TUTORIAL 1

INTRODUCTI
ON TO AIS
BRIEFLY • Work steps within business process
DESCRIBE THE that capture accounting data as
business process occurs
FIVE • Manual or computer-based records
COMPONENTS that capture accounting data from
business processes
OF AN • Internal controls
ACCOUNTING • Work steps that process, classify,
summarize and consolidate raw
INFORMATION accounting data
SYSTEM. • Work steps that generate internal
and external reports
 The Accounting Information System
Various Business Processes
What are the differences between internal
reports and external reports?
Internal reports External reports
• Used by management to oversee • Financial statements used by
and direct processes within the external users to make decisions
organization: internal decision- (investment, credit)
making
Objectives of Internal controls are the set of procedures
and policies adopted to:
internal controls 1. safeguard assets,
2. check accuracy and reliability of data,
3. promote operational efficiency, and
4. encourage adherence to prescribed
managerial practices.
For an accounts receivable system, what kind of data
would be found in master files and transaction files?

Master file Transaction file

• Relatively permanent data • Relatively temporary data
necessary to process customer processed to update the master
transactions file
• A record for each customer • Details from individual sales
• Customer name, address, phone transactions, cash collections
number, credit limit, current
balance
What type of type of structured and unstructured
data might relate to an accounts receivable system?

Structured data Unstructured data

• Accounting data captured from • Data that cannot fit into rows
transactions and columns
• Fits into rows and columns in a • Example: customer post on
relational database social media, email, audio,
• Examples: customer code, video…
customer name, sales amount…
Big data
Describe the differences between batch processing,
online processing and real-time processing?

Batch processing Online/Real-time processing

• Grouping of similar transactions • Online processing
to be processed together • Processing individual transactions
one-at-a-time
• Real-time processing
• Online processing involving
immediate (real-time) processing
of individual transactions
Explain why random • Desired action: access a single record to
change a specific pay rate
access files would be
preferable to sequential • Random access allows a single record to
be accessed without the necessity of
access files when reading all other records
payroll personnel are • If sequential access is used: necessity to
changing a pay rate for read all records in sequence until desired
a single employee. record is reached
Why do real-time • Real-time processing:
transactions are processed
systems require online and in real-time
direct access files? • Immediate access of a single
record is necessary
• Direct or random access files are
required
 Why is data contained in the data
warehouse called nonvolatile?

• Each time a new transaction is completed, part of the

operational database is updated: operational database is
volatile (constantly changing)
• Data warehouse: company-wide data for several years
• Data warehouse does not change with every transaction
• Data warehouse changes only when periodic update
occurs (end of fiscal year) so it is nonvolatile
Classify each of the following processes as either a
revenue process, expenditure process, conversion
process or administrative process.
• Selling common stock to raise capital
Administrative process: capital raising
• Moving electronic components from the stockroom to the production
floor to begin making DVD players
Conversion process: logistics
• Paying employees at the end of a payroll period
Expenditure process: payroll
Classify each of the following processes as either a
revenue process, expenditure process, conversion
process or administrative process.
• Preparing financial statements
Administrative process: general ledger
• Receiving cash payments from customers
Revenue process: cash collection
• Buying fixed assets
Expenditure process: fixed assets
Consider the following accounts receivable file:
Customer Customer Address Credit Balance
number name limit
19283 XYZ Company P.O. Box 7 30,000 24,750

35794 ABC Company 233 Lotus Ave. 45,000 12,000

56987 QRS Company 356 Book Road 25,000 24,900

• How many records are stored in the file? What are the related
entities?
• Entity: Customer
• One record for each customer: 3 records
Entity/Record

Entity Record
• An entity is defined as something • Collection of fields which store
that exists as a particular and information about a certain
discrete unit (individual unit). entity
• Individuals associated with a
single organization:
• Customers of a firm
• Vendors of a firm
• Employees of a firm
• Students at a university
Consider the following accounts receivable file:
Customer Customer Address Credit Balance
number name limit
19283 XYZ Company P.O. Box 7 30,000 24,750

35794 ABC Company 233 Lotus Ave. 45,000 12,000

56987 QRS Company 356 Book Road 25,000 24,900

• What are the fields? Data values?

• Each entity is described by a certain number of attributes: number,
name, address, credit limit, balance
• In the file, attributes correspond to fields
• Within each field, we enter a data value, example: 30,000 is the
data value of the credit limit of the customer XYZ Company
 Transaction data
Complete the following
diagram. Use the Account Transaction Transaction Document Transaction
following terms: update Number Type Date Number Amount
process, transaction data, 0123 Sale 19/1/2021 9876 $360.00
master file record,
updated master file Update process
record.
 Verify accuracy
Master file record  Match primary key (account
number)
Account Credit Previous Current  Add transaction amount to
Number Limit Balance Balance
current balance
0123 $2,000.00 $1,000.00 $1,500.00
 Compare new balance to credit
limit
 Repeat for all transactions
 Print summary reports

Updated master file record

Account Credit Limit Previous Current
Number Balance Balance
0123 $2,000.00 $ 1,500.00 $1,860.00