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Question: Critically evaluate the use of AIS as compared to MIS in

organisations and its users. [30}

A system as according to James Hall (1999) is defined as a set of
interrelated components that interact to achieve a goal or to serve a
common purpose.
An information system is then a set of formal procedures by which data is
collected, processed into information and distributed to the users.
According to Gelinas(1999), a system can only be if it contains more than
one part with each part functioning independently of the others though all
parts serve a common objective as shown below.



The input represents the economic events that take place in business for
example the gathering of elements of financial statements by the
accountants like assets and liabilities, the processing stage represents
the recording, journalising and posting information, then the output
represents the reports that come out for example the statements of
financial position. An information system comprises of two broad systems
which are accounting information systems (AIS) and management
accounting information systems (MIS).

Accounting information systems (AIS)

An AIS is a system that collects, records, stores and produces information
for decision makers as according to Vaassen(1999). The resulting
statistical reports can be used internally by the management of the
business or externally by other interested parties including, creditors and
tax authorities. AIS combines traditional and accounting practises such as

(Generally accepted accounting principles) GAAP with modern information

technology resources.

Users of AIS:
Users of AIS are many and they use it for various reasons. Some need the
information for internal use and others for external use. Suppliers and
creditors mainly need to know about a companys financial position. They
need to know whether a company is liquid and solvent enough to meet its
obligations when they are due.
Management need the AIS to get enough information for making
economic decisions. Shareholders are also concerned as they need surety
that the company in which they have entrusted their wealth is reliable.
The government needs this information as well for security reasons and
tax purposes.

An AIS comprises of six elements elements below as stated by Hurt(2008):

These are the system users, who make use of the information processed
by the system and use it to make certain decisions for example
accountants and auditors may then find out about liquidity and solvency
of the business after obtaining the reports, hence this will help the
management on decision making.
Procedures and instructions
They are the particular sequences or steps performed within one or more
of the AIS functions. They include methods of retrieving and processing
data for example the transaction processing system.
This is the structured collection of business practises which will be stored
partly in a computer system and partly in storage devices such as files,
cabinets and desk drawers and allows the users to retrieve data from the
databases for example oracle and M S access.

These are the computer programmes and software used to process data
so as to come out with the required information for example omni and
pastel which is used by most organisations in Zimbabwe like Ernest and
Young company.
Information technology infrastructure
These are the hardware used to operate the system meaning the
equipment that make up the physical components of a system. These
allow data to be entered, retrieved and stored.

Internal control
These are the security measures to protect sensitive data for example the
use of passwords to check on the people that have accessed the system,
the information they wanted and as well the time they did so and this will
be to most organisations by use of the database security as it protects
data from corruption and theft.
A well designed AIS successfully performs the following duties;
It captures data on the elements of financial statements, that is it has to
document changes in assets, liabilities, equity and other transactions
using either the debit or credit or the negative(-) or positive(+), this will
be on the processing stage of the system.
It also transmits the data into relevant and reliable information and does
this in a reasonable time, it outputs information that is beyond the
financial statements, as according to Vaassen(2004), for example
transaction histories and customer characteristics.
It as well recognises and adapts to the cost benefit constraint. AIS is all
about choices and trade-offs as stated by Gelinas (1999), what should l
capture?, what information technologies should l use?, therefore in doing
all this, information is obtained and the benefit of having this information
must outweigh the costs.
However no AIS is completely successful or totally unsuccessful as stated
by James Hall(2005), it can also be successful if it achieves most of the
goals set out for it.

Usefulness of AIS:

AIS automates and streamlines reporting as from Steinbart(2005).

Reporting is of paramount importance in business, with no consideration
of how much data is to be captured, reports have to be produced by
accountants at the end of the financial year, however the AIS pulls data
from the centralised database, processes it and ultimately produces
information that can be easily consumed and understood by majority if
not all of the users which include customers and managers.
AIS eliminates one of the major problems in business which is human
error as according to Hurt(2008) for example the errors of double entry
or omission by accountants are eliminated through the use of AIS, it is to a
greater extend efficient compared to humans. Most of the information it
delivers is in a manner desired by the business.
As noted by Obrien(1999) AIS ensures control in business in the different
accounting functions, with the use of AIS, management gains control as
most of the operations will be computerised and these computers are
bound to doing only what they have been instructed to do without
complaining or giving excuses of not performing some tasks like humans

Shortcomings of using AIS:

In the case that a natural disaster occurs for example floods and
earthquakes or even some disasters which are not natural such as fire
caused by an electrical fault, an AIS can completely be destroyed and this
leads to nothing except of the fall of the business since it will be left with
nowhere to get any decisions to move on as stated by Laudon(1998).
An AIS can prove to be of less importance in places where high power
shortages are experienced, a system needs power to carry out its
functions in a desired manner hence if this is not provided then an AIS
may fail to efficiently perform its functions which are to provide necessary
information at low cost and in a reasonable time.
AIS also can be disadvantageous because it requires highly qualified
personnel since a small human error in inputing data, for example error of
omission by an accountant can cause a major problem in the output
meaning the whole process will have to be started again. It therefore
means also that close supervision has to be done to avoid errors, which is
very expensive and time consuming for the business.

Management accounting information systems:

Management information systems (MIS) are interactive human or machine
systems that support decision making for users within the organisation as
from Gelinas(1999). AIS alone as according to Eddy Vaassen(2004) did
not seem sufficient for organisations to carry on business and to make
important decisions as it focuses on financial transactions only or that it
lacks a sound theoretical foundation, as a result MIS emerged as a way of
catering for non financial transactions. The MIS is required in business as
it provides management with the necessary information to monitor the
actual performance of the business, its past, present and to predict the
future. The system is not only a computer system but also contains other
components which are:
These are the groups and individuals within the organisation but mainly
the management who make use of the system for example the
management can make some forecasts basing on the information
produced by the system.
This is the information pertaining to the organisation that is necessary for
decision making and of importance to managements planning and
These are all the devices that allow MIS to operate and to perform all its
functions for example the computers are used for a number of functions
like input of data and storing the data.

Usefulness of MIS:
MIS ensures a good SWOT analysis for the business according to Eddy
Vasseen(2004) since it considers both financial and non-financial practises
. A business is bound to having quality decisions because it obtains from
its information the real strengths, weaknesses, opportunities and threats
and hence the decisions made from the real information are more reliable
in terms of status of the business, whether it is still able to perform
operations or not.
MIS gives rise to a good communication base and better planning in the
business. In a business, MIS operates with the use of bottom up and top

down information flow when gathering data to input in the system thus
the lower level employees have more to communicate with the upper
level management as they share ideas hence planning comes up through
making use of a variety of ideas as well as the decision support system
(DSS), and quality decisions are made.
MIS also reduces the problem of human error, this is possible as there will
be no use of human judgements and interpretations which are mostly
biased. An example can be when there is a decline in the sales levels in
business, one can simply blame the sales representatives but after use of
MIS it can be discovered that the problem maybe a change in the seasons
or consumer tastes and preferences.

Shortcomings of using MIS:

The use of MIS by companies may be disadvantageous to the general
public as it leads to unemployment. MIS as a system completes the jobs
which are to be done by a multitude of people on its on for example the
processing stage requires a large number of manpower in a case of
absentism of a MIS. This therefore promotes unemployment.
Another shortcoming of using MIS is that MIS like AIS can be affected by
natural disasters for example floods and earthquakes. If such a problem
arises then the whole business will be in danger as all its decisions and
forecasts will be damaged. This automatically leads to a fall of the
MIS has another disadvantage that it only focuses on provision of
information for internal use only. In a case that a business mainly
considers the use of MIS then it means that other parties who are
interested in the business runnings for example potential investors and
customers may fail to get the information they want.

Similarities of AIS and MIS:

AIS and MIS are similar in that they both provide information for internal
users. AIS produces financial statements for example the statement of
financial position and MIS produces internal reports for example budgets
which are used internally by management in decision making.
Another similarity between AIS and MIS is that they both make use of
computer and human resources and this is according to Lauden(1998).
Both AIS and MIS make use of data gathered by humans and fed into the

computers as input, these computers then process the data for example
assets, equity and liabilities with the help from software packages like
pastel and then produce the statement of financial position as output.

Differences between AIS and MIS:

AIS and MIS are different in that AIS is historical whereas MIS is primarily
forward looking. AIS respects some accounting practises like (GAAP)
generally accepted accounting principles and (IAAS) International
accounting standards which were formed long back unlike MIS which
makes use of current information and makes forecasts and predictions
there from.
Another difference between AIS and MIS is that AIS focuses mainly on
financial transactions whereas MIS focuses mainly on non-financial
transactions and some of the financial transaction as according to
Obrien(1999).MIS considers some theoretical factors from the human
resource like remuneration and customer complaints which are not even
considered by AIS, that is AIS lacks a sound theoretical foundation as
compared to MIS.
AIS and MIS, as according to Hall(2008) also differ in that AIS produces
information for both internal and external use whereas MIS produces
information for internal use only. The information from AIS for example the
statement of financial position is used both internally by management and
externally by other people who have interest in the business like potential
investors and customers who may need to know a business financial
position while information from MIS like budgets are used by management
only for decision making.

Conclusively, it can be deduced that MIS and AIS complement each other.
For information from AIS to be relevant it requires some significant
support from MIS, which is the same for AIS which requires support from
MIS for it to be effective and efficient, hence both the systems are useful.

Accounting information systems, 3rd Edition, Eddy Vaassen(2004)
United Kingdom.

Basic concepts and current issues, R .L Hurt(2008), McGrall Hill

Accounting Information Systems, James.A Hall (2008),6th Edition
United States of America.
Management information systems, Obrien .J(1999)3rd Edition
McGraw Hill London.
Information systems and the internet, Laudon K.C(1998) 3rd Edition.
Brace college New York