AEC 07 |

ACCOUNTING
INFORMATION
SYSTEM
2nd Year BS Accountancy & BS Management Accounting
University of Southern Mindanao- Kabacan

Instructor: Lady Enginee Alocelja, CPA

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 WHAT IS INFORMATION SYSTEM?

• The information system is the set of formal procedures

by which data are collected, processed into information,
and distributed to users.
• The information system accepts input, called
transactions, which are converted through various
processes into output information that goes to users
A transaction as an event that affects or is of interest to the organization and is processed by its information
system as a unit of work. This definition encompasses both financial and nonfinancial events.

A financial transaction is an economic event that affects the assets and equities of the
organization, is reflected in its accounts, and is measured in monetary terms.

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Why Is It Important to Distinguish between AIS and
MIS?
AIS MIS
AIS subsystems process
financial transactions and The management information system
nonfinancial transactions that (MIS) processes nonfinancial
directly affect the processing of transactions that are not normally
financial transactions. processed by traditional AIS.

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WHAT IS ACCOUNTING INFORMATION SYSTEM?

AIS, James Hall 7e Figure 1-4

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 ACCOUNTING
INFORMATION
SYSTEM

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THE ROLE OF THE ACCOUNTANT
Accountants are considered primary "users" of an Accounting Information System (AIS), as they actively
SYSTEM USERS input financial data, generate reports, reconcile accounts, and rely on the system to perform their core
accounting functions, utilizing the information it provides for financial analysis and decision-making within
a company.

Accountants must provide a clear picture of their needs to the professionals who design their systems.
They are responsible for key aspects of the information system, including assessing the information
DESIGNERS needs of users, defining the content and format of output reports, specifying sources of data, selecting
the appropriate accounting rules, and determining the controls necessary to preserve the integrity and
efficiency of the information system..

Auditors form their opinions based on a systematic process

AUDITORS
External Audit Internal Audit

Attest Assurance IT Audit

An attestation Assurance is a process for Internal auditors perform a wide range of

An IT audit is an
basically takes all independently ensuring the activities on behalf of the organization,
evaluation of an
the data and accuracy of an audit. Assurance including conducting financial statement
organization's
information that typically occurs after an audit and audits, examining an operation’s
information
has been gathered provides a second opinion on compliance with organizational policies,
technology
and checks its financial data, solidifying the reviewing the organization’s compliance
infrastructure
validity based validity of the data. Assurance is with legal obligations, evaluating
(including
upon agreed-upon an examination of those processes operational efficiency, detecting and
devices), policies,
procedure by which the accounting records pursuing fraud within the firm and
and procedures.
engagements. are produced. conducting IT audits.

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 Accountant as Designers

Accountants Information
Programmers
System

Conceptual Physical
System System
The accountant determines the nature of The medium and method for
the information required, its sources, its capturing and presenting the
destination, and the accounting rules that information.
need to be applied.

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GENERAL MODEL FOR AIS

AIS, James Hall 7e Figure 1-5

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GENERAL MODEL FOR AIS
Data collection is the first operational
stage in the information system. The
objective is to ensure that event data
entering the system are valid, complete,
and free from material errors. In many
respects, this is the most important stage
in the system.

Data should be:

Relevant - The information system should capture only relevant

data. A fundamental task of the system designer is to
determine what is and what is not relevant.
AIS, James Hall 7e Figure 1-5
Efficient - Efficient data collection procedures are designed to
collect data only once. These data can then be made available
to multiple users. Capturing the same data more than once
leads to data redundancy and inconsistency.

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GENERAL MODEL FOR AIS

Once data are collected, usually require

processing to produce information. Tasks in
the data processing stage range from
simple to complex. Examples include
mathematical algorithms (such as linear
programming models) used for production
scheduling applications, statistical
techniques for sales forecasting, and
posting and summarizing procedures used
for accounting applications.
AIS, James Hall 7e Figure 1-5

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GENERAL MODEL FOR AIS

The organization’s database is its physical

repository for financial and nonfinancial
data. We use the term database in the
generic sense. It can be a filing cabinet or a
computer disk or cloud storage.

AIS, James Hall 7e Figure 1-5

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 ACQUISITION OF INFORMATION SYSTEM

In-house systems the process of building and developing information systems entirely within a company,
using its own internal team of developers and resources, rather than outsourcing the work
development activities to external vendors; essentially, creating software applications specifically designed for
the company's needs by its own employees.

are complete, finished and tested systems that are ready for implementation. Typically, they
Commercial Systems

Turnkey systems
are general-purpose systems or systems customized to a specific industry.

consist of a basic system structure on which to build. The primary processing logic is
preprogrammed, and the vendor then designs the user interfaces to suit the client’s unique
Backbone systems
needs. A backbone system is a compromise between a custom system and a turnkey system.
This approach can produce satisfactory results, but customizing the system is costly.

are custom (or customized) systems that client organizations purchase commercially rather
Vendor-supported systems than develop in-house. Under this approach, the software vendor designs, implements, and
maintains the system for its client.

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 EVOLUTION OF INFORMATION SYSTEM MODELS

MANUAL FLAT-FILE DATA BASE

Manual systems constitute the physical The flat-file model describes an environment in which individual With the organization’s data in a central location, all
events, resources, and personnel that data files are not related to other files. End users in this users have access to the data they need to achieve
characterize many business processes. environment own their data files rather than share them with their respective objectives. Access to the data resource
This includes such tasks as order-taking, other users. Thus, stand-alone applications rather than is controlled by a database management system
warehousing materials, manufacturing integrated systems perform data processing. (DBMS). The DBMS is a special software system that is
goods for sale, shipping goods to programmed to know which data elements each user
customers and placing orders with When multiple users need the same data for different purposes, is authorized to access.
vendors. Traditionally, this model also they must obtain separate data sets
includes the physical task of record structured to their specific needs.
keeping

It's often used as a foundational

concept to understand how
computer-based systems evolved to
automate processes.

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FLAT-FILE MODEL

AIS, James Hall 7e Figure 1-12

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DATABASE MODEL

AIS, James Hall 7e Figure 1-13

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 REA is an accounting framework for modeling an organization’s critical resources, events, and agents

REA MODEL
(REA) and the relationships between them. The REA model requires that accounting phenomena be
characterized in a manner consistent with the development of multiple user views. Business data must not
be preformatted or artificially constrained and should reflect all relevant aspects of the underlying
economic events. As such, REA procedures and databases are structured around events rather than
accounting artifacts such as journals, ledgers, charts of accounts, and double-entry accounting. Under
the REA model, business organizations prepare financial
statements directly from the event database.

RESOURCES EVENTS AGENTS

Economic events are Economic agents are individuals

Economic resources are the phenomena that affect changes and departments that
assets of the organization. They in resources. They can result participate in an economic
are defined as objects that are from activities such as event. They are parties both
both scarce and under the control production, exchange, inside and outside the
of the enterprise. consumption, and distribution. organization with discretionary
power to use or dispose of
economic resources. Examples
of agents include sales clerks,
production workers, shipping
clerks, customers, and vendors

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 REA is an accounting framework for modeling an organization’s critical resources, events, and agents

REA MODEL
(REA) and the relationships between them. The REA model requires that accounting phenomena be
characterized in a manner consistent with the development of multiple user views. Business data must not
be preformatted or artificially constrained and should reflect all relevant aspects of the underlying
economic events. As such, REA procedures and databases are structured around events rather than
accounting artifacts such as journals, ledgers, charts of accounts, and double-entry accounting. Under
the REA model, business organizations prepare financial
statements directly from the event database.

RESOURCES EVENTS AGENTS

THINGS THAT COMPANY OWNS, ECONOMIC TRANSACTIONS PEOPLE OR ORGANIZATION

CONTROLS, SELLS, ETC. Example: (internal/external)
Example: Sales Example:
Cash Cash Receipts Employees
Supplies Purchases Customers
Properties and Equipment Cash Disbursements Clients
Suppliers
Vendors

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 EXAMPLE:
Company: Farmy Pharmacy
Vendor: Luxeorganic
REA MODEL POV of Farmy Pharmacy

#1 ) 12/25/2024: Farmy Pharmacy purchased 1000 Qty of face masks from Luxeorganic @ Php 5.00 each on credit.
#2 ) 01/10/2025: Farmy Pharmacy paid in full amount Luxeorganic for the purchased on credit last 12/25/2024.

RESOURCES EVENTS AGENTS

FARMY
Face Masks PHARMACY
PURCHASES
#1.)
(Inventory)

LUXEORGANIC

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 EXAMPLE:
Company: Farmy Pharmacy
Customer: Luxeorganic
REA MODEL POV of Farmy Pharmacy

#1 ) 12/25/2024: Farmy Pharmacy purchased 1000 Qty of face masks from Luxeorganic @ Php 5.00 each on credit.
#2 ) 01/10/2025: Farmy Pharmacy paid in full amount Luxeorganic for the purchased on credit last 12/25/2024.

RESOURCES EVENTS AGENTS

FARMY
CASH PHARMACY
CASH DISBURSEMENT
#2.)

LUXEORGANIC

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 EXAMPLE:
Company: Farmy Pharmacy
Customer: Luxeorganic
REA MODEL POV of Farmy Pharmacy

#1 ) 12/25/2024: Farmy Pharmacy purchased 1000 Qty of face masks from Luxeorganic @ Php 5.00 each on credit.
#2 ) 01/10/2025: Farmy Pharmacy paid in full amount Luxeorganic for the purchased on credit last 12/25/2024.

RESOURCES EVENTS AGENTS

FARMY
Face Masks PHARMACY
PURCHASES
(Inventory)

CASH
CASH DISBURSEMENT
LUXEORGANIC

REA is a conceptual model, not a physical system. Many of its tenets, however, are found within advanced database systems. The most
notable application of REA philosophy is seen in the proliferation of ERP systems.

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REA MODEL

AIS, James Hall 7e Figure 1-15

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NON-REA MODEL

AIS, James Hall 7e Figure 1-14

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