Transcript an overview - Department of Accounting and Information Systems

Accounting Information
Systems: An Overview
Chapter 1
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Learning Objectives
• Distinguish between data and information:
▫ Understand the characteristics of useful information.
▫ Explain how to determine the value of information.
• Describe the major business processes present in most
companies.
• Explain what an accounting information system (AIS) is
and describe its basic functions.
• Explain the role an AIS plays in a company’s value chain.
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Systems, Data, and Information
• A system is a set of two or more interrelated
components that interact to achieve a goal.
• Systems are almost always composed of smaller
subsystems, each performing a specific function
supportive of the larger system.
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Data vs. Information
• Data are facts stored in the system
▫ A fact could be a number, date, name,
and so on.
For example:
2/22/14
ABC Company, 123,
99, 3, 20, 60
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Data vs. Information
The previous slide just showed facts, if we put those
facts within a context of a sales invoice, for example, it
is meaningful and considered information.
Invoice Date : 2/22/14
Invoice #: 123
Customer: ABC company
Item #
99
Qty
3
Total Invoice Amount
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Price
$20
$60
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Systems, Data, and Information
• Usually, more information and better
information translates into better decisions.
• However, when you get more information than
you can effectively assimilate, you suffer from
information overload.
• When you’ve reached the overload point, the
quality of decisions declines while the costs of
producing the information increases.
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Value of Information
• Information is valuable when the benefits exceed
the costs of gathering, maintaining, and storing
the data.
Benefit (i.e., improved decision making)
> Cost (i.e., time and resources used to get
the information)
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What Makes Information Useful?
There are seven general characteristics that make
information useful:
1. Relevant: information needed to make a decision
(e.g., the decision to extend customer credit would
need relevant information on customer balance
from an A/R aging report)
2. Reliable: information free from error and bias
3. Complete: does not omit important aspects of
events or activities
4. Timely: information needs to be provided in time
to make the decision
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What Makes Information Useful?
5. Understandable: information must be
presented in a meaningful manner
6. Verifiable: two independent people can
produce the same conclusion
7. Accessible: available when needed
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Transactional Information Between
Internal and External Parties in an AIS
• Business organizations conduct business
transactions between internal and external
stakeholders.
• Internal stakeholders are employees in the
organization (e.g., employees and managers).
• External stakeholders are trading partners such as
customers and vendors as well as other external
organizations such as Banks and Government.
• The AIS captures the flow of information between
these users for the various business transactions.
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Interactions Between AIS and Internal
and External Parties
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Basic Business Processes
• Transactions between the business organization
and external parties fundamentally involve a
“give–get” exchange. These basic business
processes are:
▫ Revenue: give goods/service—get cash
▫ Expenditure: get goods/service—give cash
▫ Production: give labor and give raw materials—get
finished goods
▫ Payroll: give cash—get labor
▫ Financing: give cash—get cash
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What Is an Accounting Information
System?
• It can be manual or computerized
• Consists of
▫ People who use the system
▫ Processes
▫ Technology (data, software, and information
technology)
▫ Controls to safeguard information
• Thus, transactional data is collected and stored into
meaningful information from which business
decisions are made and provides adequate controls
to protect and secure the organizational data assets.
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How Does an AIS Add Value?
• A well thought out AIS can add value through
effective and efficient decisions.
▫ Having effective decisions means quality decisions
▫ Having efficient decisions means reducing costs of
decision making
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AIS in the Value Chain
• The value chain shows how the different
activities within an organization provide value to
the customer.
• These activities are primary and support
activities.
▫ Primary activities provide direct value to the
customer.
▫ Support activities enable primary activities to be
efficient and effective.
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ROLE OF THE AIS IN THE VALUE CHAIN
Smith Supply Co.
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
Information
technology can
facilitate synergistic
linkages that improve
the performance of
each company’s value
chain.
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The linking of these separate value chains
creates a larger system known as a supply
chain.
Pharmaceuticals,
Inc.
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
Customer Pharmacy
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
THE AIS AND CORPORATE STRATEGY
• The authors believe:
▫ Accounting and information systems should be
closely integrated.
▫ The AIS should be the primary information
system to provide users with information they
need to perform their jobs.
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The CITP Designation
• CITP: Certified Information Technology
Professional
• Identifies CPAs who possess a broad
range of technological knowledge and
the manner in which information
technology (IT) can be used to achieve
business objectives
• Reflects the AICPA’s recognition of the
importance and interrelationship of IT
with accounting
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