Accounting as an information system

Ø 1) Look at the phrases, taken from the text: a series of activities, collecting, recording, analyzing, communicating information, data organized for a special purpose, decision making, to transform, to influence, a social science, input, processing, output, to facilitate. What do they mean?

Ø 2) Name the statements that are true:

a) accounting is a series of steps such as collecting, recording, analyzing and communicating information,

b) accounting has the typical activities of systems: input, processing and output,

c) data are used for decision making,

d) accounting is a social science,

e) application of systems analysis is extremely rare in accounting.

Accounting is often analyzed as a series of activities which are linked and form a progression of steps, beginning with observing, then collecting, recording, analyzing and finally communicating information to its users. We may say, therefore, that accounting information has a special meaning in that it is data organized for a special purpose, that is, for decision making. The task of the accountant is to transform raw data into information. Data itself is simply a collection of facts expressed as symbols and characters which are unable to influence decisions until transformed into information. Conventions existing among accountants for the treatment of data give a distinctive character to accounting information.

Accounting is a social science which lends itself easily to analysis as an information system, for it has all the attributes of a system. It has a basic goal, which is to provide information, and it has clear and well-defined elements in the form of people and equipment. Moreover, accounting has the typical activities of systems, consisting of input, processing of input and output.

The application of systems analysis to the treatment of accounting facilitates the study of accounting as a social science, and enables to examine its various activities in terms of the relevance of its output for decision-making purposes.

CASH

Ø 1) Do you prefer to keep cash on hand or in a bank? Why?

Ø 2) Read the text and answer the questions:

a) Why do firms bank large sums of money daily?

b) What do they use for the settlement of debts?

c) Who is usually entrusted with a petty cash box?

d) What is a petty cash voucher?

e) Who signs a petty cash voucher?

For security reasons, few firms like to keep large sums in cash about their premises and cash takings are banked daily. Moreover, it is sound practice to use cheques for the settlement of debts, so that there is generally no need to keep cash on hand beyond relatively small sums. All firms, therefore, tend to have a petty cash box to meet any immediate need for cash for example, enabling a secretary or porter to take a taxi to deliver a document, or to buy a small article which is urgently required. The cashier is usually entrusted with a petty cash box and any payments must be claimed by means of a petty cash voucher signed by an authorized person, who is usually a head of department. The cashier is given a petty cash float which may be, say, £ 50 and pays out petty cash only against petty cash vouchers, which he retains. As the petty cash float decreases, so petty cash vouchers of an equivalent value accumulate in the petty cash box. In due course, the vouchers are checked or audited and the petty cash paid out is refunded to the cashier, thereby restoring the petty cash float to its original sum.