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Accounting as Financial Information System

We'll learn about financial information systems and accounting in a nutshell. The article will discuss FIS collects, dedicates, sorts out, and will indicate an organisation's data.

A financial information system collects and clarifies data in an organised manner and computerised way. The FIS can assess and analyse the previous financial performance and current operations, and map the upcoming steps required for the organisation’s finances.

It’s a well-organised accounting system for the data and delivers ideas for optimum usage and better actions for the organisation’s growth. The data analysis incorporates financial modelling, accuracy in trends and ratio calculations. The analysis is performed using accounting and working capital records, operating and capital budgets and cash flow forecast. Big or small e-commerce business models use FIS to gain maximum financial output.

Features of FIS in Accounts

Financial information systems in accounting have components and features which make them trustable by big and small organisations. Here are the characteristics of FIS:

  • Accuracy in financial information systems ensures the data is well-accumulated and checked to be correct and trustworthy
  • Data calculated by FIS is presentable for gaining promising inventors
  • Applicability in FIS means the data can be used to form decisions and eliminate confusion, such as, before investing in shares or starting a new venture, multiple questions arise and build pressures, FIS sets people free from such anxiety and eliminates confusion with the power of financial data
  • Security means FIS gives coverage to an organisation that presents accurate data and without any doubt, an organisation can make decisions and take action
  • Understandable and transparent financial information means any shareholder and investors can easily understand the organisation’s position
  • A person with minimal knowledge can assess and invest in the organisation
  • Financial information system presents data efficiently and effectively, which is open to users and promotes the growth of organisations

Components of FIS

Now, let us discuss the components of financial information system:-

  • Data

The financial information system’s main purpose is to collect commercial and financial data. Any form of data that causes cash inflow or outflow is recorded through FIS. The main task is to analyse and confirm data correctness, which can be in any form like bills, invoices, ledger, etc.

Software used for FIS includes importing, processing, analysing, organising, and retrieving the accounting data of an organisation. There are many software programs available in different versions, and organisations can also have their customised software designed and developed to meet their requirements. Specialised software features built-in financial calculators, formulas, storage spaces and audit options. 

  • Procedure

Every organisation has a unique set of procedures for the financial information system, followed while processing and organising data. For example, a hospital uses the patient’s name, treatment, duration, bills, insurance coverage, contacts, etc. These details are one-time feed into the system and work accordingly.

  • Information Technology Infrastructure (ITI)

The name may seem heavy and high-end, but the meaning is super simple. ITI in FIS means a computer, software, printers, scanner, laptops, servers, and hardware. Hardware should fulfil the purpose of gathering and interpretation, irrespective of IT hardware. 

  • People

The people of a financial information system are investors, shareholders, auditors, taxation departments, external authorities and advisors. These people have the right to access the FIS, which must be simple to understand with the slightest economic knowledge.

  • Internal Command

After all these components, security is an utmost component for the confidentiality of data. Most organisations use complex passwords and combinations like metric locks to make them secure. Some competitors hack and steal plans and models for their growth. For protection, investment in security apps and private networks are used. Division of departments and limited authority to particular people help secure an organisation’s FIS data.

Advantages of Financial Information System

Here are the advantages of incorporating financial information systems in accounting. Let us read them one by one:-

  1. The FIS process makes accounting easily understandable and profits the organisation. It sets a uniform tone for accounting via uniformly organising data. The big organisation uses it for a clear picture and determines the future perspective.
  2. FIS encourages financial reporting, which includes a preview of past performance, present condition and reshaping of the future. It helps keep an eye on a particular division by assigning a supervisor and overseeing the budget usage by each division. 
  3. Budget and resources are monitored technically and bring reliability and stability to accounts.
  4. The specialised financial information system for the different sectors makes the data recording easier. The various functions and features make it unique. 

For example, a multinational company uses FIS to maintain balance sheet data, shares and debentures, upcoming market trends, ongoing and upcoming project details, deadlines, status and budget usage.

  • It keeps track of the usage of current funds and the entry of new investors
  • FIS delivers a crystal clear image and prepares to generate and organise funds
  • It suggests the best ways to use the funds and detects any wastage of funds in the organisation
  • FIS in accounting lets the operator decide the limits for each division
  • The ultimate financial information system detects excessive or low performance and flashes as a safeguard


In this article, we have discussed financial information systems in accounting. The features, components and advantages are discussed in brief. All six components— data, procedure, information technology infrastructure, software, internal commands and people— are explained. FIS has five features in accounting. The advantages of FIS are mentioned, and mainly it can be used by both big and small organisations. It enhances the experience of financial interpretation and revamps the organisation’s structure in its way. However, the financial information system is a concurrent system for the foundation of identity and path for growth via data stability and reliability.


Frequently asked questions

Get answers to the most common queries related to the UPSC Examination Preparation.

Why is a financial information system used in accounting?

Answer: Sole reason behind using a financial information system is gathering, interpreting, and allocating da...Read full

Does the organisation need specialised and high-end software for FIS?

Answer: The specialisation of software depends on the size and phase of the or...Read full

What are the elements included in the financial information system?

Answer: Ongoing operations, assets, expenses and liabilities are the key eleme...Read full

Write two limitations of the financial information system?

Answer: Here are two limitations of FIS- ...Read full