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Paper Topic:

five fundamental principles

Accounting information systems

Accounting information systems collect and process data from transactions and events , organize them in useful forms , and communicate results to decision makers . These systems are crucial to effective decision making for both internal and external users of Business systems

Five fundamental principles of accounting information are

Control Principle - Managers need to control and monitor business activities . To this end , the control principle requires an accounting information system to have internal controls

Relevance Principle - Decision makers need relevant information to make informed decisions . The relevance principle requires

that an accounting information system report useful , understandable , timely , and pertinent information for effective decision making . This means an information system is designed to capture data that make a difference in decisions

Compatibility Principle - Accounting information systems must be consistent with the aims of a company . The compatibility principle requires that an accounting information system conform with a company 's activities , personnel , and structure . It also must adapt to the unique characteristics of a company . The system must not be intrusive , but rather work in harmony with and be driven by company goals

Flexibility Principle - Accounting information systems must be able to adjust to changes

The flexibility principle requires 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 change . A system must be designed to adapt to these changes Cost-Benefit Principle - Accounting information systems must balance costs and benefits

The cost-benefit principle requires the benefits from an activity in an accounting information system to outweigh the costs of that activity . The costs and benefits of an activity such as reporting certain information impact the decisions of both external and internal users . They also affect costs of computing , personnel , and other direct and indirect costs . Decisions regarding other systems principles (control , relevance , compatibility , and flexibility ) are also affected by the cost-benefit principle

BASIC COMPONENTS

Accounting information systems consist of people , records , methods , and equipment . The systems are designed to capture information about a company 's transactions and to provide output including financial managerial , and tax reports

There are five basic components of an accounting information system

Source documents - provide the basic information processed by an Accounting System

Input devices - capture information from source documents and enable its transfer to the information processing component of the system . These devices often involve converting data on source documents from written or electronic form to a form usable for the system

Information processor - is a system that interprets , transforms , and summarizes information for use in analysis and reporting . An important part of an information processor in accounting systems is professional judgment

Information storage - is the component of an accounting system that keeps data in a form accessible to information processors

Output devices - are the means to take information out of an accounting system and make it available to users...

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