Page 36 - Accountancy_F5

Activity 1.2 and application programmes are used to
Read from various sources including process business transactions. Nowadays,
online sources, discuss and write brief most of the businesses make use of
note on the following: computerised accounting system except for
• Entity theory small scale businesses. The reasons for this
• Residual equity theory include, availability of advanced technology
FOR ONLINE READING ONLY
• Social responsibility theory
at relatively affordable cost. In other
Accounting information words, computers and related application
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system programmes that help in processing and
Accounting information system (AIS) generating of financial reports are relatively
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reflect well this definition as it is composed inexpensive.
of different interrelated components and
activities. They include, inputs (for example, Components/parts and contents
the source documents), processing (activities of AIS

of transforming data from source documents Accounting information is composed of at
into ledger accounts and preparation of least six basic components or parts. These
financial statements) and output (generated include people, procedures and instructions,
financial statements). Technically, an AIS data, software, information technology
can be defined as a system or set of infrastructure and internal controls. In this
processes for collecting data about business context People refers to individuals who use
transactions; recording, organising, and the system, including accountants, managers
summarising the data, which culminate and business analysts or staff. Procedure
into preparation of financial statements and and instructions are the ways and methods
other reports for internal and external users. used to collect, store, retrieve and process

data. Data include, all the details extracted
Types/categories of accounting from source documents while software
system consists of computer programmes used for

By considering the way in which processing data. Information technology
information is being captured, processed and infrastructure includes all the hardware (for
generated, AIS can be classified into manual example, computers) used to operate the
and computerised accounting system. A AIS while internal controls are the security
manual accounting system is dominated by measures used to protect data (for instance,
paperwork that is, the use of physical records, passwords).
pads of paper and books, onto which the
transactions are entered by hand. In contrast, The contents of accounting system usually
in computerised accounting system, most reflect the nature of business activities being
of the work are done using information undertaken by the company. For example,
technology (IT). In other words, computers purchase of goods and services, sales of

Student’s Book Form Five
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