Accounting is by itself indeed information to various parties in an organization who includes management, employees, as well as external parties such as the suppliers and government. It provides information concerning various aspects of needs in the organization and outside the organization. The accounting information provides the basis for making most of the crucial decisions in the organization. Accounting information processing is a branch of accounting information system, which is mainly concerned with the processing of information collected and stored. The accounting information is obtained from the daily activities done by organizations named as accounting transactions. The process derives the actual representation of these accounting facts in a well and elaborate manner. Accounting information processing involves recording of transactions in the organization, in their respective books of accounts. The process of accounting information is a routine process done on a daily basis. The main importance of recording accounting information, is to use the recorded data to make crucial inferences by both organization managers, as well as other stakeholders and external parties. The objectives of accounting is to give the resources available to his organization and returns from these resources. It is the vital to process accounting information in order to meet these objectives and functions of accounting.
The research general objective is to establish the importance of processing accounting information in the organization, as well as determining the procedures followed during the processing procedure. The specific questions are to establish the essence of accounting information, and the chronological steps followed in the process. The general and specific questions are discussed on the same aspect.
The essence of accounting information.
Every business engages in a given economic activity, in its operations. Through accounting, the analyses of the impact of these activities of the organization are done at ease and and effective, as well as efficient decision is made. Managements require data to make financial decisions, where the financial statements processed through accounting techniques serves the need. This makes management strengthen the bond with the external parties. The processed financial statement helps to communicate the organization financial performance and financial position. Oscar, 2000, p. 100 is in support of the need to have accounting information in the organization since the information is crucial not only to management in making organizational objectives but also other parties affiliated to the organization.
According to Fuhong, 2012, p. 25, accounting information serves as a source of accounting reports to investors, government, creditors, as well as relevant departments in the organization. They also provide the general public with the necessary accounting information to be able to evaluate the organization. The information processed by accounting personnel is used to evaluate the performance of fiduciary duties of the corporate management. Such information is such cash flow information, financial results and operating results. This helps users of accounting information to make rational economic decisions. This provides the need and importance of processing accounting information since it is evident that, the information forms one of the basic needs of the going concern concept of the organization.
Literature review
Oscar, 2000, p. 100, describes the various steps to be followed in processing of accounting information. The steps can be analyzed in simple terms as transaction analyses, recording, adjustments, reporting and closing. Oscar, 2000, p. 101 explains transaction analyses as the process of data collection from various sources then entering it to its respective journal or ledger. A ledger is a book of original entry where the initial transactions are recorded. Oscar, 2000, p. 109 discusses the procedures of accounting information analyses through reclassifying each transaction to a specific accounting ledger. The broader accounting ledgers are assets, liabilities and capital which are further expanded to smaller ledgers such as sales ledger, purchase ledger and respective accounting ledgers among others. The process entirely involves with identifying the type of transaction and classifying it to its respective ledger account. A transaction is a business activity taking place in a given period of time.
Fuhong, 2012, p. 29, argues that, accounting analysis is an important to a corporation since it is a continuous process which helps in building up a strong accounting information. This shows that, for a strong accounting information to the corporate management, as well as the external parties, analyses of the accounting variables has to be done. This accounting analysis is based of primary accounting data, combined with some aspects of statistical accounting and other relevant accounting information. The information is used to compare various economic activities in an organization. This argument is in congruence with Oscars argument by identifying and classifying data as per the types of transactions.
Oscar, 2000 identifies the next step of accounting information processing as recording. He continues and discuses that, after an accountant has analyzed the accounting information, he then records the analyzed information to the respective journal entries or books of original entry. He classified the books of original entry as permanent and temporary books of accounts. The permanent books of original entry are where the transactions involving assets, liabilities, capital goods, as well as drawings are recorded. These are transactions that affect the balance or the financial position statement of the organization. Transactions recorded in temporary books of account are transferred to permanent books of account at the end of the accounting period. These are the transactions that bring revenue to the organization or costs. According to Oscar 2000, before recording a transaction, the evidence of existence of the transaction must be provided. This is by generating the source document given when the organization engaged in that particular transaction.
Cozma, et al., (2009) argue that, the first step the accounting personnel is required to undertake is recording of accounting data in a special register, which Oscar refers to as book of original entry. This recording is based on supportive document namely source documents considering the accounting principles, as well as legal rules in force. This leads to the creation of database whose structure is characterized by order, precision, as well as clarity. The both researchers are discussing on the same ideology showing the importance of recording of the analyzed transactions.
The last step of accounting information processing according to Oscar, (2000, p. 109) is reporting of accounting information. He argues that, the information is reported after it has been represented by various forms of representation. Depending on the purpose of the information, different financial statements are used to describe the information. Oscar (2000, p. 118) gives the name of such a representation statement as the trial balance. The statement shows the transactions recording whether is on the debit side or credit side. These presentations help in giving information to various parties affected by the organization. According to Cozma, et al., 2009, the financial statements provide information concerning the financial position of the organization, performance and their changes. This information is crucial in budgeting processes and making of crucial decisions concerning the organization. This is an indication that, the process of accounting information processing has the objective of obtaining a reliable database to extract accounting information whenever it is required.
There are many theories designed to describe the process of accounting information processing. One of the theories used to describe the accounting processing procedures is the lens model. According to Hammond (2005, p. 2-3 ), in the lens theory, a value judgement is made after a series of variables affecting the outcome are evaluated. The model therefore has an input, as well as output components made of various variables. Many industries such as water industries use the model to evaluate their effect on social cost due to their existence. There are costs associated with existence these industries to the environment, an important idea discussed in the lens model. The model incorporates these social costs to identify the social benefits after consideration of these negative externalities. Water industries such as United states Water processing plant uses the lens model to make its value judgement. The plant makes the process of transferring water to various locations in the country to be smooth and also to be considerate of the social welfare in the region. The plant follows the environmental act passed in the country to prevent costs associated with environmental pollution.
Accounting information processing is a process of obtaining reliable information concerning the organization. The procedure followed is similar to that of the lens model where the value judgement arrived at is a function of key independent variables. These variables are those factors that influence the costs, as well as the benefits to the organization. These costs are inclusive of environmental related costs to the society such pollution costs. From the lens model, it is clear that the assessment of information before processing is important. This assessment forms the basic variables that are required to make the final judgement. The decision made according to lens model should be able to meet the environmental needs. Lens model explains that the variables used to make decisions and the judgement made should both be environmentally sensitive. For instance, in the water industry, the variables considered in deciding the regions to supply water and the actual process of supplying the water are required to be environmentally sensitive. The processes of water catchment areas and the piping systems should consider their impact to the entire society. This gives a justification that, the firm using the accounting information processing ideologies should make their judgements based subject to the surrounding conditions. In the assessment of accounting variables, various parties' interests such as for employees, government and suppliers should be considered since they affect the quality of the decision arrived at.
Research methodology
The research is mostly based on the processing of accounting information, and the approach to be used is through sampling method. A sample of 100 organizations carrying out accounting information processing will be investigated, and a data coding will be done to clean up the data. The sample size is sufficient enough to give the relevant and sufficient information required to carry out the research process. Also, the sample size is sufficient to minimize the error of estimation. A model with accounting information processing as a dependent variable will be built to delineate the relationship between the tested variables and to identify Hypothesis testing.
The model of various variables affecting the accounting information processing needs to be tested as a whole or the variable coefficients. A null hypothesis of that there is no need to process accounting information will be stated followed by its alternative hypothesis. A t- test will be conducted to establish the statistical significance of coefficients of the independent variables in explaining the dependent variable. Also, F statistics will be conducted to test the statistical significance of the whole model. In every model, the coefficient of determination is calculated to establish the extent to which the independent variable explains the dependent variable. These hypothesis testing will be important in making of rational decisions on the findings either qualitative or quantitative data.
Data collection.
Data collection is the actual process of extracting data from the field. Both secondary and primary data will be used in this research paper. The secondary data will be obtained from recorded sources such as organization journals whereas the primary data will be from the actual field. The process to be used will involve the use of questionnaires and interviews with various selected organizations. The qualitative data will be recorded differently from quantitative data. This will make the process of representation simple thus minimal analytical errors.
Conclusion
In conclusion, accounting information is crucial information in most of the current organization. The information is used by various parties making the transaction with the organization. The process involves some steps which should be followed to process the information. The steps form the basis of accounting information processing. From the importance of processing accounting information, I would recommend the currently existing organization to embrace the technique to achieve these advantages. This may not give the only ways of processing information, but software such as QuickBooks has been developed to make the process simple.
References
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