Accounting Information System (AIS): An Introduction

Learning Objectives:
1. Explain what an accounting information system (AIS) is and describe the
basic functions it performs.
2. Discuss why studying the design and management of an AIS is important.
3. Explain the role played by AIS in a company’s value chain and discuss
ways that AIS can add value to a business.
4. Describe and contrast the basic strategies and strategic positions that a
business can adopt.
Introduction:

– This chapter defines an accounting information system (AIS).

– It discusses why AIS is an important topic to study.
– It describes how an AIS adds to an organization’s value chain
The Information Environment

– We begin the study of AIS with the recognition that information is a business
resource.
– Every business day, vast quantities of information flow to decision makers
and other users to meet a variety of internal needs. (Marketing techniques)

Top Management- Stakeholders and one who manage the company.

Middle Management- one who converts idea of top management
Operational Management – decision making implementers of the strategies that was
made by middle management.
Operation Personnel- Day to day persons that implement instructions.
Accounting Information
 While most of the information is expressed in traditional monetary
terms, some is expressed as ratios, percentages, or units. Traditionally, accountants
have limited their concern to monetary amounts. This was understandable for the
era of manual accounting systems because the cost of capturing and processing data
was far more expensive than is the case today.
But a contemporary view of accounting must expand to include any data
that are either directly or indirectly reflected in the financial statements whether in
this or in the future accounting periods. Thus, hours worked, units processed or
even planned, employee vacation days earned, and customer telephone numbers are
all data that are captured, processed, stored, and reported by the accounting system
and that represent information used for decision making by managers.
What is an AIS?

– 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.
– An accounting information system (AIS) consists of:
 People
 Procedures
 Data
 Software
 Start Video
 Information technology infrastructure
What important functions does the AIS perform in an organization?

– It collects and stores data about activities and transactions.

– It processes data into information that is useful for making decisions.
– It provides adequate controls to safeguard the organization's assets

Learning Objective #2
 Discuss why studying the design and management of an AIS is important.
Why Study AIS?
In Statement of Financial Accounting Concepts NO. 2, The FASB…

– Defined accounting information system

– Stated that the primary objective of accounting is to provide information
useful to decision makers.
– The Accounting Education Change Commission recommended that the
accounting curriculum should provide students with a solid
understanding of three essential concepts.
1. The use of information in decision making
2. The nature, design, use and implementation of an AIS
3. Financial information reporting
To understand how the accounting system works.

 How to collect data about an organization’s activities and transactions

 How to transform that data into information that management can use to run
the organization
 How to ensure the availability, reliability, and accuracy of that information.

– Auditors need to understand the systems that are used to produce a

company’s financial statements.
– Tax professionals need to understand enough about the client’s AIS to be
confident that the information used for tax planning and compliance work is
complete and accurate.
– One of the fastest growing types of consulting services entails the design,
selection, and implementation of new Accounting Information System.
– A survey conducted by the Institute of Management Accountants (IMA)
indicates that work relating to accounting systems was the single most
important activity performed by corporate accountants.

Information Technology and Corporate Strategy

The same survey conducted by the Institute of Management Accountants
(IMA) also indicated that the second most important job activity of corporate
accountants is long term strategic planning.

Information Technology and Corporate Strategy

 The same survey conducted by the Institute of Management Accountants (IMA)
also indicated that the second most important job activity of corporate
accountants is long- term strategic planning.

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 of interrelationship of IT
with accounting
Ten Most Important Activities Performed by Accountants
1. Accounting systems and financial reporting
2. Long-term strategic planning
3. Managing the accounting and finance function
4. Internal Consulting
5. Short-term budgeting
6. Financial and economic analyses
7. Process improvement
8. Computer systems and operations
9. Performance evaluation
10. Customer and product profitability analyses

Learning OBJECTIVES 3
Explain the role played by the AIS in a company’s value chain and discuss ways that
the AIS can add value to a business.
The Value Chain
o The ultimate goal of any business is to provide value to its customers.
o A business will be profitable if the value it creates is greater than the cost of
producing its products or services.
o An organization’s value chain consists of nine interrelated activities that
collectively describe everything it does.
o The five primary activities consist of the activities performed in order to
create, market, and to deliver products and services to customers and also to
provide post-sales services and support.

The Value Chain

The four support activities in the value chain make it possible for the primary
activities to be performed efficiently and effectively.

The Value System

  The value chain concept can be extended by recognizing that organizations
must interact with suppliers, distributors, and customers.
 An organization’s value chain and the value chains of its suppliers,
distributors, and customers collectively form a value system.

How an AIS Can Add Value to an Organization

An AIS adds value….
 o By providing accurate and timely information so that five primary value
chain activities can be performed more effectively and efficiently.
How an AIS Can Add Value to an Organization
An AIS adds value….
o Improving the quality and reducing the costs of products or services.
o Improving efficiency
o Improving decision making capabilities
o Increasing the sharing of knowledge
o A well- designed AIS can also help an organization profit by improving the
efficiency and effectiveness of its supply chain.

Information and Decision Making