STRUCTURE OF AIS
of unfilled sales orders.
I. Business Processes and Subsystems
A Business Process
 A group of interrelated business
events
 Compromises the first and most
general level of subsystems in an
AIS
 Are defined according to the types
of events they capture, process,
store, and communicate
FOUR Business Processes that
compromise an AIS
 Revenue Process
- “Selling or selling and collection
process”
- Encompasses activities related to
the distribution of goods and
services to customers and
receipt of money in exchange for
these goods and services
- Subsystems: sales, sales order
processing, shipping, accounts
receivable and sales analysis
o Sales Subsystem – sale of
goods or services for
immediate delivery of goods
or provision of services. It
may include establishing
credit terms, recording sales
tax data, and determining
sales commissions.
o Sales Order Processing
Subsystem – processing of
orders received from
customers for subsequent
delivery of goods or
provision of services. This is
an extension of the sales
subsystem in which it
includes the same activities
but added is the management
o Shipping Subsystem –
handles the retrieval of goods
from the warehouse and the
preparation of the goods for
shipment and the
accompanying paperwork. It
includes the recording of
shipment of the goods.
o Accounts Receivable
Subsystem – receiving
payment for goods and
services sold to customers. It
involves preparing customer
invoices and periodic
customer statements,
maintaining records of
customer balances and total
receivables, and collecting
cash. Sometimes divided into
two subsystems: Customer
Invoicing and Cash Receipts.
o Sales Analysis Subsystem –
decision support activity
dealing with the analysis of
historical sales data to
provide management with
information for marketing
and similar purposes.
 Purchasing Process
- “Expenditure, procurement, or
acquisition process”
- Encompasses activities related to
the acquisition of goods and
services and disbursement of
money in exchange for these
goods and services.
- Subsystems: purchase order
processing, receiving, and
accounts payable, payroll
o Purchase Order Processing
Subsystem – issuance and
tracking of purchase orders
to vendors or suppliers.
 o Receiving Subsystem –
receipt, inspection, and
acceptance of goods
delivered to the organization
by vendors. It includes
recording the receipt of
goods and distributing the
goods within the
organization.
o Accounts Payable
Subsystem – paying for the
goods and services purchased
from vendors. It involves
processing invoices received
from vendors, maintaining
records if vendor balances
and total liabilities, and
disbursing cash. Sometimes
divided into two subsystems:
Vendor Invoicing and Cash
Disbursements.
o Payroll Subsystem –
payment of wages, salaries,
and sales commissions to
employees and the related
withholding of taxes and
other deductions.
 Inventory Process
- In manufacturing and
construction organizations, it
encompasses activities related to
the transformation of raw
materials into finished goods, the
accumulation of product costs,
and the management of
inventories.
- In the manufacturing
environment, this may be
referred to production business
process.
- In a merchandising
organization, it encompasses
activities related to the
accumulation of product costs
and the management of
merchandise inventories.
- In a service organization, it
encompasses activities related to
the accumulation of the cost
services and the management
parts and supplies inventory.
- Subsystems (manufacturing):
production control, inventory
management, and cost
accounting.
- Subsystems (service): inventory
management (parts and
supplies), and cost accounting.
o Production Control
Subsystem – handles the
initiation of production
orders in the factory and the
tracking and control of
production operations.
o Inventory Management
Subsystem – accounting for
raw materials, finished
goods, merchandise, and
supplies inventories. It
extends to the regulation of
inventory levels to satisfy
demand while avoiding the
extremes of stockouts or
excessive inventory levels.
o Cost Accounting Subsystem
– accumulation of product
costs in manufacturing and
merchandising organizations
or with the accumulation of
the costs of providing
services.
 Financial Process
- “general ledger”
- Three types of entries
1. Data captured in and
transferred from other processes
to the financial process.
2. Transactions originally
recorded in the financial process.
3. End-of-period adjustments
required in the financial process.