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Part Four

Part Four. Accounting information system development and application. 4.1 Software architecture of a modern AIS.

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Part Four

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  1. Part Four Accounting information system development and application

  2. 4.1 Software architecture of a modern AIS • A modern AIS typically follows a multitier architecture separating the presentation to the user, application processing and data management in distinct layers. The presentation layer manages how the information is displayed to and viewed by functional users of the system (through mobile devices, web browsers or client application). The entire system is backed by a centralized database that stores all of the data. This can include transactional data generated from the core business processes (purchasing, inventory, accounting) or static, master data that is referenced when processing data (employee and customer account records and configuration settings).

  3. As transaction occur, the data is collected from the business events and stored into the system’s database where it can be retrieved and processed into information that is useful for making decisions.The application layer retrieves the raw data held in the database layer, processes it based on the configured business logic and passes it onto the presentation layer to display to the users. • For example, consider the accounts payable department when processing an invoice. With an accounting information system, an accounts payable clerk enters the invoice, provided by a vendor, into the system where it is then stored in the database. When goods from the vendor are received, a receipt is created and also entered into the AIS. Before the accounts payable department pays the vendor, the system’s application processing tier performs a three-way matching where it automatically matches the amounts on the invoice against the amounts on the receipt and the initial purchase order. Once the match is complete, an email is sent to an accounts payable manager for approval. From here a voucher can be created and the vendor can ultimately be paid.

  4. 4.2 Development of Accounting Information Systems An accounting information system is designed uniquely for businesses. Many different types of systems are available, and it is crucial to find one specifically tailored to a business' needs. • Uses An accounting information system is used to input, process, store and distribute information. The needs of each business for an accounting system are slightly different.

  5. Analysis Every business has unique objectives and goals; and because of this, every accounting system is set up with slight variations. For example, manufacturing companies have different needs than retail stores. Companies must analyze their needs when determining what type of system to use • Design After the analysis of the business is complete, a company begins to design the system it needs, ensuring it can fulfill all objectives within the organization. The business can either do this internally with accounting personnel or hire a firm to design it for them. Small companies can purchase software that can be customized to their needs. Other companies hire a computer programmer to write code specific to their needs.

  6. Implementation After the system is designed, the company can begin to implement it. This is a complicated process because it requires a conversion from one system to another. Most companies begin using the new system right away but spend months transferring data over if needed. Some programs are capable of transferring the data with the help of a computer programmer. • Re-evaluation Many times, once an accounting system is up and running, a company finds it may be lacking something. For instance, after using the system, a firm may realize it needs a database installed for customer mailings. A re-evaluation is done for such reasons, and adjustments are then made.

  7. ATTESTATION • AIS change the way internal controls are implemented and the type of audit trails that exist within a modern organization. The lack of traditional forensic evidence, such as paper, necessitates the involvement of accounting professionals in the design of such systems. Periodic involvement of public auditing firms can be used to make sure the AIS is in compliance with current internal control and financial reporting standards.

  8. After implementation, the focus of attestation is the review and verification of system operation. This requires adherence to standards such as ISO 9000-3 for software design and development as well as standards for control of information technology. • Periodic functional business reviews should be conducted to be sure the AIS remains in compliance with the intended business functions. Quality standards dictate that this review should be done according to a periodic schedule

  9. 4.3 The Technology for an Accounting Information System • General Ledger Automation General ledger accounting is the heart of an accounting information system. The general ledger is classified as the "item" record or main data file of the system. All transactions in an accounting system revolve around the general ledger. The general ledger also reflects changes to accounts when transactions are initiated.

  10. Technology for Mainframe Systems Mainframe accounting systems are configured for distributed processing over a large environment of users which may have to access item or detailed accounting records as end user, programmers or mid level management. Mainframe accounting systems can allow remote processing terminals access through a data network or via satellite. Software at this level for an accounting information system can be customized by in-house program developers or a specialized package designed by a company, such as IBM-bundled with the purchase of an IBM server dedicated to accounting functions.

  11. Technology for Mid-Range Systems Mid-range accounting information systems use server based technologies. An example of a server base technology operating system is a UNIX or Windows 7 configuration with 64-bit processing. The server acts as the main unit or "mainframe," but at a smaller capacity. On this type of accounting network, there can be up to three servers providing resources for users on the network to access accounting applications. The procurement of software for the system is usually from a software vendor that specializes in accounting packages for this type of configuration and offers an annual maintenance contract. Mid-range accounting information systems can provide processing capabilities for 50 users.

  12. Technology for LAN or PC Based Systems For small accounting information system needs, a Local Area Network (LAN) or PC-based configuration is sufficient for a small organization or businesses, which use accounting applications. LAN and PC based systems support sharing of data and resources over a dedicated network between end users and managers. LAN and PC based systems are excellent configurations for "turnkey software" (software which is pre-programmed and packaged) such as QuickBooks Pro Enterprise Version and Peachtree Accounting. The only drawback to this type of accounting information systems is there is no customization of programming with the exception of creating reports. This accounting information system can be effective for up to 20 users and cost wise, is the cheapest to implement.

  13. Software Integration Modules Accounting information systems at the mainframe level can have specialized third party programs written or implemented into the system. For example, an accounting system designed for retail management can have a catalog on programs on the system for inventory and stock management. Third party designs can range from research and development accounting to mortgage "Rule of 78" accounting programs. These "add- ons" can be expensive. Midrange and LAN-based/PC systems have standard configurations and don't allow much software integration.

  14. 4.3 ENTERPRISE RESOURCE PLANNING (ERP) • ERP systems are large-scale information systems that impact an organization's AIS. These systems permeate all aspects of the organization and require technologies such as client/server and relational databases. Other system types that currently impact AISs are supply chain management (SCM) and customer relationship management (CRM). • Traditional AISs recorded financial information and produced financial statements on a periodic basis according to GAAP pronouncements. Modern ERP systems provide a broader view of organizational information, enabling the use of advanced accounting techniques, such as activity-based costing (ABC) and improved managerial reporting using a variety of analytical techniques

  15. Thanks for Your Attention

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