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    The Information System: An Accountant's Perspective: Accounting Information Systems, James A. Hall

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    Diane Magnaye

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    The Information System: An Accountant's Perspective: Accounting Information Systems, James A. Hall

    Uploaded by

    Diane Magnaye
    17 views40 pages

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    AIS-ch01

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    17 views40 pages

    The Information System: An Accountant's Perspective: Accounting Information Systems, James A. Hall

    Uploaded by

    Diane Magnaye

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 40

    Chapter 1

    The Information System:


    An Accountant’s Perspective

    Accounting Information Systems, James A. Hall

    COPYRIGHT © 2009 South-Western, a division of Cengage Learning. Cengage Learning and South-Western
    are trademarks used herein under license
    Internal & External
    Information Flows
    Internal Information Flows
    Horizontal flows of information used primarily at the
    operations level to capture transaction and operations
    data
    Vertical flows of information
    downward flows — instructions, quotas, and budgets
    upward flows — aggregated transaction and operations
    data
    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 for detail.
    Information in Business
    Information is a business resource
    that:
    needs to be appropriately managed
    is vital to the survival of
    contemporary businesses
    What is a System?
    A group of interrelated multiple components or
    subsystems that serve a common purpose
    System or subsystem?
    A system is called a subsystem when it is viewed as a
    component of a larger system.
    A subsystem is considered a system when it is the focus
    of attention.
    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
    What is an Information System?
    An information system is the set of
    formal procedures by which data are
    collected, processed into information,
    and distributed to users.
    Transactions
    A transaction is a business event.
    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 the organization’s
    information system
    e.g., an airline reservation — no commitment by the
    customer
    Transactions
    Financial

    Transactions User
    Information
    Decision
    Nonfinancial System
    Information Making
    Transactions
    What is Accounting Information Systems?
    Accounting is an information system.
    It identifies, collects, processes, and
    communicates economic information about
    a firm using a wide variety of technologies.
    It captures and records the financial effects
    of the firm’s transactions.
    It distributes transaction information to
    operations personnel to coordinate many key
    tasks.
    AIS versus MIS
    Accounting Information Systems (AIS) process
    financial transactions; e.g., sale of 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., tracking customer
    complaints
    AIS versus MIS?

    IS

    AIS MIS

    GLS/FRS TPS MRS Finance Marketing Production HRS Distribution


    AIS Subsystems
    Transaction processing system (TPS)
    supports daily business operations
    General Ledger/ Financial Reporting System
    (GL/FRS)
    produces financial statements and reports
    Management Reporting System (MRS)
    produces special-purpose reports for internal use
    The General AIS Model
    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.
    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
    1. Data Collection
    Capturing transaction data
    Recording data onto forms
    Validating and editing the data
    2. Data Processing
    Classifying • Merging
    Transcribing
    • Calculating
    Sorting
    Batching
    • Summarizing
    • Comparing
    3. Data Management
    Storing
    Retrieving
    Deleting
    4. Information Generation
    Compiling
    Arranging
    Formatting
    Presenting
    Characteristics of Useful Information
    Regardless of physical form or technology, useful
    information has the following characteristics:
    Relevance: serves a purpose
    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
    Information System Objectives in a
    Business Context
    The goal of an information system is
    to support
    the stewardship function of management
    management decision making
    the firm’s day-to-day operations
    Organizational Structure
    The structure of an organization helps to allocate
    responsibility
    authority
    accountability
    Segmenting by business function is a very common
    method of organizing.
    Functional Areas
    Inventory/Materials Management
    purchasing, receiving and stores
    Production
    production planning, quality control, and
    maintenance
    Marketing
    Distribution
    Personnel
    Finance
    Accounting
    Computer Services
    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.
    The Computer Services Function
    Distributed Data Centralized Data
    Processing Most companies fall in between. Processing

    Reorganizing the All data processing


    computer services is performed by
    function into small one or more large
    information processing computers housed
    units that are distributed at a central site
    to end users and that serves users
    placed under their control throughout the
    organization.

    Primary areas:
    database administration
    data processing
    systems development
    systems maintenance
    Organization of Computer Services Function in a
    Centralized System
    Organizational Structure for a Distributed Processing
    System
    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
    Potential Disadvantages of DDP
    Loss of control
    Mismanagement of company resources
    Hardware and software incompatibility
    Redundant tasks and data
    Consolidating tasks usually segregated
    Difficulty attracting qualified personnel
    Lack of standards
    Manual Process Model
    Transaction processing, information processing, and
    accounting are physically performed by people, usually
    using paper documents.
    Useful to study because:
    helps link AIS courses to other accounting courses
    often easier to understand business processes when not
    shrouded in technology
    facilitates understanding internal controls
    The Evolution of IS Models: The Flat-File Model
    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
    Currency of 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 multiple users
    The Evolution of IS Models: The Database Model
    An REA Data Model Example
    R E A
    M M M 1
    Inventory Line items Sales Party to
    Sales
    M person
    M
    1
    Pays for Made to
    Customer
    1
    M
    M Received
    1 M Cash from
    Cash Increases
    Collections M 1 Cashier
    Received 34
    by
    REA Model
    The REA model is an accounting framework for
    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
    Interrelationships among resources, events and
    agents
    Entity-relationship diagrams (ERD) are often
    used to model these relationships.
    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 systems design.
    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.
    Accountants as System Auditors
    External Auditors
    attest to fairness of financial statements
    assurance service: broader in scope than
    traditional attestation audit
    IT Auditors
    evaluate IT, often as part of external audit
    Internal Auditors
    in-house IS and IT appraisal services

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