Ais in banking sector

Table of Content
Chapter Topic Title Page No.
Executive Summary v
Chapter - 1 Introduction
1.1: Introduction
1.2: Objectives of the Study
1.3: Limitation of the study
1.4: Methodology of the Study
1-3
1
2
2
3
Chapter - 2 Description of AIS
2.1: Characteristics of Useful Information
2.2: Component of Accounting Information System
2.3: Principles of AIS
2.4: Usefulness of Accounting Information System
4-7
4
5
6
7
Chapter - 3 AIS in Banking Sector
3.1: Concepts of AIS in Banking Sector in Bangladesh
3.2: Operational System of AIS in Banking Sector
3.3: Types of Software Used in Banking Sector
3.4: Core Activities of AIS in Banking Sector
3.5: Advantages of AIS in Banking Sector
3.6: Maintenance of Computer Based Transaction in
........Banks
3.7: Principles of AIS maintained in Banking Sector
8-14
8
9
10
11
11
11
13
Chapter - 4 Problems and Prospects of AIS in Banking Sector
4.1: Problems of AIS in Banking Sector
4.2: Prospects of AIS in Banking Sector
15-18
15
16
Chapter - 5 Findings and Suggestions
5.1: Findings
5.2: Suggestions
19-20
19
20
Conclusion 21

P r o b l e m s a n d P r o s p e c t s o f A I S i n B a n k i n g S e c t o r | 1
Chapter - 1
Introduction
1.1: Introduction
An accounting information system (AIS) is a system of collection, storage and
processing of financial and accounting data that is used by decision makers. An
accounting information system is generally a computer-based method for
tracking accounting activity in conjunction with information technology
resources. The resulting statistical reports can be used internally by
management or externally by other interested parties including investors,
creditors and tax authorities. The actual physical devices and systems that allows
the AIS to operate and perform its functions-
 Internal controls and security measures: what is implemented to
safeguard the data
 Model Base Management
Accounting information allows commercial banks to speculate upon opportunity
of attractive business in placements and resource attraction. The role of
accounting information in the banking activity is extremely important in the
orientation of bank management towards successful strategies. By exercising the
main functions, consecrated by law, banks generate extremely useful accounting
information for both customers and bank management. Users of bank accounting
information are internal users (bank clients and shareholders, employees in
front office and bank office, bank managers) and external users (client business
partners, tax authorities, insurance companies, other banks).
The main generating sources of accounting information in bank activity are:
client accounts, bank accounts and bank computerized programs (which deal
both with accounting data and statistical data, bank management, etc.).

The classification of bank operations into active and passive operations
underlines the importance of accounting information in the whole bank activity.
These bank operations generate accounting information regarding the attraction
and placement of bank resources.
In the context of world’s economy globalization the great banks, which are the
giants of the international financial market, fight ferociously for supremacy.
Accounting information and the transparency of their accounting systems lead
banks to success.
1.2: Objectives of the Study
General objective:
The prime objective of this report is to analyze the “Problems and Prospects of
Accounting Information System in Banking Sector in Bangladesh”.
Specific objectives:
 To conceptualize AIS and AIS in Banking Sector.
 To know about the characteristics, role and use of AIS.
 Identify the computer based transaction in Banking Sector.
 To know about the application of AIS in Banking Sectors.
 Identify the components and users of AIS.
1.3: Limitation of the study
 We can’t visit the branches of banks for field work.
 The website of banks are not much rich with data.
 We have not enough knowledge about the AIS of Banking Sector.
 Due to time limitation many of the aspects could not be discussed in the
present report.
 We have some error while analyzing the data and preparing the report.

1.4: Methodology of the Study
Methods followed to perform a job or conducting activities to complete a task is
called methodology. In conducting this study the following methodology was
adopted in collecting data and information, preparation of reports etc. The
methodology of report is given below:
Research Type: This is a qualitative & descriptive research; which briefly
explain the accounting information system and, its prospects and problems in
banking sector in Bangladesh.
Sources of Data: To prepare this report all the necessary information collected
from secondary sources of data.
Secondary sources of data are of two kinds:
 Internal: Annual Reports of all private banks, other published documents
of the bank, banks Website.
 External: Books, Articles and Website.

Chapter – 2
Description of AIS
An accounting information system (AIS) is a system that collects records, stores
and process data to produce information for decision makers. An accounting
information system is generally a computer-based method for tracking
accounting activity in conjunction with information technology resources. The
resulting statistical reports can be used internally by management or externally
by other interested parties including investors, creditors and tax authorities.
AIS can be a very simple paper-and-pencil based manual system, a very complex
system using the very latest in computers and information technology, or
somewhere these two extremes. Regardless of the approach taken, the process is
the same.
2.1: Characteristics of Useful Information
Accounting activities are depending on the information. The information
provided to take decisions must be useful for the purpose. Some characteristics
of useful information are given below.
i) Relevant: Information is relevant if it reduces uncertainty decision maker’s
ability to make predictions, or confirms or corrects their prior expectations.
ii) Reliable: Information is reliable if it is free from error or bias and accurately
represents the events or activities of the organizations.
iii) Complete: Information is complete if it does not omit important aspects of
the underlying events or activities that it measures.
iv) Timely: Information is timely if it is provided in time for decision makers to
make decisions.

v) Understandable: Information is understandable if it is presented in a useful
and intelligible format.
vi) Verifiable: Information is verifiable if two knowledgeable people acting
independently would each produce the same information.
vii) Accessible: Information is accessible if it is available to users when they
need it and in a format they can use.
2.2: Component of Accounting Information System (AIS)
AIS can’t do anything’s without any its users. So the AIS and the people who use
it must still collect, enter, process, store, and report data and information. The
paper and pencil or the computer hardware and software are merely the tools
used to produce the information.
Accounting information systems are composed of six main components:
 People: Users who operate the systems and perform various functions.
 Procedures and instructions: Both manual and automated, processes
involved in collecting, processing, managing and storing the data about
the organization’s activities.
 Data: Data that is related to the organization and its business processes.
 Software: Application that processes the organization’s data.
 Information technology infrastructure: The actual physical devices
(computer, peripheral devices, and network communication devices) and
systems that allows the AIS to operate and perform its functions (to
collect, store, process, and transmit data and information).
 Internal controls and security measures: That safeguards or secures
the data in the AIS.

2.3: Principles of AIS
A sound accounting information system must be flexible and coat beneficial as
these are the principles of an effective AIS. Here in below those are described
briefly.
 Flexibility of Accounting Information System: Flexibility means that
the system should be so much flexible that it can be changed when
necessary. Flexibility helps the organization to perform its task easily and
quickly as they want.
 Organizational Structure should flexible for improving their
activities in different situation.
 Organizational Data structure should be very easy which will
help the employee to cope up with the system easily for the long
run success.
 Data Recovery system must be simple which will help the
employee to recover the lost data or previous data.
 Cost effectiveness of Accounting Information System: Cost beneficial
means the benefits of information must outweigh the cost of providing it.
Cost effectiveness indicates the minimizing process of cost which helps to
maximize the profit of an organization.
 Data Documentation system is the process how data are
maintained and stoke for future.
 Data Storing should be less costly because it reduces the level of
profit.
 Maintenance of Data Structure is the most costly activities in
every organization so they should maintain is chiefly.

2.4: Usefulness of Accounting Information System
Sometime a success of a company depends on the usefulness of AIS. If AIS
provides more useful data or information with a proper way & also in time, than
it will help the organization to achieve the goal easily. Here in below I provide
some information about usefulness of AIS in banking sector.
 Relevant data means if data reduces uncertainty decision maker’s ability
to make predictions, or confirms or corrects their prior expectations as
they demand.
 Reliability of data means if it is free from error or bias and accurately
represents the events or activities of the organizations.
 Accuracy of data means if it is free from error or bias and
misrepresentation.
 Timely data means if it collected and provided in time for decision makers
to make decisions and for user’s generating information.

Chapter – 3
AIS in Banking Sector
3.1: Concepts of AIS in Banking Sector in Bangladesh
A proper structural Accounting Information System (AIS) is so important part of
an organization. All banks maintain separate department for Accounting
Information System (AIS). The name of their department is FAD. For performing
their activities they need the help of Information Technology Department (IT). IT
department help them by providing computerized and technological support.
FAD work centrally for connecting all branches of the Banks. They maintain a
distributed information system. Every branch maintain separate server for
updating information. FAD collects that information via different software and
manually generates information as they need. But some information is collected
through Fax, Phone and Letter because of lack of their technological opportunity.
On the other hand sometime a branch collects some information from FAD by the
same way but there are some restrictions for providing information to the user.
After collecting the information they manually generate information. That
information is in printed copy. They prepared two copy of data and then one
copy of data are send to the Audit Committee and others are preserved for
evidence. After auditing the data the audit committee make information
themselves and again sends it to the FAD division. Then they analysis the
information and publish or provide the information to the user. By this way the
FAD works and maintains all accounting rules & regulation with help of
information technology. In the view of that it is easy to say that Accounting
Information System is totally mixed with their system and tiring to speed up
their system for achieving the success. So it can be said that they maintain their
AIS in a proper structural way within a separate department.

Some key information about FAD department is given below.
Name of the department: Financial Administration Division (FAD)
Activities of the Department:
 Data collection
 Data maintenance
 Data management
 Data control
 Information generation
3.2: Operational System of AIS in Banking Sector
In present days all the commercial banks make their banking operation through
combination of manual and computerized system. Here some operational
activities of FAD, that how they collect the data are given below.
Manual System:
 Payment order(PO)’s data collection,
 Demand Draft(DD) ’s data collection,
 VISA card’s data collection,
 L/C Opening’s data collection,
 Monthly equipment’s data collection
 Investment Application’s data collection, etc.
Computerized System:
 Local remittance transfer’s data collection,
 Foreign remittance transfer’s data collection,
 Primary share request entry’s data collection,
 Performance report’s data collection etc.

Combination of Both Systems:
 Account opening’s data collection,
 Deposit Scheme open’s data collection,
 Cash receiver’s data collection,
 Cash payment’s data collection,
 Clearing of Cheque’s data collection, etc.
3.3: Types of Software Used in Banking Sector
A company can use many different strategies to obtain new AIS. They can
purchase software (local and foreign) or they can use their information system
departments to develop their requirements are unique or they can hire an
outstanding company to handle data processing actives. In our country very few
companies’ software’s are developed by local and foreign companies. Many
Software are used in every banks, which are categories in below.
Self: Most of Banks build their self-software for maintaining their transaction
and data transfer process within their organization. Names of self-build software
are given billow.
 Customized Software (PcBank, Flora, Ultimas, BankingPro etc.)
 Customized Clearing Edition Software
Foreign: They also use some foreign software for preparing report or document
and for preserved it in server. Names of foreign software are given billow.
 Microsoft Office 2007/2010 Business Edition
 Windows Server Edition
 Adobe Reader Office Essential Edition

Local: Some local software are used for helping the daily activities. Names of
local software are given billow.
 Canon Printer Installer
 Epson scanner ultimate
3.4: Core Activities of AIS in Banking Sector
 Banking Transactions are held through AIS like cash payment, cash
receive etc.
 It helps to input the Clients Information in server.
 It process bank statement of clients.
 It enables to prepare the financial statements automatically.
 It helps the authorized user to send or receive data from another user.
3.5: Advantages of AIS in Banking Sector
 It is a Decentralized or Distributed System that’s why data are separately
saved in several servers.
 It is a distributed system that helps to minimize the risk of data loss
 The features of this software are so modified that’s why it is quite easy
transaction Process in a short time.
 It uses real time processing system that is easy for updating information.
3.6: Maintenance of Computer Based Transaction in ... ..
.. Banks
Transaction processing system is a part of Accounting Information System.
Mainly two types of transaction are held in Banking Sector. Transaction varies

department to department as their need. So transaction processing system
depends on the user’s activities as it demanded. Here I describe them in below.
Software Base:
They have some activities that are maintain through software. Those are given
below.
 Entry of account opening information,
 Profit distribution,
 Collection of Deposit,
 Payment of Salary,
 Internal expenses listing,
 Investment activities listing, etc.
Example: In banking salary structure are predefined, when salary of employee
are occurred than software send those salaries from Salary Account to all
Employees individual account. Like this way software base transaction occurs.
Web Base:
They have some activities that are maintain through web. Those are given below.
 Online Cash Transfer,
 Payment of Cash,
 Collection of Cash,
 Clearing of Cheque,
 SWIFT (Society for Worldwide Interbank Financial Telecommunication),
 Letter of Credit authentication,
 Currency selling and purchasing,
 Branch to Branch Internal Transaction, etc.

Example: Payment of cash is a web based transaction, because a client can draw
his/her money from any branch in our country. For that reason employee of cash
counter need to verify client’s signature and photos as on requirement so he
entered on web and collect data from the server by querying his/her account
number.
3.7: Principles of AIS maintained in Banking Sector
Flexibility of Accounting Information System in Banking Sector:
Flexibility means that the system should be so much flexible that it can be
changed when necessary. Flexibility helps the organization to perform its task
easily and quickly as they want. In Private Banking Sector I found something that
depends on flexibility. Those are given in below.
 Organizational structure: Private Banks maintain a stable
organizational structure. If any problem arises they cannot change it.
 Organizational data or file structure: They use complicated data
structure in their organization, and the employees face difficulties doing
their activities and they need more time to adopt it.
 Data recovery system: They can recover lost data easily because they
use both printed and computerized data storing system.
Cost effectiveness of Accounting Information System in Banking Sector:
Cost beneficial means the benefits of information must outweigh the cost of
providing it. Cost effectiveness indicates the minimizing process of cost which
helps to maximize the profit of an organization. If AIS is more costly than it
reduce profit ratio of an organization but if it effective and efficient and need low
cost to maintain than it help the organization many way. Like it maximize the

profit, reduce the time for handling the client and generating information in low
cost.
 Data documentation: Private Banks maintain the printed and
computerized data documentation control system, in this regard they
need to store huge data for daily activities that are too costly for them.
 Data storing: Private Banks have many branches, every branch maintain
several server of computerized data storing and store house for printed
document storing.
 Maintenance of data structure: Private Banks maintain a fixed data
structure which is less costly and effective for them.

Chapter – 4
Problems and Prospects of AIS in
Banking Sector
4.1: Problems of AIS in Banking Sector
 The main problem is that the data are in decentralized, if one server is
disable then data ware lost from the server and if connecting server are
disable than the total system will disable.
 As computerized accounting system is highly systematic, if system is lost
in any station/division of the process then the total system would be
breakdown.
 It needs much time to collect information from outside of the city, because
data transfer speed depends on distance between data sender and
receiver.
 In online banking system branches of the bank depend on the server
computer which is stay in the head office. If server computer is shutdown
or make late to be startup then all transaction and activities are
stacked/paused.
 There is no slandered data processing system. Different banks customize
their AIS differently. So, users of the AIS face problems when they change
their work place.
 Low Security for data hacking, error and misrepresentation of data.
 If virus attacks server computer or hard disk then all information and
data will be damaged.
 In case of manual process, accountant may make error in calculation as
nature of human being.
 In manual process accounting information are recorded on paper which is
so tough banking sector and loss of any document may create a great
problem in Accounting Information System.

4.2: Prospects of AIS in Banking Sector
Accounting Information System can be more developed to make easier, faster
and secured the banking activities. Computerized AIS used in private banks are
already developed for easier and faster transactions. Now, AIS of a bank is
connected with all branches of the bank over the country. So, any change in any
financial statement in any branch of the bank causes change in bottom line of
final statements of the bank. Interest and profit are automatically transferred to
customers, owners and creditors’ accounts.
By technological advancement and creating highly security in both govt. and
private banks, AIS can be make familiar to user and can be enable the fast and
secure money transfer. Banks have to establish computerized AIS instant of
manual book keeping system. Employees within organization should be well
trained to efficiently use the computerized accounting information system.
AIS ensure banking activity to record data in a standardized format and in easy
way. So, both internal and external users of the information can easily
understand the banks’ financial statements.
By using high speed internet service AIS can be made smoother to control all
branches of Banks from center and faster transactions. Branches’ AIS should be
independent and they should not wait for the main server computer for
transaction. For that, a well-developed system should be established where
branches can perform their activity independently without waiting for server
computer and when server computer become ready then all branches’
computers should be automatically connected with the server computer, and
transaction and records should be automatically transfer to the server to
balance.
Now a day’s internet is expanded its dimension all over the world and connected
people over the world. So internet or websites are an essential part of an
organization. They maintain Website for their user and they also maintain web
base transaction in all over the country. This Website maintain through
Information Technology (IT) department.

When the data are entered in computer software then the data are uploaded over
a network. They have both Intranet and Extranet network. In below the activities
of those networks are explained with example.
Intranet:
In every branch of Bank’s have several server. When certified data are uploaded
in software then the data are stored in server of its branch. Several branches
have different code for them and for server. When an employee need to know
about specific information about a client then he access the server and find the
information. So it is clear that Customized software is the media that can connect
every server to each other and store the data in server.
Example: When a cash transaction occurs then few activities are happened with
software. First of all the clients account number are entered in the software, then
a signature verification command are pressed then software collect the data
automatically and show it to the employee. After that his required amount are
deducted from his balance and again software saved it to server with proper
information (like time of the transaction, employee code and etc.).
Extranet:
Extranet are maintained for external user. They manage their extranet through a
website. It provides lots information for external user. Information’s are updater
through the employees of IT department and information’s are created and
authenticated with help of the employees of FAD department. Some
information’s about the extranet are given in below.
Updating Procedures:
 Information & News uploaded by IT department.
 Coding & structure changed by several customized software.
Period of update: As on demand

Activities of network:
 Keep alive and make relation between the server and website.
 Connect each server with every server for transferring dates.
 It helps FAD to collect daily information from several servers.
 It helps to provide information to internal & external users.

Chapter – 5
Findings and Suggestions
5.1: Findings
This study has focused on the accounting information system in banking sector.
The main findings about AIS in banking sector are given in below.
 The Banks maintain both manual and computerized system for
performing the daily operations of AIS.
 All the Banks maintain a fixed organizational and data structure which
can create problem for new employee to cope up with the existing system.
 Private Banks in Bangladesh are using highly developed and
computerized accounting information system.
 Government owned Banks in Bangladesh are still using manual
accounting information system. Very little use of computerized AIS in
government owned commercial banks.
 The computerized transaction processing system is categorized into
software and web based system.
 In Private Banking, they use self-developed software for performing
transaction and they also use local and foreign software for preparing
report and it also helps to performing other activities.
 They use many different main software that use to performing
transactional activities and transferring data. It has some advantage like,
decentralized system, minimum risk of data lost and speedy transaction
system. And the negative side is it needs much time to collect information,
risk of data hacking and it has no auto data processing system.
 Both the banks maintain a stable organizational structure, a complicated
manual and computerized file structure, easy data recovery system, costly
data documentation & storing system. Their AIS can also provide relevant
and reliable data’s.

5.2: Suggestions
The following points are suggested after the study.
 All the Banks should maintain a standard organizational and data
structure which can empower new employees to cope up with the
existing system.
 They use decentralized web based transaction and data storing system,
which create problem for financial administration division (FAD) for
collecting data, so they should use centralized system for increasing the
effectiveness of AIS.
 The main software different customized operating software which is not
effective enough for generating report or information, so they should
develop new software for batter performance.
 They should give more emphasize on their manual (mail & fax) data
transferring system.
 They should convert their AIS from manual to computerized system.
 They should increase more safety for protecting data hacking, error and
misuse of data.
After solving all the problem of above it can say Banks maintain a proper
structural banking system with the help of AIS.

Conclusion
The accounting information system of banking sector is in the primitive stage.
They have separate AIS department. From the above discussions, it may
conclude that the banks made their banking operation through combination of
both manual and computerized system. They use computerized system generally
for operating, data transferring and storing purposes. But the impact of
computerized AIS is not significant. Thought they maintain a web-site, but all the
transactions are not web based. They regularly prepare financial statements for
evaluation of performance and for external reporting and performance
evaluation they prepared financial statements and published annually. The users
of AIS were satisfied about their AIS and internal control system. They record
and collected their source document through computer. They think their AIS are
cost beneficial and flexible. They use real time and batch processing for updating
their information. But their AIS were not so effective to provide information.
They should give more emphasis on internal control system, safeguarding assets
and information generation or reporting system. In case of external reporting
and internal reporting their actives have lots of gap. In comparing with the
developed foreign banking sector some banks basically government owned
commercial banks should put more emphasis on web based transaction and
individual online banking system.

Executive Summary
An accounting information system (AIS) is a system that collects records, stores
and process data to produce information for decision makers. An accounting
information system is generally a computer-based method for tracking
accounting activity in conjunction with information technology resources.
Generally two types of operational systems are contained in AIS that are manual
process and computerized process. Useful accounting information system has
some characteristics, principles and key components.
A proper structural Accounting Information System (AIS) is so important part of
a banking organization. All banks maintain separate department for Accounting
Information System (AIS). For performing their activities they need the help of
Information Technology Department (IT). IT department help them by providing
computerized and technological support. Banking organizations maintain
different AIS than other organizations and their accounting information system
is complex. They maintain both manual and computerized AIS, and web based
accounting information system. To maintain multi types of accounting
information system Banks face some problems in AIS. In manual system records
are kept on papers and it’s done by paper-pen work, which required more
manpower and time. On the other side in computerized accounting information
system data are decentralized for that there is a risk of break down of the
systems, stuck of transactions, loss of secrecy and possibility of hacking.
Banks should develop better software to increase the effectiveness of AIS. They
should give more emphasis on internal control system, safeguarding assets and
information generation or reporting system. In case of external reporting and
internal reporting their actives have lots of gap. In comparing with the developed
foreign banking sector some banks basically government owned commercial
banks should put more emphasis on web based transaction and individual online
banking system.

Ais in banking sector

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