After completing this chapter you should be able to: Identify the principles and components of accounting information systems, explain the goals and uses of special journals, describe the use of controlling accounts and subsidiary ledgers. | Chapter 7 Accounting Information Systems Chapter 7: Accounting Information Systems Fundamental System Principles C1 Accounting information systems collect and process data from transactions and events, organize them in useful reports, and communicate results to decisions makers. Accounting information systems collect and process data from transactions and events, organize them in useful reports, and communicate results to decisions makers. In an accounting system, the fundamental principles that must be included in any system are: control, relevance, compatibility, flexibility, and cost-benefit. The control principle prescribes that an accounting information system have internal controls. Internal controls are methods and procedures allowing managers to control and monitor business activities. The relevance principle prescribes that an accounting information system report useful, understandable, timely, and pertinent information for effective decision making. The system must be . | Chapter 7 Accounting Information Systems Chapter 7: Accounting Information Systems Fundamental System Principles C1 Accounting information systems collect and process data from transactions and events, organize them in useful reports, and communicate results to decisions makers. Accounting information systems collect and process data from transactions and events, organize them in useful reports, and communicate results to decisions makers. In an accounting system, the fundamental principles that must be included in any system are: control, relevance, compatibility, flexibility, and cost-benefit. The control principle prescribes that an accounting information system have internal controls. Internal controls are methods and procedures allowing managers to control and monitor business activities. The relevance principle prescribes that an accounting information system report useful, understandable, timely, and pertinent information for effective decision making. The system must be designed to capture data that make a difference in decisions. The compatibility principle prescribes that an accounting information system conform with a company’s activities, personnel, and structure. It also must adapt to a company’s unique characteristics. The system must not be intrusive but must work in harmony with and be driven by company goals. The flexibility principle prescribes that an accounting information system be able to adapt to changes in the company, business environment, and needs of decisions makers. Technological advances, competitive pressures, consumer tastes, regulations, and company activities constantly evolve. A system must be designed to adapt to these changes. The cost-benefit principle prescribes that the benefits from an activity in an accounting information system outweigh the costs of that activity. The costs and benefits of an activity such as producing a specific report will impact the decisions of both external and internal users. Components of Accounting
