Transcript Slide 1
Chapter 1
Accounting Information Systems: An Overview
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Learning Objectives
Distinguish between data and information.
Discuss the characteristics of useful information.
Explain how to determine the value of information.
Explain the decisions an organization makes and the information needed to make them.
Identify the information that passes between internal and external parties and an AIS.
Describe the major business processes present in most companies.
Explain what an accounting information system (AIS) is and describe its basic functions.
Discuss how an AIS can add value to an organization.
Explain how an AIS and corporate strategy affect each other.
Explain the role an AIS plays in a company’s value chain.
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What Is a System?
System
A set of two or more
interrelated components
interacting to achieve a
goal
Goal Conflict
Occurs when components
act in their own interest
without regard for overall
goal
Goal Congruence
Occurs when components
acting in their own interest
contribute toward overall
goal
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Data vs. Information
Data are facts that are
recorded and stored.
Insufficient for decision
making.
Information is processed
data used in decision
making.
Too much information
however, will make it
more, not less, difficult to
make decisions. This is
known as Information
Overload.
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Information
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Value of Information
Benefits
Costs
Reduce Uncertainty
Time & Resources
Improve Decisions
Improve Planning
Produce Information
Distribute Information
Improve Scheduling
Benefit $’s > Cost $’s
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What Makes Information Useful?
Necessary characteristics:
Relevant
“The capacity of information to make a difference in a
decision by helping users to form predictions about the
outcomes of past, present, and future events or to
confirm or correct prior expectations.”
Reliable
“The quality of information that assures that information is
reasonably free from error and bias and faithfully
represents what it purports to represent.”
Complete
“The inclusion in reported information of everything
material that is necessary for faithful representation of the
relevant phenomena.”
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What Makes Information Useful?
Timely
“Having information available to a decision maker before
it loses its capacity to influence decisions.”
Understandable
“The quality of information that enables users to perceive
its significance.”
Verifiable
“The ability through consensus among measurers to
ensure that information represents what it purports to
represent or that the chosen method of measurement
has been used without error or bias.”
Accessible
Available when needed (see Timely) and in a useful
format (see Understandable).
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Business Process
Systems working toward
organizational goals
Financing
Revenue
Human
Resources
Expenditure
Production
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Business Process Cycles
Revenue
Expenditure
Production
Human Resources
Financing
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Business Transactions
Give–Get exchanges
Between two entities
Measured in economic terms
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Business Cycle Give–Get
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Accounting Information Systems
Collect, process, store, and report data and information
If Accounting = language of business
AIS = information providing vehicle
Accounting = AIS
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Components of an AIS
People using the system
Procedures and Instructions
For collecting, processing, and storing data
Data
Software
Information Technology (IT) Infrastructure
Computers, peripherals, networks, and so on
Internal Control and Security
Safeguard the system and its data
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AIS and Business Functions
Collect and store data about organizational:
Activities, resources, and personnel
Transform data into information enabling
Management to:
Plan, execute, control, and evaluate
Activities, resources, and personnel
Provide adequate control to safeguard
Assets and data
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AIS Value Add
Improve Quality and Reduce Costs
Improve Efficiency
Improve Sharing Knowledge
Improve Supply Chain
Improve Internal Control
Improve Decision Making
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Improve Decision Making
Identify situations that require action.
Provide alternative choices.
Reduce uncertainty.
Provide feedback on previous decisions.
Provide accurate and timely information.
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Value Chain
The set of activities a product or service moves along
before as output it is sold to a customer
At each activity the product or service gains value
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Value Chain—Primary Activities
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Value Chain—Support Activities
Firm
Infrastructure
Technology
Human
Resources
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Purchasing
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Value Chain
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AIS and Corporate Strategy
Organizations have limited
resources, thus investments
to AIS should have greatest
impact on ROI.
Organizations need to
understand:
IT developments
Business strategy
Organizational culture
Will effect and be effected
by new AIS
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