information technology have facilitated the use of cost and
management accounting procedures. Developments in IT have been paramount in recent
decades, and they have been leading developments to the business organization in the field of
globalization of markets and societies. In the view of the fact, it is widely acknowledged that AIS
plays an important role in the field of profit recognition through validation, recording, and
evaluation of financial transaction of a business organization. AIS can be strategic weapons to
support the objective and strategy of an organization by terminating CoGS, TAX and
forecasting future growth of the business. Some business organizations get competitive
advantage by equipping new information systems regarding accounting within the organization.
In an era of global competition, the key to a firms survival is the continuous improvement of its
performances projected through AIS of the past focused information on the recording,
summarizing and validating of data about business financial transactions thus AIS provide a
cohesive picture of the organizations These functions were performed for the various groups
within the organization that were concerned about the respective decisions associated with
financial accounting, managerial accounting, and tax compliance issues.

Accounting Information System (AIS):

An accounting information system (AIS) is a system that collects, records, stores and process
data to produce information for decision makers. An accounting information system is generally
a computer-based method for tracking accounting activity in conjunction with information
technology resources. The resulting statistical reports can be used internally by management or
externally by other interested parties including investors, creditors and tax authorities.
AIS can be a very simple paper-and-pencil based manual system, a very complex system using
the very latest in computers and information technology, or somewhere these two extremes.
Regardless of the approach taken, the process is the same.
Component of Accounting Information System (AIS):
AIS cant do anythings without any its users. So the AIS and the people who use it must still
collect, enter, process, store, and report data and information. The paper and pencil or the
computer hardware and software are merely the tools used to produce the information.
Accounting information systems are composed of six main components:
People: users who operate the systems and perform various functions.

Procedures and instructions: both manual and automated, processes involved in collecting,
processing, managing and storing the data about the organizations activities.
Data: data that is related to the organization and its business processes
Software: application that processes the organization s data
Information

technology

infrastructure: The

actual

physical

devices(computer,

peripheral

devices, and network communication devices)and systems that allows the AIS to operate and
perform its functions(to collect, store, process, and transmit data and information)
Internal controls and security measures: That safeguards or secures the data in the AIS.
How AIS can add value to an organization:
As a support activity, the AIS adds value by providing accurate and timely information so the
five primary value chain activities can be performed more effectively and efficiently. Welldesigned AIS can do this by:

Improving the quality and reducing the cost of products or services.

Improving efficiency. Well-designed AIS can make operations more efficiently by

providing more timely information.

Sharing knowledge. A well designed AIS can make it easier to share knowledge and
expertise, perhaps thereby improving operations and even providing a competitive
advantage.

Improving the efficiency and effectiveness of its supply chain.

Improving the internal control structure. Security, control and privacy are important
issue in todays world. AIS with the proper internal control structure can protect systems
from problems such as fraud, errors, equipment and software failures and political
disasters.

Improving decision making.

Principles of AIS
A sound accounting information system must be flexible and coat beneficial as these are the
principles of an effective AIS. Here in below those are described briefly.

I.

Flexibility of Accounting Information System

Flexibility means that the system should be so much flexible that it can be changed when
necessary. Flexibility helps the organization to perform its task easily and quickly as they want.
Organizational Structure should flexible for improving their activities in different situation.
Organizational Data structure should be very easy which will help the employee to cope up
with the system easily for the long run success.
Data Recovery system must be simple which will help the employee to recover the lost data
or previous data.

II.

Cost effectiveness of Accounting Information System

Cost beneficial means the benefits of information must outweigh the cost of providing it. Cost
effectiveness indicates the minimizing process of cost which helps to maximize the profit of an
organization.

Data Documentation system is the process how data are maintained and stoke for future.
Data Storing should be less costly because it reduces the level of profit.
Maintenance of Data Structure is the most costly activities in every organization so they
should maintain is chiefly.

III.

Usefulness of Accounting Information System

Some time a success of a company depends on the usefulness of AIS. If AIS provides more
useful data or information with a proper way & also in time, than it will help the organization to
achieve the goal easily. Here in below I provide some information about usefulness of AIS in
Private banking sector.
Relevant data means if data reduces uncertainty decision makers ability to make
predictions, or confirms or corrects their prior expectations as they demand.
Reliability of data means if it is free from error or bias and accurately represents the events
or activities of the organizations.
Accuracy of data means if it is free from error or bias and misrepresentation.
Timely data means if it collected and provided in time for decision makers to make
decisions and for users generating information.

The Role of Accounting in Business:

Accounting is often called the language of business. Because it communicates so
much of the information that owners, managers, and investors need to evaluate a
companys financial performance. These people are all stakeholders in the business
theyre interested in its activities because theyre affected by them. In fact, the purpose
of accounting is to help stakeholders make better business decisions by providing
them with financial information. Obviously, you wouldnt try to run an organization or
make investment decisions without accurate and timely financial information, and its
the accountant who prepares this information. More importantly, accountants make
sure that stakeholders understand the meaning of financial information, and they work
with both individuals and organizations to help them use financial information to deal
with business problems. Actually, collecting all the numbers is the easy parttoday, all
you have to do is start up your accounting software. The hard part is analyzing,
interpreting, and communicating the information. Of course, you also have to present
everything clearly while effectively interacting with people from every business
discipline. In any case, were now ready to define accounting as the process of
measuring and summarizing business activities, interpreting financial information, and
communicating the results to management and other decision makers.

Fields of Accounting in Bangladesh:

Accountants in Bangladesh typically work in one of two major fields. Management
accountants provide information and analysis to decision makers inside the
organization in order to help them run it. Financial accountants furnish information to
individuals and groups both inside and outside the organization in order to help them
assess its financial performance.
In other words, management accounting helps you keep your business running while
financial accounting tells you how well youre running it.

Management Accounting
Management accounting plays a key role in helping managers carry out their
responsibilities. Because the information that it provides is intended for use by people
who perform a wide variety of jobs, the format for reporting information is flexible.
Reports are tailored to the needs of individual managers, and the purpose of such
reports is to supply relevant, accurate, timely information in a format that will aid
managers in making decisions. In preparing, analyzing, and communicating such
information, accountants work with individuals from all the functional areas of the
organizationhuman resources, operations, marketing, and finance.

Financial Accounting
financial accounting is responsible for preparing the organizations financial
statementsincluding the income statement, the statement of owners equity, the
balance sheet, and the statement of cash flowsthat summarize a companys past
performance and evaluate its current financial condition. In preparing financial
statements, financial accountants adhere to a uniform set of rules called generally
accepted accounting principles (GAAP)the basic principles for financial reporting.
Users want to be sure that financial statements have been prepared according to GAAP

because they want to be sure that the information reported in them is accurate. They
also know that they can compare the statements issued by one company to those of
another company in the same industry.

User of Financial Accounting Information:

The users of managerial accounting information are pretty easy to identifybasically,
theyre a firms managers. We need to look a little more closely, however, at the users
of financial accounting information, and we also need to know a little more about what
they do with the information that accountants provide them.
Owners and Managers
In summarizing the outcomes of a companys financial activities over a specified
period of time, financial statements are, in effect, report cards for owners and
managers. They show, for example, whether the company did or didnt make a profit
and furnish other information about the firms financial condition. They also provide
information that managers and owners can use in order to take corrective action.

Investors and Creditors

If you loaned money to a friend to start a business, wouldnt you want to know how the
business was doing? Investors and creditors furnish the money that a company needs
to operate, and not surprisingly, they feel the same way. Because they know that its
impossible to make smart investment and loan decisions without accurate reports on
an organizations financial health, they study financial statements to assess a
companys performance and to make decisions about continued investment.

Government Agencies of Bangladesh

Businesses are required to furnish financial information to a number of government

agencies. Publicly owned companies, for examplethe ones whose shares are traded
on a stock exchangemust provide annual financial reports to the Securities and
Exchange Commission (SEC), a federal agency that regulates stock trades. Companies
must also provide financial information to local, state, and federal taxing agencies,
including the Internal Revenue Service.
Other Users
A number of other external users have an interest in a companys financial statements.
Suppliers, for example, need to know if the company to which they sell their goods is
having trouble paying its bills or may even be at risk of going under. Employees and
labor unions are interested because salaries and other forms of compensation are
dependent on an employers performance.

General Uses of Accounting Information

Accounting provides companies with various pieces of information regarding business
operations. It is often conducted by a company’s internal accounting
department and reviewed by a public accounting firm. Small businesses often have
significantly less financial information recorded during the accounting process.
However, business owners often review this financial information to determine how
well their business is operating. Accounting information can also provide insight on
growing or expanding current business operations.
Performance Management
A common use of accounting information is measuring the performance of various
business operations. While financial statements are the classic accounting information
tool used to assess business operations, business owners may conduct a more
thorough analysis of this information when reviewing business operations. Financial
ratios use the accounting information reported on financial statements and break it
down into leading indicators. These indicators can be compared to other companies in
the business environment or an industry standard. This helps business owners
understand how well their companies operate compared to other established
businesses.

Create Budgets
Business owners often use accounting information to create budgets for their
companies. Historical financial accounting information provides business owners with
a detailed analysis of how their companies have spent money on certain business
functions. Business owners often take this accounting information and develop future
budgets to ensure they have a financial road map for their businesses. These budgets
can also be adjusted based on current accounting information to ensure a business
owner does not restrict spending on critical economic resources.

Related Reading: General Partnership Accounting Information

Business Decisions
Accounting information is commonly used to make business decisions. Decisions may
include expanding current operations, using different economic resources, purchasing
new equipment or facilities, estimating future sales or reviewing new business
opportunities. Accounting information usually provides business owners information
about the cost of various resources or business operations. These costs can be
compared to the potential income of new opportunities during the financial analysis
process. This process helps business owners understand how current business
operations will be affected when expanding or growing their businesses. Opportunities
with low income potential and high costs are often rejected by business owners.

Investment Decisions
External business stakeholders often use accounting information to make investment
decisions. Banks, lenders, venture capitalists or private investors often review a
company’s accounting information to review its financial health and
operational profitability. This provides information about whether or not a small
business is a wise investment decision. Many small businesses need external financing
to start up or grow. The inability to provide outside lenders or investors with
accounting information can severely limit financing opportunities for a small business.
Accounting and Its Use in Business Decisions
This is the first in a series of accounting courses that cover a wide range of topics.
These will greatly increase your knowledge and understanding of the theory of
accounting and accounting practices. In this first free online accounting course you will
be introduced to accounting and its use in making business decisions. You will learn
how to identify and describe the three basic forms of business organizations, and also

distinguish among the three types of activities performed by business organizations.

The course then describes the content and purposes of the income statement,
statement of retained earnings, balance sheet, and statement of cash flows. You will
learn about the basic accounting equation and describe its relationship to the balance
sheet. The course then shows you how to prepare an income statement, a statement of
retained earnings, and a balance sheet, and also how to analyse and use the financial
resultsthe equity ratio. This free online accounting course will be of great interest to
entrepreneurs and business professionals who would like to get a thorough
introduction to accounting principles, and to any learner who is interested in
accounting as a future career.
How Business Accounting Works
People are starting their own businesses every day. If you're thinking about joining
them, you probably have a vision of what you want that business to be. What may
excite you about your business is the product or service you have to offer, the success
that you imagine, and the freedom of lifestyle that you are sure will come -- in time.
What may bore or even frighten you is the plethora of numbers you have to wrestle
with. You will be asked business questions that may elicit a blank stare as your
response. Cash accounting? Accrual basis? Profit and loss statement? Projections? Huh?
Whether you want to create fine oil paintings or sell pork bellies on the street, your
business will require some form of accounting. That term alone can cast a glaze over
the brightest eyes, but in this article, we'll show you that accounting is a process larger
than crunching your numbers. It is a tool that will help you "account for" what your
business has done, is doing, and hopes to do in the future. Accounting can be a bit like
painting a picture, and a little like solving a puzzle. Despite its bad press, it can
actually be fun.
Keys to Success
The first step to making accounting fun is to get a grip on the terminology. If your
heart skips a beat when someone asks about your balance sheet, you can calm yourself
by learning exactly what a balance sheet is and how it can help you. We've added a
glossary of accounting terms at the end of this article to get you over the hump

Second, realize that accounting is more than numbers. It includes databases of your
customers, your vendors, and your employees, if you have them. The information you
keep on these people and companies will help you track your business and plan your
future. With proper accounting, you might discover that people in the Florida Keys buy
barrels of pork bellies in February. You can legitimately plan a sales trip for the entire
month. See? This is getting interesting.
Third, the key to successful accounting is in the establishment of your accounting
system and the reliable input of data. You will set up a system that is uniquely yours.
Recording the transactions and information is called bookkeeping, and it must be done
regularly. You won't get a good picture of your company if the paint (data) is stored in
boxes in the basement. There is nothing harder than the task of going back to find and
key in reams of old information. When you do, you stand a good chance of getting
something wrong.
Accounting in Bangladesh
n Bangladesh, the profession of accountancy developed during the British colonial
period. Today it is represented by two professional bodies, the Institute of Cost &
Management Accountants of Bangladesh (ICMAB) and the Institute of Chartered
Accountants of Bangladesh (ICAB).

Chartered Accountants complete their training in practising firms and specialise in

financial accounting, financial audit and tax. CMAs receive particular training in cost
audit, management audit and management accounting, as well as general accounting
and taxation. Both the ICMAB and ICAB are under the administrative control of the
Ministry of Commerce. The Government of Bangladesh considers both type of
professional accountants equal in respect of employment in government services.[1]

The Generally Accepted Accounting Principles (GAAP) in Bangladesh are based upon
standards set by the ICAB, which has stated its intention to adopt International

Financial Reporting Standards. As of 2001, 23 such standards had already been

adopted, and listed companies are required to use IFRS.