CHAPTER intellectual context for your work and position




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2.1 Introduction

Literature review is a vital component of a study. A
literature review surveys scholarly articles, books, dissertations, conference
proceedings and other resources which are relevant to a particular issue, area
of research, or theory and provides context for a dissertation by identifying
past research. The essence of the literature review section of this study is to
identify gaps in current knowledge, to avoid reinventing
the wheel by discovering the research already conducted on a topic sets the
background on what has been explored on a topic so far, to increase the breadth
of knowledge in the area of research, to help the researcher identify seminal
works in your area, allows  to provide
the intellectual context for your work and position your research with other,
related research , to provide the researcher with opposing viewpoints and also
the researcher to discover research methods which may be applicable to your


 This section pays critical attention to the concept of accounting
information system, the effectiveness of accounting information as a tool for
decision making and the interconnectedness or the relationship between
accounting information and strategic decision making respectively.



2.2 The concept
of an accounting information system

An accounting
information system (AIS) conceptually involves the collection, storage and
processing of financial and accounting data used by
internal users to report information to investors, creditors and tax
authorities. An accounting information system has been briefly explained by various
scholars as a computer-based method for tracking accounting activity in
conjunction with information technology resources. Accounting, as a term
also involves a closed-system recording (which is the collection of procedures,
methods, techniques, legal regulations, rules and experts), includes the
identification, tracking, measuring, recording, processing, storing,
systemizing, valuing, controlling and publishing of the phenomena influencing
the property, financial and profit status of the enterprise, ensuring the
conditions of continuous, undisturbed activity. Accounting
helps in constructing a crucial and a formidable source of information which
contributes to organizational development. This assertion is evident in the
works of Hall as he aptly points out that as a key source of information
about an entity’s financial position and performance, accounting can help
managers to develop knowledge about the organization in several ways. (Hall,


In this
regulated, closed system the accounting information system records the economic
events influencing the enterprise, then processes them according to the demands
and conveys them to the persons or units responsible for decisions. In
addition, the system greatly contributes to preparing different reports,
financial statements, working out an expense management system and compiling
controlling reports. The accounting system includes two main activities
according to Schehl’s categories concerning the activities of the enterprise
(Schehl 1994):

processing information and
supplying information. According to the above
categories, the dual purpose of the accounting information system can be
defined: on one hand to fulfill the registrative, accounting and reporting
duties; on the other hand to provide information at the highest possible
level for the manager’s decision-making activity (Schehl 1994). This dual
function defines the contents of the sub-system, its tasks and its
connections. The characteristic sub-systems of the accounting information
system are the following in practice (Schehl 1994):

Ledger and current account sub-system
Financial sub-system
Sub-system of labour and wage accounting
Sub-system of investment
Sub-system of invoice and sales
Sub-system of stockpiling.

Accounting information system generally follows due structural procedures
to arrive at logical conclusions as 
Boockhodt (1999) aptly points out as ‘comprising
of data gathering, processing, categorizing and reporting financial events with
the aim of providing relevant information for the purpose of score keeping,
attention directing and decision making’. In generating accounting information
system, there is always a system of planning, organization, directing and
presentation of data in order to ensure effective coordination in producing an
efficient and a tangible outcome. Four qualitative characteristics
have been developed by The Framework for the Preparation and Presentation of
Financial Statements to determine the essence of information provided by annual
accounts : (IFRS, 2010)


The understanding
and effective coordination of information contained in the synthesis documents
enable users to have a credible and a comprehensive knowledge of business and
accounting concepts;


It basically has
to do with the capacity of information to essentially influence decision-making
process. Relevant information help users evaluate and make a comparative
analysis between the past, present or future events, to confirm or correct
their future assessments. It also helps in establishing correlation as well.


Reliability information

The information
must be devoid of errors and must also be objective in its analysis and
findings, providing essential information for users in the decision-making



It involves the
ability of information to be compared over a period of time or in space and
relative to other desired goals or objectives.  The main desired goal of an
accounting information system (AIS), a pre-eminently user-oriented system, is
the collection and recording of data and information regarding events that have
an economic impact upon organizations and the maintenance, processing and
communication of information to internal and external stakeholders. 
Hubber (1990), support this assertion by arguing that integration of accounting information leads
to coordination in organisation, which in turn, increases the quality of the

2.3 The Usefulness
of Accounting Information System

information system is very critical to an organizational development

Good cooperation

A major attribute of good cooperation is support
and team work. Good cooperation involves common needs and wants, understanding,
maturity and empathy. Cooperation in an organization entails the process of
groups of organisms working
or acting together for common or mutual benefit or for the benefit of the organization
as well, as opposed to working in competition selfish benefit. There
is the need for effective understanding among the consumers in order to ensure
a smooth operation of their production, in order to ensure the free flow and
the timely recording and keeping of materials and most importantly avoiding
duplication of information collection and shortcomings.


To meet the needs of multi-users

Meeting the needs
of multi-users of accounting information is very crucial to a sustainable
growth and advancement of a company. As stated in Vol. 2 of an article on ‘Usefulness
of Accounting Information System in Emerging Economy’ published by the
International Journal of Economics and Finance, any activities according to the
value chain management should be the value-added process, and account is a
measure means of the value of economic activity, therefore, any economic
activity through the accounting information system can be measured and


control afterwards, and control in advance and in concurrent


Accounting information
system has the critical role of supervision and control of the economic
activities of the company. The traditional manual account and of the computer
accounting system for “accounting” can only do inspection afterwards,
the mistakes means that by that time the harm will have already been done.


The Concept of
Decision making




2.4 The effectiveness
of accounting information as a tool for decision making

According to
Flynn (1992), the effectiveness of accounting information systems can be
received providing management information to assist concerned decisions. By
Corner (1989) the effectiveness of AIS can be assessed as added value of
benefits. Gelinas (1990) considers the effectiveness of AIS as a measure of
success to meet the established goals.


The essence of
accounting information in decision making has been clearly stipulated by Alexandra-Daniela
(2012) by highlighting the following key functions:

helps managers to have an in-depth knowledge about what happened in the
past and which is the present situation of the organization. This helps to
establish a correlation between the past and the present and provides a
fertile ground to make future predictions.
makes visible those events that are not perceptible by daily activities.
It involves an in-depth analysis of hidden data or information that of
greater importance to the development of the institution or company.
 It provides a quantitative overview of
the company.

information basically involves quantitative data analysis, descriptive
statistics, accounting, data presentations and record keeping. Accounting information is very much important for decision
making as it provides a quantitative data which is crucial for planning,
controlling and evaluating organizational performance.

helps managers prepare for future events and to make relevant decisions as

Company’s findings on accounting information must be beneficial for
decision making, financial accounting information must be unbiased, essential,
reliable and must provide effective future predictions or directions as well.
Also managers must be objective and realistic in providing accounting
information and must also be optimistic in its implementation as well
irrespective of the outcome of their findings















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(1989). Systems Analysis for Profitable Business Applications, Prentice Hall.


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