Financial and accounting information system (FAIS) is a system that provides information related to the accounting and financial activities in an organization. It includes budgeting, cash and asset management, capital budgeting, portfolio analysis, general ledger, accounts receivable, inventory control, and payroll systems. Other systems include record keeping, account analysis, cash management, financial analysis, leasing options, insurance claims processing, and investment management. Financial institutions, such as banks, use specialized FAIS, such as commercial loan
analyzers, credit approval systems, commercial account rating systems, credit application systems, automated teller control, and securities trading. Other institutions and farms may have their own specialized FAIS sub systems. Regardless of the type and number of subsystems, financial and accounting subsystems work together to create, record, generate, and disseminate financial and accounting information vital to good decision making.
Types of financial and accounting information systems
Various functions of FAIS are
1. General ledger system generate the firm’s income statements and balance sheets and are responsible for managing new and old accounts in the firm.
2. Asset management systems maintain an inventory of the firm’s long-term assets and ensure that accounting practices for firm assets comply with regulatory standards. The output of this system often becomes input to the general ledger system.
3. Order entry systems capture and manage different kinds of data relating to a transaction, such as number of units sold, customer billing, credit history, sales tax, and inventory levels. The output of this system is input to a number of other systems, such as accounts receivable and inventory management.
4. Accounts receivable and accounts payable capture and process data, such as creditor and customers billing information, payments received and owed, credit terms, account balances, and payment schedules.
5. Inventory control system captures, processes, and manages all data related to the firm’s inventory, such as items in inventory, inventory levels and coasts, accounting practices related to inventory maintains, stock balance, and data on lost, damaged, or returned goods.
6. Payroll systems capture and process data related to wages and salaries, including central and states taxes, other payroll deductions, employee benefits, overtime, and related data.
These systems are designed to support mostly operational decisions. These are
1. Cash management systems. Systems that ensure that the organization has enough cash to conduct normal business, to receive the best possible return on its short-term cash deposits, and to leverage its cash flow to achieve good ratings in financial markets.
2. Capital budgeting system. Systems that ensure the acquisition and disposal of capital assets, such as land, buildings, and so on.
3. Investment management systems. Systems that ensure that the organization to facilitate gets the best possible returns on its long- term investments.
Integrated Financial and accounting systems
• FAIS are often integrated with other functional systems in the organization to facilitate data sharing and team decision making. After all, financial decisions are not masse in vacuum;
they often involve marketing, manufacturing, and human resources. Thus, a free flow of information among these units is vital for good decision making.
• A radically different form of accounting, called ABC accounting, is helping firms integrate financial information with other system. The activity- based coasting (ABC) accounting system assigns overhead costs based on actual resources. A key benefit of ABC is that it allows affirm to determine the true cost of a product and the cost of serving a customer.
• This system is simple but highly information intensive. Instead of viewing the business as a collection of salaries and machines, ABC views it as a collection of processes or activities, and calculates the coast of each process or activity. These calculations are made by integrating information from different sources, such as the firm’s general ledger and timekeeping systems. Determining the true coast of a product is the first step toward increasing
profits and a FAIS can help a firm achieve this goal.