ACCOUNTING INFORMATION SYSTEM
information.
AIS- An Overview
 System- is a set of two or more
interrelated components that interact to
achieve a goal. Most systems are
composed of smaller subsystems that
support the larger system.
 Each subsystem is designed to
achieve one or more organizational
goals. Changes in subsystems cannot
be made without considering the effect
on other subsystems and on the
system as a whole.
 Goal conflict occurs when a 
subsystem’s goals are inconsistent with
the goals of another subsystem or with
the system as a whole.
 Goal congruence occurs when a
subsystem achieves its goals while
contributing to the organization’s
overall goal. The larger the
organization and the more complicated
the system, the more difficult it is to
achieve goal congruence.
 Data are facts that are collected,
recorded, stored, and processed by an
information system.
 Businesses need to collect several
kinds of data:
 such as the activities that take
place,
 the resources affected by the
activities,
 and the people who participate in
the activity.
 For example, the business
needs to collect data about a
sale (date, total amount), the
resource sold (good or
service, quantity sold, unit
price), and the people who
participated (customer,
salesperson).
 Information is data that have been
organized and processed to provide
meaning and improve the decision-
making process. As a rule, users make
better decisions as to the quantity and
quality of information increase.
 Information overload occurs when
limitations are passed, resulting in a
decline in decision-making quality and
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an increase in the cost of providing that
 Information system designers
use information technology (IT) to
help decision-makers more effectively
filter and condense information.
 The value of information is the benefit
produced by the information minus the
cost of producing it.
 The benefits of information include
reduced uncertainty, improved
decisions, and improved ability to
plan and schedule activities.
The costs include the time and
resources spent to produce and
distribute the information.
 Information costs and benefits can
be difficult to quantify, and it is
difficult to determine the value of
information before it has been
produced and utilized.
 Nevertheless, the expected value
of information should be calculated
as effectively as possible so that
the costs of producing the
information do not exceed its
benefits.”
Module 1
Data vs. Information
-Data are facts stored in the system
-a fact could be a number, date, name, and
so on
For example:
-dec 25, 2019
-12252019-10
-Jose Manalo
-$450
-Item #99
 If we put these facts within a context
of sales invoice, it is meaningful
and considered information
Kinds of Data
1. Activity
2. Resources that affects the activity (cash,
inventory)
3. People who participated in the activity
(agent, receiving party)
-it is meaningful and considered information
(data)
-to improve decision making as the quality
and quantity information increases
-should have factual evidence
3vs -external stakeholders are trading partners
 volume such as customers, vendors, banks govt
 velocity -the AIS captures the flow of information
 variety between users for various business
transactions
Structured data
- may mga forms, mas mabilis ianalyze Interactions between AIS & Internal &
External Parties
Unstructured data
- picture, tweet, comment (=> information)
we need specialized software

Value of Information
-Information is valuable when the benefits
exceeds the cost of gathering, maintaining
and storing the data
-benefit (improved decision making, reduce
uncertainty)
-cost (time [effect] and resources used to
get the info, effort to extract info);
-expected value of information- calculated Basic business processes
-transactions between the business
Characteristics of Useful Information organization and external parties
-relevant (needed to make a decision) fundamentally involve "give-get" (double
-reliable (free from bias; free from error; entry) exchange
accurate) -basic business processes are: [also called
-complete (does not omit important aspects) transaction cycle]
-timely (provided in time to make decision;  revenue/sale (give goods/services=get
addressed in a timely manner) cash)
-understandable (must be presented in  expenditure/disbursement (get
meaningful manner; useful and intelligible goods/service,=give cash)
format to be understood by users)  production/conversion cycle (give
-verifiable (two independent people can labor&raw mat= get finished goods);
produce the same conclusion) conversion FOH
-accessible (available when needed in the  payroll (give cash=get labor) ; human
format that they can use; nakalagay sa resource cycle
database [computer])  financing (give cash=get cash);
assets= Liabilities (bonds;interest)
Organization decisions and information +Equity (shares;dividends- return on
needed investment)
-business organization use business
processes to get things done. these What is an Accounting Information
processes are set of structured activities System?
that are performed by people, machines, or -can be manual (pen/paper) or
both to achieve a specific goal [related, computerized (IT)
coordinated, structured] -consists of: people who use the system,
-key decisions and information needed often processes (procedures and instruction- to
come from these business processes collect, process and store data), technology
(data, software, IT[networks, routers,
Transactional information between computers etc]), controls [internal] to
Internal & External parties in an AIS safeguard information
-business organizations conduct business -the process are still the same whether
transactions [exchange money for manual/computerized
goods/services] between internal and -thus, transactional data is collected and
external stakeholders (transaction stored into meaningful information from
processing> transaction data > process > which business decisions are made and
output> FS) provides adequate controls to protect and
-internal stakeholders are employees in secure the organizational data assets
the organization -It has often been said that accounting is the
language of business. If that is the

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case, then an accounting information
system (AIS) is the intelligence—the
information-providing vehicle—of that
language.
-Accounting is a data identification,
collection, and storage process as well as
information development, measurement,
and communication process. By
definition, accounting is an information
system, since an AIS collects, records,
stores, and processes accounting and other
data to produce information for
decision-makers.
-AIS can and should be the organization’s
primary information system and that it
provides users with the information they
need to perform their jobs.
Six components of an AIS:
1. The people who use the system
2. The procedures and instructions used to
collect, process, and store data
3. The data about the organization and its
business activities
4. The software used to process the data
5. The information technology infrastructure,
including the computers, peripheral devices,
and network communications devices used
in the AIS
6. The internal controls and security
measures that safeguard AIS data
These six components enable AIS to
fulfill three imporant basic business
functions:
1. Collect & store data
 Collect and store data about
organizational activities, resources, and
personnel. Organizations have a
number of business processes, such as
making a sale or purchasing raw
materials, which are repeated
frequently.
2. Transform the data to information
 Transform data into information so
management can plan, execute, control,
and evaluate activities, resources, and
personnel.
3. Provides adequate control
 Provide adequate controls to safeguard
the organization’s assets and data.
Data> AIS> information> user> decision
Programs:
 Popular ERP systems
 SAP Business One
 Microsoft Dynamics
How does an AIS add value?
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a well thought out AIS can add value
through effective and efficient decisions
-having effective decisions means
QUALITY decisions
-having efficient decision means reducing
COSTS of decision making [i.e. readily
available-JIT approach]
A well-designed AIS can add value to an
organization by:
 Improving the quality and reducing the
costs of products or services.
 Improving efficiency.
 Sharing knowledge.
 Improving the efficiency and
effectiveness of its supply chain.
 Improving the internal control structure.
 Improving decision making.
What AIS are we going to implement?
I- identify
D- data collection and interpret
E- evaluate
S - select the best
I- implement
F- feedback (verify if it serve its purpose)
AIS and strategy
-an AIS is influenced by an organization's
strategy
-a strategy is the overall goal the org hopes
to achieve (increase profitability)
-once an overall goal is determined, an org
can determine actions needed to reach their
goal and identify the informational
requirements necessary to measure how
well they are doing in obtaining that goal
AIS in the Value Chain
-shows how the different activities within an
org provide value to customer [farmer to
logistics to bahay-bahay]
-these activities are primary and support
activities:
 primary- direct value to the customer
 support- make primary efficient and
effective
Value Chain
*AIS- part of firm infrastructure
*human resource [Hired-Trained-
Compensated-Evaluated
{promoted/terminated}]
*technology- research/dev
*purchasing-procurement
Module 2
Introduction to Transaction Processing &
Enterprise Resource Planning Systems
AIS is just a small part of ERP system
ERP- both covers non financial & financial
(customer's complaint are monitored)
AIS- accounting information [financial data]
 The operations performed on data to
generate meaningful and relevant
information are referred to collectively
as the data processing cycle. This
process consists of four steps: data
input, data storage, data processing,
and information output.
Data Processing Cycle
-to generate a meaningful and relevant info
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Data input
steps in processing input are:
1. capture transaction data triggered by a
business activity (event)
ie. sales (the date, employee who
created the sale, item sold, quantity,
price, total amount, customer's
name)
Data Capture
3 facets of business activity where data is
collected:
-kind of activity [sales]
-resources affected by the activity [inventory
and cash]
-person/ people who participated [customer
and employee]
 Information comes from source
documents
Source documents
-captures data at the source when the
transaction takes place
-paper source documents
 They later transferred that data
into the computer. When the data
is entered using computer screens,
they often retain the same name
and basic format as the paper
source document it replaced.
-turnaround documents (companys
output;i.e. meralco bill/ utility bill)
 company output sent to an external
party, who often adds data to the
document, and then are returned
to the company as an input
document.
-source data automation (captured data
from machines at the time and place of
origin; ie. point of sale scanners at grocery
store) ; eliminates human error
2. make sure captured data are accurate
and complete
3. ensure company policies are followed
(e.g. approval of transaction)
Data Storage
important to understand how data is
organized (to function properly)
-Chart of accounts (which is a list of the
numbers assigned to each general ledger
account.)
•coding schemas (systematic assignment of
numbers or letters to items) that are well
though out to anticipate management needs
are most efficient and effective.
4 basic coding techniques:
 sequence [numbered
consecutively],
 block [reserve for specific
categories of data],
 group [two or more subgroups in
conjuction w/ block codes],
 mnemonics [alphanumeric;
description of the item]
Coding System Techniques
-Be consistent with its intended use,
which requires that the code
designer determine desired system
outputs prior to selecting the code
[kung tig apat na digit, laging apat]
-allow for growth, for example, dont
use a three digit employee code for
a fast growing company with 950
employees
-be as simple as possible to
minimize costs, facilitate
memorization and interpretation,
and ensure employee acceptance
-Be consistent with the company’s
organizational structure and across
the company’s divisions.

-Transaction journals (sales)

 Transaction data are often
recorded in a journal before they
are entered into a ledger.
-General Journals- used to record
infrequent or nonroutine transactions such
as loan payments and end-of-period
adjusting and closing
-Specialized Journals- records large
numbers of repetitive transactions such as
sales, cash receipts, and cash
disbursements.
-Subsidiary ledgers (AR)
 contains detailed data for any
general ledger account with many
individual sub accounts.
-General ledger
 contains summary-level data for
every asset, liability, equity,
revenue, and expense account.
 The general ledger account
corresponding to a subsidiary
ledger is called a control
account.
*one can trace the path of the transaction
(audit trail)
 from point of origin to final output,
or backward from final output to
point of origin. It is used to check
the accuracy and validity of ledger
postings.
Computer-based Storage
 entity is something about which
information is stored, such as
employees, inventory items, and
customers.
 Each entity has attributes, or
characteristics of interest, that are
stored, such as a pay rate and address.
 A file is a group of related records.
 Master file- like a ledger in a manual
AIS, stores cumulative information
about an organization.
 The inventory and equipment
master files store information
about important organizational
resources.
 The customer, supplier, and
employee master files store
information about important
agents with whom the
organization interacts.
 are permanent; they exist
across fiscal periods
 Individual master file records
may change frequently. For
example, individual customer

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 accounts balances are updated
to reflect new sales transactions
and payments received.
 Transaction file contains records of
individual business transactions that
occur during a specific time; are not
permanent and may not be needed
beyond the current fiscal period.
 Database- set of interrelated,
centrally coordinated files
-data is stored in master files or transaction files
as they occur and stored for later
processing.
Information Output
The data stored in the database files can be
viewed
 Online (soft copy)
 Printed out (hard copy)
 Document (sales invoice)
 Report (monthly sales report)
 Query (question for specific
information in a database; what
division had the most sales for the
month)

Enterprise Resource Planning (ERP)

Systems
Integrates activities from the entire
organization
 Production
 Payroll
 Sales
 Purchasing
 Financial Reporting
 Project management
 Customer relationship
management
 System tools
-collects, processes, and stores data and
provides the information managers and
external parties need to assess the
company.
The fields containing data about entity
attributes constitute a record. In this figure,
Advantages of ERP System
each row represents a different record, and -Integrated enterprise-wide allowing for
each column represents an attribute. better flow of the information as it’s stored in
a centralized database and can be
Each intersecting row and column is a field accessed by various departments which
within a record, the contents of which are also improves customer service
called a data value. -Data captured once (i.e. no longer need
sales to enter data about a customer and
Data Processing then accounting to enter same customer
CRUD# data for invoicing)
4 types of processing: -Management gains greater visibility into
 Creating new records every area of the enterprise and greater
 Reading existing data monitoring capabilities.
 Updating previous record or data -Improve access of control of the data
 Deleting data through security settings
-Standardization of procedures and reports
Data processing can be batch processed - -Customer service improves
wait for the other, when the batch is done -Manufacturing plants receive new
[payroll- di pwede yung isa lang sumweldo] orders in real time, and the automation
(eg. post records at the end of the business of manufacturing processes leads to
day) or in online /real time processing increased productivity
(process as it occurs) ie. credit cards,
grades, real time processing. Disadvantages of ERP System
 online batch processing- -Costly
combination of the two approaches; -Significant amount of time to implement
transaction data are entered and edited -Changes to business processes
-Complex

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-User resistance (learning new things is
sometimes hard for employees)

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