Chapter 5

AIS and Business Processes: Part II

Introduction
The Resource Management Process
The Production Process
The Financing Process
Business Processes In Special Industries
Monitoring Business Processes

Chapter
5-1
 Introduction

Many organizations need

 typical AIS requirements and
 some specialized information also
Focus of AISs
 formerly transaction processing
 presently capturing data around business processes
Two important transaction processing cycles are
 the production and
 financing cycles.
Chapter
5-2
 The Resource
Management Process

Organizations use resources

to produce goods,
to provide services, and
to generate revenues.
An AIS must pay attention to
the inventory,
human resources, and
fixed assets.
Chapter
5-3
 Human Resource
Management

An organization’s human resource

management activity includes
the personnel function
 hires employees,
 trains employees, and
 maintains personnel records
 maintains payroll records for employees

Chapter
5-4
 Human Resource
Management

the payroll function

 pays employees for their work
 maintains records of employees’ paychecks,
 complies with employee tax,
 reports on various deduction categories, and
 interacting with the personnel function

Chapter
5-5
 Human Resource
Management Objectives

Hiring, training, and employing workers

Maintaining employee earnings records
Complying with regulatory reporting
requirements
Reporting on payroll deductions
Making timely and accurate payments
to employees
Providing an interface for
personnel and payroll activities
Chapter
5-6
 Human Resource
Management Inputs

Personnel Action Forms

 document the hiring of new employees or changes in
employee status
Time Sheets
 used to track hours worked
Payroll Deduction Authorizations
 authorize the payroll system to deduct certain amounts
Tax Withholding Forms
 authorize payroll to reduce gross pay by the
appropriate withholding tax.
Chapter
5-7
 Human Resource
Management Outputs

Financial Statement Information

Employee Listings
 shows current employees and may contain address and
other demographic information
Paychecks
 the final documents in the process; subject to strict internal
controls
Check Registers
 used to make journal entries for salary and payroll tax
Chapter expenses
5-8
 Human Resource
Management Outputs

Deduction Reports
 contain summaries of deductions for employees as a
group
Tax (Regulatory) Reports
 reports the government requires for income tax,
social security tax, and unemployment
tax information
Payroll Summaries
 used by management in
analyzing expenses
Chapter
5-9
 HUMAN RESOURCE
MANAGEMENT FUNCTION

All of the following activities are common

to the human resource management
function except:
a. Hiring, training and employing workers
b. Reporting on payroll deductions
c. Maintaining employee earnings records
d. Certified financial planning for
Chapter
5-10 employees
 Fixed Asset Management

Fixed assets
 assets with usable lives of more than one year.
A fixed-asset management system has to
manage the assets in terms of their
 purchase,
 maintenance,
 valuation, and
 disposal.
Chapter
5-11
 Fixed Asset Management Function.

Chapter
5-12
 Fixed Asset Management
Objectives

Tracking the purchase, maintenance, valuation, and

disposal of the fixed assets
Calculating the depreciation for a company’s
financial statements
Tracking repair costs, distinguishing
between revenue and capital expenditures
Calculating the gain or loss upon
disposal of individual fixed assets.

Chapter
5-13
 Fixed Asset Management
Inputs

Purchase Requisition
 requiring approval by one or more managers
Receiving Report
 upon receipt of a fixed asset
Supplier Invoice
 when it ships the asset

Chapter
5-14
 Fixed Asset Management
Inputs

Construction Work Orders

 if the company builds the asset
Repairs and Maintenance Reports
 update of expense accounts for repairs and
maintenance
Fixed Asset Change Forms
 basis for transferring fixed assets from one
location to another, retiring, selling or trading-in
Chapter
5-15
fixed assets
 Fixed Asset Management
Outputs

Financial Statement Information

 gives the details of the valuation of the fixed assets
Fixed Asset Register
 lists identification numbers and location for
each fixed asset
Depreciation Register
 shows depreciation expense and
accumulated depreciation
Chapter
5-16
 Fixed Asset Management
Outputs

Repair and Maintenance Reports

 show the repair and maintenance
expenses and history
Retired Assets Report
 shows all assets disposed of
during the accounting period

Chapter
5-17
 FIXED ASSET MANAGEMENT

What is the objective of the fixed asset

management function?
a. To track purchases of fixed assets
b. To manage the purchase, management
valuation, and disposal of an organization’s
fixed assets
c. To record maintenance and depreciation of
fixed assets
d.
Chapter To keep a current list of approved vendors
5-18
 The Production Process

The production process

 begins with a request for raw material and
 ends with the transfer of finished goods to warehouses
This cycle, associated with producing goods
 concerns the capture of data and
 the reporting of information

Chapter
5-19
 The Production Process

Chapter
5-20
 Production Process - Objectives

Track purchases and sales of inventories

Monitor and control manufacturing costs
Control and coordinate the production process
Control inventory
Provide input for budgets
Chapter
5-21
 Cost Accounting Subsystem

The cost accounting subsystem

is an important part of the production process
provides important control information for the
budget
can vary depending upon the type of business
manufacturing can have a
 job costing system
 process costing system
 activity-based costing system
Chapter
5-22
 Just-in-Time (JIT)
Inventory Systems

A Just-in-Time (JIT) Inventory System

is a make-to-order inventory system
ensures that the production cycle processes
inventory transactions appropriately
attempts to minimize inventory carrying
costs.

Chapter
5-23
 Just-in-Time (JIT)
Inventory Systems
JIT depends upon AIS:
to help minimize inventory costs
to ensure that the manufacturing
processes have the raw materials to keep
a continuous work flow.
or, to be proactive and reengineer the
process.

Chapter
5-24
 Production Process - Inputs

Material Requisition Form

 directs stores to issue materials or parts to
designated work centers or authorized persons
Bill of Materials
 shows the types and quantities of parts needed to
make a single unit of product
Master Production Schedule
 shows the quantities of goods needed to meet sales
demands
Chapter
5-25
 Production Process - Inputs

Production order
 shows prices charged for raw materials.
 incorporates data from sales orders or forecasts,
 operates lists and bills of materials in order to
authorize the production of an order or batch
Job Time Card
 shows the distribution of labor costs to
specific jobs or production orders

Chapter
5-26
 PRODUCTION PROCESSES—
TECHNOLOGICAL
ASSISSTANCE

ERP
Barcode scanners
Radio frequency technology (RFID)
Advanced electronic tags

Chapter
5-27
 Production Process - Outputs

Financial Statement Information

 gives details of the costs and pricing
Materials Price List
 shows prices charged for raw materials
Periodic Usage Report
 provides managerial information on use of raw
materials
Inventory Reconciliation Report
 reconciles physical inventory with perpetual records
Chapter
5-28
 Production Process - Outputs

Inventory Status Report

 allows purchasing and production managers
to monitor inventory levels
Production Cost Report
 details the actual costs for each production
operation, each cost element, and/or each separate
job
Manufacturing Status Report
 provides managers with information about the status
Chapter
5-29 of various jobs
 The Financing Process

The financing process

 is where a company acquires and uses
financial resources
 cash
 other liquid assets
 investments
The financing process
 includes the activities of;
 borrowing cash
 selling ownership shares.
Chapter
5-30
 The Financing Process

Chapter
5-31
 Financing Process - Objectives

Effective cash management

 making use of lockbox systems and
electronic funds transfer (EFT).
Minimizing cost of capital
 reducing the cost of obtaining
financial resources

Chapter
5-32
 Financing Process - Objectives

Maximizing return on investments

 using financial planning models
Project cash flows
 Consists of a cash receipts forecast and a
cash disbursements forecast.

Chapter
5-33
 Financing Process - Inputs

Remittance Advices
 accompanies a customer’s payment
Deposit Slips
 banks provide to document account deposits
Checks
 companies receive and issue checks

Chapter
5-34
 Financing Process - Inputs

Bank Statements
 used to reconcile the cash balance in the
company’s ledger against the cash balance in the
bank account
Stock Market Data
Interest Data
Financial Institution Profiles

Chapter
5-35
 Financing Process - Outputs

Financial Statement Information

Cash Budget
Investment Reports
Debt and Interest Reports
Financial Ratios
Financial Planning Model Reports
Chapter
5-36
 Business Processes in
Special Industries

Vertical market
 refers to markets or industries
 services they provide or
 the goods they produce.
These organizations
 may require more information than is typically output from a
traditional AIS.
Examples of specialized information needs include
 time and billing systems,
 activity based costing systems, and
 point-of-sale systems.
Chapter
5-37
 Industries with Specialized AISs

Professional service organizations have

several unique operating characteristics:
a. No merchandise inventory
b. Professional employees
c. Difficulty in measuring output
d. Small size
Not-for-profit
a. Professional employees and volunteers
b. Usually not affected by the market
c.
Chapter Sometimes have a political environment
5-38
 INDUSTRIES WITH
SPECIALIZED AISs

Health care
a. Share many of the professional and not-
for-profit organizations’ special AIS needs
b. Special accounting needs because of third-
party billing (private and government)

Chapter
5-39
 Business Process Reengineering

AISs
 were concerned with accounting transactions earlier
 are more concerned with business events now

Business events
 include important activities that affect the business
 are not captured by the financial accounting system

Business process reengineering (BPR)

 concerns redesigning business processes from scratch
Chapter
5-40
 Business Process
Reengineering

Business process reengineering

a. Is an incremental approach to redesigning
business processes.
b. Involves redesigning business processes
from scratch.
c. Is rarely successful in cutting an
organization’s costs.
d. Is usually welcomed by an organization’s
Chapter
5-41 employees.