accounting_information_system[1].pptx
- 1. CHAPTER ONE (1) INTRODUCTION TO ACCOUNTING INFORMATION SYSTEM(AIS) Study objectives • Information Flows • Information in Business • What is a System? • What is an Information System? • AIS versus MIS • AIS Subsystems • The General AIS Model • AND SO ON.
- 2. Internal & External Information Flows
- 3. Internal Information Flows Horizontal flows of information used primarily at the operations level to capture transaction and operations data Vertical flows ofinformation downward flows — instructions, quotas, and budgets upward flows — aggregated transaction and operations data
- 4. Information Requirements Each user group has unique information requirements. The higher the level of the organization, the greater the need for more aggregated information and less need fordetail.
- 5. Information in Business Information is a business resource that: needs to be appropriately managed is vital to the survival of contemporary businesses
- 6. What is a System? Agroup of interrelated multiple components or subsystems that serve a common purpose System or subsystem? Asystem is called a subsystem when it is viewed as a componentof a larger system. Asubsystem is considered a system when it is the focus of attention.
- 7. System Decomposition versus System Interdependency System Decomposition the process of dividing the system into smaller subsystem parts System Interdependency distinct parts are not self-contained they are reliant upon the functioning of the other parts of the system all distinct parts must be functioning or the system will fail
- 8. What is an Information System? An information system is the set of formal procedures by which data are collected, processed into information, and distributed tousers.
- 9. Transactions Atransaction is a businessevent. Financial transactions economic events that affect the assets and equities of the organization e.g., purchase of an airline ticket Nonfinancial transactions all other events processed by theorganization’s information system e.g., an airline reservation — no commitment by the customer
- 11. What is Accounting Information Systems? Accounting is an informationsystem. It identifies, collects, processes, and communicates economic informationabout a firm using a wide variety of technologies. It captures and records the financial effects of the firm’stransactions. It distributes transaction information to operations personnel to coordinate many key tasks.
- 12. AIS versus MIS Accounting InformationSystems(AIS) process financial transactions; e.g., saleof goods and nonfinancial transactions that directly affect the processing of financial transactions; e.g., addition of newly approved vendors Management Information Systems(MIS) process nonfinancial transactions that are not normally processed by traditional AIS; e.g., trackingcustomer complaints
- 13. AIS versus MIS? IS AIS GLS/FRS TPS MRS MIS Finance Marketing Production HRS Distribution
- 14. AIS Subsystems Transaction processingsystem (TPS) supports daily businessoperations GeneralLedger/ Financial Reporting System (GL/FRS) produces financial statements and reports Management Reporting System (MRS) produces special-purpose reports for internal use
- 15. The General AIS Model
- 16. Data Sources Data sources are financial transactions that enter the information system from internal and external sources. External financial transactions are the most common source of data for most organizations. E.g., sale of goods and services, purchase of inventory, receipt of cash, and disbursement of cash (including payroll). Internal financial transactions involve the exchange or movement of resources within the organization. E.g., movement of raw materials into work-in-process (WIP), application of labor and overhead to WIP, transfer of WIP into finished goods inventory, and depreciation of equipment.
- 17. Transforming the Data into Information Functions for transforming data into information according to the general AIS model: 1. Data Collection 2. Data Processing 3. Data Management 4. Information Generation
- 18. 1. Data Collection Capturing transaction data Recording data onto forms Validating and editing the data
- 19. 2. Data Processing Classifying Transcribing Sorting Batching • Merging • Calculating • Summarizing • Comparing
- 22. Characteristics of Useful Information Regardless of physical form or technology, useful information has thefollowing characteristics: Relevance: serves apurpose Timeliness: no older than the time period of the action it supports Accuracy: free from material errors Completeness: all information essential to a decision or task is present Summarization: aggregated in accordance with the user’s needs
- 23. Information System Objectives in a Business Context The goal of an information system is to support thestewardship function of management management decision making the firm’s day-to-dayoperations
- 24. Organizational Structure The structure of an organization helps to allocate responsibility authority accountability Segmenting by business function is a very common method oforganizing.
- 25. Functional Areas Inventory/Materials Management purchasing, receiving and stores Production production planning, quality control, and maintenance Marketing Distribution Personnel Finance Accounting Computer Services
- 26. Accounting Independence Information reliability requires accounting independence. Accounting activities must be separate and independent of the functional areas maintaining resources. Accounting supports these functions with information but does not actively participate. Decisions makers in these functions require that such vital information be supplied by an independent source to ensure its integrity.
- 27. The Computer Services Function Centralized Data Processing Distributed Data Processing Most companies fall in between. All data processing is performed by one or more large computers housed at a central site that serves users throughout the organization. Primary areas: database administration data processing systems development systems maintenance Reorganizing the computer services function into small information processing units that are distributed to end users and placed under their control
- 28. Organization of Computer Services Function in a Centralized System
- 29. Organizational Structure for a Distributed Processing System
- 30. Potential Advantages of DDP Cost reductions in hardware and data entry tasks Improved cost control responsibility Improved user satisfaction since control is closer to the user level Backup of data can be improved through the use of multiple data storage sites
- 31. Potential Disadvantages of DDP Loss of control Mismanagement of companyresources Hardware andsoftware incompatibility Redundant tasks and data Consolidating tasks usuallysegregated Difficulty attracting qualifiedpersonnel Lack of standards
- 32. Manual Process Model Transaction processing, information processing, and accounting are physically performed by people, usually using paper documents. Useful to studybecause: helps link AIS courses to other accounting courses often easier to understand business processes when not shrouded in technology facilitates understanding internal controls
- 33. The Evolution of IS Models: The Flat-File Model
- 34. Data Redundancy Problems Data Storage - excessive storage costs of paper documents and/or magnetic form Data Updating - changes or additions must be performed multiple times Currencyof Information - potential problem of failing to update all affected files Task-Data Dependency - user’s inability to obtain additional information as needs change Data Integration - separate files are difficult to integrate across multipleusers
- 35. The Evolution of IS Models: The Database Model
- 36. 34 An REA Data Model Example Inventory Sales Party to Sales person Pays for Cash Collections Increases Cash Made to Customer Cashier Received from Received by M 1 M Line items M M M M M M M 1 1 1 1 R E A
- 37. REA Model The REAmodel is anaccounting frameworkfor modeling an organization’s economic resources;e.g., assets economic events; i.e., affect changes in resources economic agents; i.e., individuals and departments that participate in an economic event Interrelationshipsamong resources, eventsand agents Entity-relationship diagrams(ERD)are often used to model these relationships.
- 38. Accountants as Information System Users Accountants must be able to clearly convey their needs to the systems professionals who design the system. The accountant should actively participate in systems development projects to ensure appropriate systemsdesign.
- 39. Accountants as System Designers The accounting function is responsible for the conceptual system, while the computer function is responsible for the physical system. The conceptual system determines the nature of the information required, its sources, its destination, and the accounting rules that must be applied.
- 40. Accountants as System Auditors External Auditors attest to fairness of financial statements assurance service: broader in scope than traditional attestation audit ITAuditors evaluate IT, often as part of external audit Internal Auditors in-house IS and IT appraisal services