Accounting As An Information System

Accounting as an information system

The term 'system' is commonly used today, and we read much about environmental systems, ecological systems, economic systems and political systems. Indeed, we live in the age of systems. Reduced to its utmost simplicity, a system is a set of elements which operate together in order to attain a goal.
Protect your loved ones from the hardship of losing the major bread winner, it costs less than you think; for an instance quote click here.


From the foregoing illustrations, we may see that systems vary considerably in their appearance, their attributes, their elements and their basic goals. They have certain characteristics in common, however, for they consist of parts which interact together to achieve one or a number of objectives. Systems, therefore, do not consist of random sets of elements, but of elements which may be identified as belonging together because of a common goal.

A system may also be seen as consisting of three activities: input, processing of input, and output. Sometimes, one hears references to closed systems and open systems, and these terms refer to the nature of the relationship between these systems and their environment. An open system is one which interacts with its environment, and a closed system is one which does not. We may classify a business organization as an open system which has a dynamic interplay with its environment from which it draws resources and to which it consigns its products and services. An example of a closed system is a chemical reaction in a sealed container. The important distinction between an open and a closed system is that the former is constantly rejuvenated by its environment, whereas the latter tends to run down through loss of energy which is not replaced from the environment.

Accounting is often analysed as a series of activities which are linked and form a progression of steps, beginning with observing, then collecting, recording, analysing 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, decision making. The task of the accountant is to transform raw data into information. Of itself, data is simply a collection of facts expressed as symbols and characters which have no meaning, and are unable to influence decisions until transformed into information. We shall see in Part 2 how conventions existing among accountants for the treatment of data gives accounting information a distinctive character.

Accounting is a social science which lends itself easily to its 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, process and output.

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


Learn More About Standard Costs

Read on: Theoretical Framework Summary

Here, we have examined the development of accounting from its earliest form as a recording activity to its present-day importance which stems from its objective of providing socio-economic information for decision making.

The history of accounting development reflects an ability to respond to changing social needs. Today, changing social attitudes combine with developments in information technology, quantitative methods and the behavioural sciences to affect radically the environment in which accounting operates. These changes have created a number of problems for the accountant. It is with... see: Theoretical Framework Summary