Prelims

September 22, 2022 8:39 PM

What is System?
- A set of two or more interrelated components interacting to achieve a goal
Goal Conflict
- Occurs when components act in their own interest without regard for overall goal
Goal Congruence
- Occurs when components acting in their own interest contribute toward overall goal

Data vs. Information

• Data are facts that are recorded and stored. Insufficient for decision making.
• Information is processed data used in decision making. Too much information however, will make it more, not less,
difficult to make decisions. This is known as Information Overload.

Value of Information
Benefits Cost
- Reduce Uncertainty - Time and Resources
- Improve Decisions
- Produce Information
- Improve Planning - Distribute Information
- Improve Scheduling

What Makes Information Useful?

Necessary characteristics:
• Relevant
- “The capacity of information to make a difference in a decision by helping users to form predictions about the outcomes
of past, present, and future events or to confirm or correct prior expectations.”
• Reliable
- “The quality of information that assures that information is reasonably free from error and bias and faithfully represents
what it purports to represent.”
• Complete
- “The inclusion in reported information of everything material that is necessary for faithful representation of the relevant
phenomena.”
• Timely
- “Having information available to a decision maker before it loses its capacity to influence decisions.”
• Understandable
- “The quality of information that enables users to perceive its significance.” Verifiable “The ability through consensus
among measurers to ensure that information represents what it purports to represent or that the chosen method of
measurement has been used without error or bias.” Accessible Available when needed (see Timely) and in a useful format
(see Understandable).

Business Process
- Systems working toward organizational goals

Business Process Cycles

Business Transactions
- Revenue
- Give–Get exchanges
- Expenditure
- Between two entities
- Production
- Measured in economic terms
- Human Resources
- Financing

Accounting Information Systems

- Collect, process, store, and report data and information
- If Accounting = language of business
- AIS = information providing vehicle
- Accounting = AIS

Components of an AIS
• People using the system
• Procedures and Instructions
- For collecting, processing, and storing data
• Data
• Software
• Information Technology (IT)
- Infrastructure Computers, peripherals, networks, and so on
• Internal Control and Security
- Safeguard the system and its data

AIS and Business Functions

• Collect and store data about organizational:
- Activities, resources, and personnel
• Transform data into information enabling
- Management to:
- Plan, execute, control, and evaluate
-Activities, resources, and personnel
• Provide adequate control to safeguard
- Assets and data

AIS Value Add

• Improve Quality and Reduce Costs

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 • Improve Quality and Reduce Costs
• Improve Efficiency
• Improve Sharing Knowledge
• Improve Supply Chain
• Improve Internal Control
• Improve Decision Making
- Identify situations that require action.
- Provide alternative choices.
- Reduce uncertainty.
- Provide feedback on previous decisions.
- Provide accurate and timely information.

Value Chain
• The set of activities a product or service moves along before as output it is sold to a customer
- At each activity the product or service gains value
• Primary Activities
- Inbound Logistics
- Operations
- Outbound Logistics
- Marketing/Sales
- Service
• Support Activities
- Firm Infrastructure
- Human Resources
- Technology
- Purchasing

AIS and Corporate Strategy

- Organizations have limited resources, thus investments to AIS should have greatest impact on ROI.
- Organizations need to understand:
- IT developments
- Business strategy
- Organizational culture
- Will effect and be effected by new AIS

Chapter 2
Data Processing Cycle
- What data is stored?
- Who has access to the data?
- How is the data organized?
- How can unanticipated information needs be met?

Data Input—Capture
As a business activity occurs data is collected about:
1. Each activity of interest
2. The resources affected
3. The people who are participating

Paper-Based Source Documents

• Data are collected on source documents
- E.g., a sales-order form
- The data from paper-based will eventually need to be transferred to the AIS
• Turnaround
- Usually paper-based
- Are sent from organization to customer
- Same document is returned by customer to organization

Source Data Automaton

Source data is captured
- In machine-readable form
- At the time of the business activity
* E.g., ATM’s; POS

Data Input—Accuracy and Control

- Well-designed source documents can ensure that data captured is
- Accurate : Provide instructions and prompts Check boxes Drop-down boxes
- Complete : Internal control support Prenumbered documents

Data Storage
Types of AIS storage:
- Paper-based
○ Ledgers
○ Journals
- Computer-based

Ledger
General
- Summary level data for each: Asset, liability, equity, revenue, and expense
- Subsidiary Detailed data for a General Ledger (Control) Account that has individual sub -accounts Accounts Receivable
Accounts Payable

Journals

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Journals
- General: Infrequent or specialized transactions
- Specialized: Repetitive transactions E.g., sales transactions

Coding Techniques
• Sequence
- Items numbered consecutively
• Block
- Specific range of numbers are associated with a category 10000–199999 = Electric Range
• Group
- Positioning of digits in code provide meaning
• Mnemonic
- Letters and numbers
- Easy to memorize
- Code derived from description of item
• Chart of accounts
- Type of block coding

Computer Based Storage

Entity
- Person, place, or thing (Noun)
- Something an organization wishes to store data about
- Attributes
- Facts about the entity
- Fields
- Where attributes are stored
- Records
- Group of related attributes about an entity
- File
- Group of related Records

File Types
• Transaction
- Contains records of a business from a specific period of time
• Master
- Permanent records
- Updated by transaction with the transaction file
• Database
- Set of interrelated files

Data Processing
Four Main Activities
1. Create new records
2. Read existing records
3. Update existing records
4. Delete records or data from records

Data Output Types

- Soft copy - Displayed on a screen
- Hard copy - Printed on paper

Enterprise Resource Planning (ERP)

Integrate an organization’s information into one overall AIS
ERP modules:
- Financial
- Human resources and payroll
- Order to cash
- Purchase to pay
- Manufacturing
- Project management
- Customer relationship management
- System tools

ERP Advantages
- Integration of an organization’s data and financial information
- Data is captured once
- Greater management visibility, increased monitoring
- Better access controls
- Standardizes business operating procedures Improved customer service
- More efficient manufacturing

ERP Disadvantages
- Cost
- Time-consuming to implement
- Changes to an organization’s existing business processes can be disruptive
- Complex Resistance to change

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