c.

Equipment and devices used in the system to expedite the work and
Management Information System and the Systems provide better control.
Engagement d. Personnel directly involved in the accounting activities.

SYSTEM – an organized or established set of procedures (of operation). ☛OBJECTIVES:

a. To provide a means by which interested parties may be given
INFORMATION SYSTEM- network of all the methods used in communicating information on the financial position and results of operations of an
information within the organization organization.
b. To facilitate management planning, control, and decision- making.
☛THE MAJOR INFORMATION SYSTEMS c. To comply with various laws and government requirements.
a. Financial Information System – Flow of monetary information in the d. To protect the organization and safeguard its assets.
organization
b. Personnel Information System – Flow of information about the staff or ☛ESSENTIAL COMPONENTS:
personnel working in an organization. a. Business Papers and Forms
c. Logistics Information System – Information about the physical flow of b. Business machines
goods within an organization. c. Journals and Ledgers
d. Chart of accounts
☛MANAGEMENT INFORMATION SYSTEM e. Flow chart – pictorial presentation of the flow of work and/or
- A set of data gathering analyzing and reporting functions designed to documents through a department or an entire organization.
provide management with the information it needs to carry out its
functions.

☛ACCOUNTING INFORMTION SYSTEM *Types of Flow Charts:

- A sub-system of the broad Management Information System, an
orderly arrangement of procedures, personnel, written records,
equipment, and devices used for the systematic or organized
collection, processing, and reporting of financial and other information
essential to the official and effective conduct and evaluation of the
activities or transactions of a business enterprise.
a. System Flow Chart – shows a logical diagram of the flow of
data through all parts of the data processing system; identifies
which functions are manual, mechanized, and computerized.
b. Document Flow Chart – Traces the flow of documents and
reports for particular function or activity through the system from
origin to destination.

c. Program Flow Chart- shows the different operations and

☛BASIC ELEMENTS: decisions required in a specific program.
a. A set of interrelated activities involving the originating, processing,
and reporting of financial and other data. f. Organizational Charts – shows the lines of authority, control,
b. Written records and reports necessary to collect, process, store, and responsibility, and functions in a business organization
transmit information. g. Financial Reports
h. Internal Control
 d. Knows how to use the hardware in a computer system;
e. Is an intelligent consumer of products and services related to computers

☛COMPUTER – an electronic device that can interpret and execute programmed

☛DATA PROCESSING instructions or commands for inputs, computations, logic operations, and output.

DATA –refers to the facts that pertain to, or describe some situation or condition. ☛COMPUTER SYSTEM – refers collectively to all the interconnected hardware
PROCESSING- refers to the handling or manipulation of data. including the processors (computers), storage, devices, input/output devices, and
DATA PROCESSING- refers to the operations needed to collect and transform data communications equipment.
into useful information
☛HARDWARE AND SOFTWARE
☛BASIC DATA PROCESSING OPERATIONS HARDWARE- the physical devices that comprise a computer system
1. Classifying SOFTWARE – the programs, routines, and procedures used to direct the
2. Sorting functions of a computer system.
3. Calculating
4. Summarizing TYPES OF COMPUTER SERVICE
5. Recording 1. System Software – helps the operator use the machine; generates
6. Storing interaction between the computer, its peripherals, other programs,
7. Communicating and sets of data to be used, and the operator himself; controls the
input/output functions of the computer; and translates programming
☛DATA PROCESSING METHODS languages.
1. MANUAL DATA PROCESSING- performed by hands, using pen or pencil 2. Applications Software – programs that help the operator use the
2. MECHANICAL DATA PROCESSING – mechanical equipment such as office computer to do specified tasks or to solve particular processing jobs.
machines and bookkeeping machines are utilized to increase speed and
accuracy. ☛BASIC COMPONENTS OF A COMPUTER SYSTEM
3. ELECTRONIC DATA PROCESSING (EDP) – the data are converted into 1. Input
machine-readable form and then processed through electronic impulses. 2. Processing
Processing takes place in a computer at incredibly high speed, and with 3. Output
minimum human intervention. 4. Storage

INPUT DEVICES- prepare and insert data into the computer after
☛EDP SYSTEMS translating data into computer language.
COMPUTER COMPETENCY – The fundamental understanding of the technology, OUTPUT DEVICES- translate the processes data back into the language of
operation, application, and issues about computers. written words out of the computer to the accountant or other users.
A computer competent individual:
a. Feels comfortable in using and operating a computer system; ☛CAPABILITIES OF COMPUTER SYSTEMS
b. Is able to use software to make the computer work; 1. Speed
c. Is able to input data to, and generate output from, the computer;
 - Computers have the ability to provide new time dimensions. They can
perform various activities, e.g., mathematical calculations, at *Expert System
incredibly high speed – even at the speed of light. - An interactive knowledge-based system that responds to
questions, asks for clarifications, makes recommendations, and
2. Logical operations generally helps users make complex decisions.
- Computers can manipulate in logical ways, mathematical expressions
and other symbols to which men have given meaning. *Assistant System
3. Memory - A type of knowledge-based system that helps users make
- Instructions (programs) and an almost unlimited amount of other data relatively straightforward decisions.
can be stored in the memory unit of a computer and can be retrieved,
used, and changed anytime. ☛THE SYSTEM LIFE CYCLE
1. Birth Stage
4. Accuracy - A person has an idea on how a computer can help provide better and
- Computers have the ability to control error. timelier information.
2. Development stage
5. Reliability - The idea becomes a reality; systems analysts, programmers, and user
- Computer systems can perform repetitive tasks without work together to analyze the company’s information processing
“complaining”. needs, design the systems, and implement the same.

☛COMPUTER LIMITATIONS 3. Production stage

1. A computer can only handle the information it was programmed to handle
and communicate such information to the users – no more, no less.
2. It can neither prepare its own program, nor determine its own course of
action. Instructions must be given in very detailed manner.
3. It cannot be perfect. It can also malfunction due to environmental,
technical, and human factors.
- The system becomes operational, serving the information needs of the
company.
4. Death stage
- The system becomes too cumbersome to maintain such that, it is no
longer operationally or economically effective, thus, the system is
discarded, and the system life cycle is repeated.

☛COMPUTER INFORMATION SYSTEMS ☛BASIC APPROACHES TO SATISFY THE COMPANY’S INFORMATION

*Executive Information System (EIS) 1. IN-HOUSE DEVELOPMENT – use of the company employees and/or
- A system designed specifically to support decision making at the consultants to develop a system
executive levels of management, primarily the tactical and
strategic levels 2. USE OF PROPRIETARY SOFTWARE PACKAGE

*Decision Support System (DSS) ☛PHASES IN SYSTEMS DEVELOPMENT

- An interactive information system that relies on integrated set Phase 1: System Analysis
of user-friendly hardware and software tools to produce and - The process of learning how the current system functions, determining
present information focused to support management decision the needs of users, and developing the logical requirements of a
making involving semi-structured and unstructured problems. proposed system.

Phase 2: System design
- The process of developing specifications for hardware, software,
manpower, data resources, and information products required to
develop a system.
Three Major Activities of Systems Design:
 User interface design – how the users will interact with the system to
meet their needs.
 Data design – how data will be organized.
 Process design – formulation of processing steps.
Phase 3: Programming
- Programs are written to create the software necessary to make the
information system operational.
Activities Involved:
 System specifications review
 Program identification and description
 Program coding
 Testing
 Documentation
Phase 4: Conversation and implementation
Common Approaches to Systems Conversion:
 Parallel Conversion – operates the old and new systems
simultaneously.
 Direct Conversion – involves immediate conversion to the new system
throughout the organization
 Phased Conversion – the information system is implemented one
module at a time by either parallel or direct conversion.
 Pilot Conversion – the new system is implemented by parallel, direct,
or phased conversion a pilot system in only one of the several areas
for which it is targeted.
 Prototype Conversion – involves developing and putting into operation
successively more refined versions of the system until sufficient
information is obtained to produce a satisfactory design.
Phase 5: Post implementation
1. Post Implementation Review – a critical examination of the system 3
to 6 months after it has been implemented.
2. Systems maintenance – this continues throughout the life of the
system; involves monitoring, evaluating, and modifying a system as
needed, i.e., to meet new needs or to correct design flaws.
THE SYSTEM ENGAGEMENT
☛PRINCIPLES OF SYSTEM DESIGN
1. The system’s objectives should be accompanied by operating at the least
possible cost.
2. The system should be simple.
3. The system should be tailored to the organizational structure and policies
of the company to be sure that the specific needs of the business are
satisfied.
4. Adequate controls should be provided to prevent and/or minimize fraud
and error, check the accuracy and reliability of financial data, and
safeguard the company’s asset.
5. Activities in the system should be arranged in such a way that the data
maybe process in a meaningful, economical, continuous, and controlled
manner.
6. The system should take human factors into consideration such as nature,
capabilities, and limitations of the personnel involved.
7. The system should be flexible enough to facilitate possible expansion or
contraction
8. In designing the system, the possibility of using mechanical equipment and
devices should be considered.
9. The system should provide for timely, effective, and relevant reports
needed by management and other parties.
10. The system should facilitate audit trail, that is, the tracing data processing
steps from the financial statements to source documents and vice versa.
☛PHASES OF SYSTEMS ENGAGEMENT
1. Gathering and Analyzing facts
 This may be done by conducting a survey to obtain the necessary
information that will enable the practitioner to define the problem, as well  ACCOUNTING SYSTEM MANUAL – a collection of instructions that set
as the scope and objectives of the engagement forth the basic systems and accounting policies and procedures which
must be followed within the business organization.

2. Designing the system It contains:

The Activities Involved: a. The organization of the accounting, auditing, and systems
a. Determining the specific nature and extent of information required departments;
from the system; b. Basic policies on systems and accounting;
b. Drafting the desired reports, schedule, and other statements; c. Chart of accounts and codes;
c. Determining the best way on how the data and other needed d. Books of accounts, including contents and sources of entries;
information for the reports preparation will be collected, recorded, e. Statements and reports;
and classified; f. Flow charts; and
d. Preparing the chart of accounts with the proper coding; g. Sample or specimen forms.
e. Designing the book of accounts;
f. Designing the required forms and other documents; and
g. Preparing flow charts and other written procedures that may be used
as guides by those who will operate the system.

3. Preparing and presenting the systems report

This includes:
a. Transmitter letter;
b. Organization charts;
c. Proposed chart of accounts, including the coding system;
d. Pro-forma financial statements;
e. Book of accounts, subsidiary ledgers, and other auxiliary records,
indicating the title, design, location, purpose, and personnel
responsible for entries.
f. System and documents flow charts; and
g. Sample forms.

4. Implementation or installation of recommendations

5. Follow-up

6. Documentation of the system

Documentation refers to a detailed written description of the accounting
systems which is generally in a form of accounting systems manual.