In any organization financial information is necessary to plan and control financial transaction so that the organization as whole work efficiently and effectively to meet the organizational financial goals. All organization have financial and non financial objectives. However, financial objectives are more important objectives, particularly for profit motive private sector compared to non-profit activities. That is, all organization must have a financial information system, whether manual or computerized so that it produces financial reports in a frequent basis to evaluate financial performance and take corrective action to improve efficiency and revise financial objectives. In addition, financial information is necesary for public companies as its required by stock exchange listing rules and by the requirements of corporation law in any country as well as required by tax authorities.
The basic concept of acounting is that it is based on historical financial transaction. That is, it is based on the actual transaction takes place in any organization. Irrespective of organizations, the transactions can be classified as revenue, expences, assets and liabilities. In addition, in accounting conventions the owner is separate from the business entitiy. The accounting equation is that ownners equity + profit= Assets – liabilities. That is, the financial information system must have detail records of day-t-day transactions in journals such as sales journals, purchase journals, purchase returns journals, sales returns journals, cash receipts journals, cash payments journals and general journals. As well, they must have a general ledger system, which has double entry of all transactions and a subsidiary leadger system of accounts receivable, payroll system, costing system, accounts payable system and inventory system so that it can manage the workong capital of a business. The accounting system. As well, accounting system is based on period covention like a yearly period and cycle where the leadgers are balanced and a trial balance is prepared. This produces for a period, the profit and loss statement and balance sheet at the end of the period. The accounts are auditied by external independent auditor in accordance with accounting stanadards relates to some specific accounting transactions and with the evaluation of internal controls to ensure the true and fair view of the financial information. As well, the auditors must also must be registered and must hold high ethical stanadards as required by the law.
In essense, accounting and financial information system must hae detailed records of all financial information which takes place on a day-to-day basis in appropriate journals and must have a general leder and subsidiarly leadger system and periodically must prepare financial information to internal and external users of the financial information to make informed economic decisions. It must be based on double entry principles so that all transactions have a debit and a credit. As well, it is a public company listed in the stock exchange the financial information also must have adequate disclosure as notes and must be in accordance with accounting standards for specific transactions and must be prepared in a specific foramat as prescribed by the accounting standards.