An insight into accounting management systems

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Accounting standards are trustworthy statements of how particular types of transactions and other events should be treated and released so that the financial, statements will give a true and fair view of the reporting company's results. Generally, observance with accounting standards narrows significantly the differences in financial reporting practice and makes comparisons of results more meaningful and realistic.

Accounting Concepts:

Are the broad basic assumptions or general principles applied by accountants in preparing periodic accounts or financial statements.

Going Concern Concept: - A business will continue to carry out its normal activities and operations in the predictable future.

Accruals or Matching Concept: - Revenues and costs or expenses are earned and incurred not as cash is received or paid but as they are recognized as being applicable to the period under consideration.

Consistency Concepts: - Similar accounting treatment should be given to similar items within each accounting period and form one period to the next.

Prudence Concepts: - if profits are likely to result from a certain activity or transaction, no record of it should be made unless and until this is realized either in the form of cash or some other asset.

Materiality: - The size and nature of an amount should determine its accounting treatment.

Money Measurement: - Only events or transactions that can be expressed in money terms should be recorded in the books of account.

Business Entity: - Separates the individuals behind a business from the business itself and records transactions in the books of account as they affect the business and not its owners.

Post Balance Sheet Events:

Post balance sheet events: - those events, both favorable and un favorable, which occur between the balance sheet date and the date on which the financial statements are approved by the board of directors.

Adjusting events: - post balance sheet events which provide additional evidence relating to conditions existing at the balance sheet date. They require changes in amounts to be included in financial statements. Examples:

Fixed Assets




Non-adjusting events: - arise after the balance sheet date and concern conditions which did not exist at the time. Examples:

Issue of shares

Purchases and sales of fixed assets

Changes in rates of foreign exchange

A material post balance sheet event requires changes in the amounts to be included in financial statements where it is an adjusting event, or, it indicates that application of the going concern concept to the whole.

Post Profit and Loss A/c:

The profit and loss a/c it is drawn up in order to calculate a trader's net profit or loss.

Net profit: - is the excess of gross profit plus any additional income over the total business expenses and charges incurred in the year under consideration.

Net loss: - is the excess of total business expenses and charges over gross profit and any additional income.

The profit and loss a/c is debited with the gross los if any and all the business expenses. It is credited with the gross profit and any additional income, e.g. discounts received. An excess credit shows that the trader has made net profit; an excess debit suggests that he has suffered a net loss. The net profit or loss affects the traders' capital. The net profit increases the capital in comparison with the net loss that decreases it.


The use of those two historical accounting information systems, it is very helpful and effective to show clearly of the company is worth keeping. Those two financial statements show the profit or the loss the company had at the end of the past year. By this the trader can choose how he wants to take his risks for the year coming.

Those two statements are in my opinion very reliable to keep the manager of the company informed because all we use to create them are the transactions the trader used the past year with the expenses the incomes in sequence.


Accounting Information Systems: - (AISs) combine the study and practice of accounting with the design, accomplishment, and observing of information systems. Such systems use traditional accounting controls and methods to provide users the financial information necessary to manage their organizations. ( [entered 10th of February 2010] ).

Management Information Systems: - (MIS) is the term given to the discipline focused on the integration of computer systems with the aims and objectives on an organization. The development and management of information technology tools assists executives and the general workforce in performing any tasks related to the processing of information. MIS and business systems are especially useful in the spread of business data and the production of reports to be used as tools for decision making. ( [entered 10th of February 2010] ).


The main difference between accounting information systems and the management information systems is that in accounting information systems we use all the data we have collected from the past transactions and we use them to create a profit and loss a/c and then a balance sheet, as the finals accounts, to predict if our company is going to be profitable or not. For example, in the FORMUNI LTD, they have done for the past five years and we can see that the company does not have a constant profit. They have the ups and the downs in terms of the profit.

On the other hand, in the management information systems they are using all the available data to create reports that will be useful for them to make a decision or take a risk. The managers collect the information most of the time from the accountants and the transform them to a report to explain and predict what the future of the company will be on the next year. For example, as we can see from the case study, the manager of the D.AIR PLC, created a report to make sure if the FORMUNI LTD is the best choice for them to sign a contract for 2 years.


A company to be successful must work with both systems so to know if they will be able to continue into the market and what are the risks they will come opposite as the years pass through. The AIS and the MIS are needed for different reasons respectively.