Prelim Ch1

Accounting Information Systems
Fourteenth Edition
Chapter 1
Accounting Information
Systems: An Overview
A L W AYS L E A RN
Copyright ©IN Copyright
G 2016, 2015 Pearson Education,
2017, ©All
Inc. 2017, 2016,
Rights 2015 Pearson Education, Inc. All Rights Reserved
Reserved
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:
• The information needed to make them.
• The major business processes present in most
companies.
• Explain how an AIS adds value to an organization.
• How it affects and is affected by corporate strategy.
• The role of AIS in a value chain.
Copyright © 2017, 2016, 2015 Pearson Education, Inc. All Rights Reserved
Distinguishing Between Data and
Information
• Data are facts collected, recorded, and stored in
the system
• A fact could be a number, date, name, and so on.
For example:
2/22/14
ABC Company, 123,
99, 3, 20, 60
Data vs. Information
The previous slide just showed data, if we organize
the data within a context of a sales invoice, for
example, it is meaningful and considered
information.
Invoice Date : 2/22/14 Invoice #: 123
Customer: ABC company
Item # Qty Price
99 3 $20
Total Invoice Amount $60
Decision Quality
• Information helps us make better decisions.
• Too much information causing information
overload can reduce decision quality.
• Information Technology (IT) is used to help
decision makers more effectively filter and
condense information.
Value of Information
• Information is valuable when the benefits exceed
the costs of gathering, maintaining, and storing the
data.
Benefit (i.e., improved decision making) - Cost
(i.e., time and resources used to get the
information) = value of information
What Makes Information Useful?
There are seven general characteristics that make
information useful:
1. Relevant: information needed to make a decision (e.g., the decision to
extend customer credit would need relevant information on customer
balance from an A/R aging report)
2. Reliable: information free from bias
3. Complete: does not omit important aspects of events or activities
4. Timely: information needs to be provided in time to make the decision
5. Understandable: information must be presented in a meaningful
manner
6. Verifiable: two independent people can produce the same conclusion
7. Accessible: available when needed
Information Needs and Business
Processes
• Business organizations use business processes to
get things done. A business process is a set of
related, coordinated, and structured activities and
tasks performed by people, machines, or both to
achieve a specific organizational goal.
• Key decisions and information needed often come
from these business processes.
Transactional Information Between
Internal and External Parties in an AIS
• Business organizations conduct business
transactions which is an agreement between two
entities to exchange goods, services, or any other
event that can be measured in economic terms by
an organization.
• Transaction data is used to create financial
statements and is called transaction processing.
• The flow of information between these users for
the various business activities involves a give-get
exchange grouped into business processes or
transaction cycles.
Interactions Between AIS and Internal and
External Parties
Basic Business Processes
• Transactions between the business organization
and external parties fundamentally involve a “give–
get” exchange. These basic business processes are:
• Revenue cycle: give goods / give service—get cash
• Expenditure cycle: get goods / get service—give cash
• Production cycle: give labor and give raw materials—get
finished goods
• Payroll cycle: give cash—get labor
• Financing cycle: give cash—get cash
What Is an Accounting Information
System (AIS)?
• AIS is a system that collects, records, stores, and
processes data to produce information for decision
makers.
• Consists of
• People who use the system
• Processes (procedures and instructions)
• Technology (data, software, and information technology)
• Controls to safeguard information
• Thus, an AIS collects and stores data, transforms
that data into information, and provides adequate
controls.
How Does an AIS Add Value to an
Organization?
• A well thought out AIS can add value by:
• Improving the quality and reducing the costs of products
or services
• Improving efficiency
• Sharing knowledge
• Improving efficiency and effectiveness of its supply chain
• Improving the internal control structure
• Improving decision making
AIS and Corporate Strategy
• An AIS is influenced by an organization’s strategy.
• A strategy is the overall goal the organization hopes
to achieve (e.g., increase profitability).
• Once an overall goal is determined, an organization
can determine actions needed to reach their goal
and identify the informational requirements (both
financial and nonfinancial) necessary to measure
how well they are doing in obtaining that goal.
AIS in the Value Chain
• The value chain links together the different
activities within an organization that provide value
to the customer.
• Value chain activities are primary and support activities.
• Primary activities provide direct value to the customer.
• Support activities enable primary activities to be efficient and
effective.
• A supply chain is an extended system that includes
the organizations value chain as well as its
suppliers, distributors, and customers.
The Value Chain
Key Terms
• System • Revenue cycle
• Goal conflict • Expenditure cycle
• Goal congruence • Production (conversion) cycle
• Data • Human resource/payroll cycle
• Information • Financing cycle
• Information technology (IT) • General ledger and reporting system
• Information overload • Accounting information system (AIS)
• Value of information • Predictive analysis
• Business process • Value chain
• Transaction • Primary activities
• Transaction processing • Support activities
• Give-get exchange • Supply chain

Prelim Ch1

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Prelim Ch1

Uploaded by

Copyright:

Available Formats

Accounting Information Systems

Customer: ABC company

Item # Qty Price

Total Invoice Amount $60

You might also like