Impact of Accounting Information System on Financial Reporting

Impact of Accounting Information System on Financial Reporting

Introduction

The contemporary business practices require faster decision making. There are many enterprises who must maintain their cash on a daily basis in order to borrow it overnight. These organizations also manage their receivables and payables on daily bases. Several digital accounting processes have been developed over the decades to make the financial reporting clear and understandable for a layman. There have also been issues in financial supply chain. The financial supply chain is the term normally used for the flotation of cash. This paper will analyze the Accounting Information System in its application to financial reporting. Financial reporting, if properly done, produces great results and also provides a competitive edge (Handfield & Nichols, 2002).

Discussion

Financial Supply Chain

Financial supply chain is an area that needs significant attention, and it has the potential to improve and provide competitive advantage. Financial reporting is part of the financial supply chain. All the transactions of financial supply chain are presented by the financial statements. There are two objectives of developing Enterprise Resource Planning systems. Production of effective and well defined reports (financial and managerial) is the prime function of these systems. With the progress of production processes, the ERP system will track the production, account receivables, shipping and consumption of inventory (Zare et al, 2013).

The ERP systems provide substantial and vast information through their highly effective transactional engines. This helps managers to make more effective decisions with the availability of increased level of information. There is a need of interface between transactional data and tactical decision making. There are three types of data including transactional, organizational, and conceptual. Errors can occur in all three types of data (Ramaswamy et al, 2012).

Features of Accounting Information System

The basic objective of the Accounting Information System is to meet the requirements of users. Some features ensure quality of this system. The International Financial Reporting Standards require that the accounting information should be comparable, relevant, reliable, and understandable. Business owners use this accounting information for financial analysis of their companies (Salehi & Abdipour, 2013). Financial information should be understandable by a layman. Technical financial information, which is not understandable by a layman, is not very effective for a business owner. Enhanced Business Reporting Consortium first initiated the need for financial reporting reforms with the use of information technology. The consortium was consisted of stakeholders whose aim was to ...