Purposes of Accounting Information Systems
The accounting information system of a business is the collection of people, policies, procedures, information
technology, and processes that identifies, classifies, processes, summarizes, and distributes economic and
financial information to its various users.
1
A business’ management accounting information should describe
its economic performance and resources with respect to its:
 Operating units (such as divisions and departments),
 Processes,
 Products, and
 Customers
A business’ accounting information system should provide this information in a manner that permits managers
to plan and control the activities of the business in pursuit of its strategy.2
To be appropriate to a particular
business, managers must tailor its accounting information system to its particular industry characteristics,
organization, products, and requirements for planning and control. In turn, a business’ planning and control
requirements depend on its strategy and objectives. Management accounting information is useful to
managers in examining and reducing the costs of a business’ processes, products, and operating units,
thereby leading to increased market share, profits, or both. Examples of ways businesses reduce costs
include:
 Renegotiating terms with suppliers
 Outsourcing manufacturing activities to third parties that have lower operating costs
 Redesigning products (so that they require fewer or lower-cost components) or manufacturing
processes to shorten production cycle times (by implementing just-in-time manufacturing methods that
reduce excessive production and warehousing of goods and excessive material handling during
manufacturing)
3
 Pursuing total quality management (TQM) by reducing product defects and the associated costs of
rework and waste

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