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  Accounting As an Information System

Introduction to Accounting As an Information System

We have already described that accounting can be observer like the provision of a service to 'clients'. Other way of viewing accounting is like a part of the total information system of business. Both inside and outside the business users have to make decisions regarding to the allocation of scarce economic resources. To make sure that these resources are well allocated, users requirement economic information at which to base decisions. It is the function of the accounting system to give that information and this will include communication and information gathering. The accounting information system should contain specific features that are general to all valid information systems in a business. These are:

  • capturing and identifying appropriate information (in this case financial information);
  • in a systematic manner recording the information collected;
  • interpreting and analysing the collected information;
  • reporting, the information in a way that is suitable according to the requirements of users.

The relationship among these features is set out in Figure below.

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It has been described that the decision-making emphasis of this book, we shall be concerned mainly with the last two elements of the process: the reporting and analysis of accounting information. We shall refer the way where information is employed by and is useful to, users than the way where it is recorded and identified. Efficient accounting systems are a necessary element of an efficient business. While the accounting systems fail, the results can be very much disastrous.

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