Accounting Information System

Chapter 12: Electronic Commerce system

Learning objective
 Internet commerce
 Benefits for internet commerce
 Risk associated with electronic commerce
 Security assurance and trust

INTERNET COMMERCE
Internet commerce, also known as e-commerce or electronic commerce, refers to the
buying and selling of goods and services over the internet. E-commerce involves the transfer of
money and data to complete the sales. It can be conducted via a desktop computer, laptop,
smartphone, or tablet.

Internet technologies
Internet technologies in internet commerce refer to the various tools, protocols, and
systems used to facilitate online business transactions. Some key types of internet technologies in
internet commerce include.
1. Packet switching
2. Virtual Private Networks
3. World Wide Web

Packet switching
Packet switching is a way of sending information over a network by dividing it into small
pieces called packets. Each packet contains a part of the data, like a message or a file. These
packets are then sent separately and can take different paths to reach their destination)‫ (زنملکتانچنہپ‬.
Virtual private Networks
A Virtual Private Network (VPN) is a secure connection that allows you to access the
internet privately by creating a private network from a public internet connection.

World Wide Web

The World Wide Web (WWW) is a system of interconnected webpages and information
accessible through the internet. It allows users to browse and access websites, documents, and
multimedia content )‫(وماد‬using web browsers.

Internet Address
The Internet uses three types of addresses for communications:
1. Email address
2. URL address
3. IP address
Email Address
An email address is a unique identifier used for sending and receiving electronic mail (email)
messages. It consists of two parts: a username and a domain name, separated by the "@" symbol.
For example, johnsmith@example.com is an email address where "johnsmith" is the username
and "example.com" is the domain name.

URL address
A URL (Uniform Resource Locator) is the web address used to access a specific resource on
the internet. It consists of the protocol, domain name, and additional path)‫ (راہتس‬or parameters.
Example: https://www.example.com/website/page.html

IP Address
An IP (Internet Protocol) address is a unique numerical label assigned to each device connected to a
network. It identifies and locates devices on the internet. Example: 192.168.0.1

Definition of protocol
Protocols are a set of rules or guidelines that define how data is transmitted and communicated
over a network, ensuring smooth and standardized communication between devices.

Transfer Control Protocol/Internet Protocol (TCP/IP)

Internet Protocol (IP) is a network protocol that assigns unique addresses to devices and routes
data packets across networks. Transmission Control Protocol (TCP) ensures reliable delivery of data packets
over the internet. The following are some of the more common protocols that are used for specific tasks:
1. File Transfer Protocols (FTP)
2. Mail Protocols
3. Security Protocols
4. Network News Transfer Protocols (NNTP)

File Transfer Protocols (FTP)

File Transfer Protocol (FTP) is a standard network protocol used to transfer files between a client
and a server on a computer network. It enables easy sharing and exchange of files across the internet.

Mail Protocols / Simple Network Mail Protocol (SNMP)

Mail protocols are sets of rules governing the exchange of email messages. They enable the
sending, receiving, and management of email across networks, ensuring reliable communication.

Security Protocols
A security protocol is a set of rules and procedures designed to ensure the secure transmission and
protection of data over a network. It establishes measures for authentication, encryption, access control,
and other security mechanisms to safeguard information from unauthorized access and threats.

Network News Transfer Protocols (NNTP)

Network News Transfer Protocol (NNTP) is a communication protocol used for distributing and
retrieving Usenet newsgroup articles. It allows users to access and participate in discussion groups and
share information across the network.
BENEFITS FOR INTERNET COMMERCE
Online/ Internet commerce offers a too much of benefits, from selling everywhere to personalized
experiences that drive loyalty and e-commerce provides a 24/7 storefront. Here are some of the key
benefits of internet commerce:
1. E-commerce enables the students' community to learn and acquire knowledge through online.
2. Customers need not travel to shop a product, thus less traffic on road and low air pollution.
3. It helps in connecting with people all across the world.
4. No need for a physical storefront.
5. Ability to reach a broader audience.
6. You communicate more easily and rapidly.
7. Information sharing and finding are faster.
8. Reduced overhead costs. Running an e-commerce store is a lot more cost-effective than running a
physical store.
9. Product and price comparison.
10. Faster response to buyer/market demands.
RISK ASSOCIATED WITH ELECTRONIC COMMERCE
1. Intranet Risks
2. Internet Risks
Intranet Risks
Intranets consists of small LANs and large WANs that may contain thousands of individual nodes.
Intranets are used of connect employees within a single building, between buildings on the same physical
campus, and between geographically dispersed locations. Typical intranet activities include e-mail routing,
transaction processing between business units, and linking to the outside internet.

 Interception of network messages

 Access to corporate database
 Privileged employees
 Reluctance to prosecute
Internet Risks
Internet risks in e-commerce refer to potential dangers and vulnerabilities associated with
conducting online business transactions over the internet, including data breaches, fraud, hacking, and
unauthorized access to sensitive information.
Risk to consumers
Consumers engaging in e-commerce face several risks that they should be mindful of when
conducting online transactions. Here are some key risks for consumers:

 Theft of credit card number

 Theft of passwords
 Consumer privacy
 Misleading Product Information
 Consumers may face challenges related to late or non-delivery of products
Risk to Businesses
Businesses engaging in e-commerce face various risks that can impact their operations, reputation, and
financial well-being. Here are some key risks

 IP spoofing
 Denial of service attack
 Operational Disruption
 Legal and Compliance Issues
 Supply Chain Disruptions
SECURITY, ASSURANCE AND TRUST IN INTERNET/ E COMMERCE
Security, Assurance, and Trust are critical aspects of e-commerce that play a crucial role in building
a successful online business and ensuring customer confidence. Let's delve into each of these elements:
i. Protecting Your Information: Ensuring your personal data is safe and secure.
ii. Secure Online Payments: Trustworthy payment methods for worry-free transactions.
iii. Verified Websites: Identifying genuine and reliable e-commerce platforms.
iv. Customer Reviews: Real feedback from other shoppers to guide your decisions.
v. Easy Returns and Refunds: Hassle-free processes for customer satisfaction.
vi. Privacy Policy: Clear explanations of how your data is handled and protected.
vii. Trusted Seals and Badges: Recognizable symbols of credibility and security.
viii. Helpful Customer Support: Assistance whenever you need it.
ix. Safe Browsing: Protecting against scams and fraudulent websites.
x. Transparency in Product Information: Honest and accurate descriptions of products and services.
xi. SSL Encryption: Keeping your online interactions confidential and secure.

Chapter # 8: Management Reporting System

Factors that influence the Management reporting system (MRS)
Several factors influence the Management Reporting System, shaping how information is collected,
analyzed, and presented to support decision-making in organizations. These factors include:
1. Management principles
2. Management Function level & decision types
3. Problem structure and unstructured problem
4. Types of management reports
MANAGEMENT PRINCIPLES
Management principles play a crucial role in shaping the effectiveness and efficiency of a
Management Reporting System. These principles provide the foundation and guidance for how
information should be collected, analyzed, and communicated within an organization. The principles that
most directly influence the MRS are:
I. Formalization of tasks
II. Responsibility and authority
III. Span of control
IV. Management by exception
Formulization of Task: Formulization of Task involves outlining and defining a clear plan for completing a task,
including the steps to be taken and the expected outcomes.

Responsibility and authority: Responsibility and authority mean being accountable for tasks and having
the power to make decisions and take actions to fulfill those tasks.
Span of control:
Span of control refers to the number of
subordinates or employees that a manager or
supervisor can effectively and directly oversee
and manage.

Management by exception:
Management by exception is a
management approach where leaders focus on
addressing and intervening only when
significant deviations or problems occur, rather than involving themselves in routine operations.
MANAGEMENT FUNCTIONS, LEVEL AND DECISION TYPES
The management functions of planning and control have a profound effect on the MRS. The
planning function is concerned with making decisions about the future activities of the organization.
Planning and control decisions are frequently classified
into four categories:
i. Strategic planning decision
ii. Tactical planning decision
iii. Managerial control decision
iv. Operational control decisions

Strategic Planning decision: Strategic planning decisions

are important choices made by a business to set long-term goals, determine actions needed, and allocate
resources for achieving success.
Tactical planning decision: Tactical planning decisions involve making short-to-medium-term plans to
implement strategic goals, organizing resources, and managing activities for efficient day-to-day
operations.
Managerial control decision: Managerial control decision is when managers make choices to guide their
team towards success, using resources and strategies effectively.
Operational control decision: Operational control decision is when day-to-day decisions are made to
manage tasks, processes, and resources efficiently to achieve immediate goals in a business or
organization. Operational control decisions have three basic elements:
i. Setting standards
ii. Evaluating performance
iii. Taking corrective action.
STRUCTURE AND UNSTRUCTURED PROBLEMS
In a management reporting system,
structure problems are well-defined and have
clear solutions, making them easy to address.
On the other hand, unstructured problems lack
clear solutions and require more analysis and
creativity to resolve as they are complex and
ambiguous.
TYPES OF MANAGEMENT REPORTS
Reports are the formal vehicles for conveying information to managers. The term report tends to
imply a written message presented on sheets of paper. The report may express information in verbal,
numeric, or graphic form, or any combination of these.
Report Objectives
Management report objectives are the specific goals and purposes of creating a report for
managers, providing them with valuable information to make informed decisions and improve business
performance.
Programmed Reporting
Programmed reports provide information to solve problems that users have anticipated. There are two
subclasses of programmed reports:
i. Scheduled reports
ii. On-demand reports
Scheduled Reports: The management reporting system (MRS) produces scheduled reports according to an
established time frame. This could be daily, weekly, quarterly, and so on.
On-demand Reports: On-demand reports are triggered by events, not by the passage of time. For example:
when inventories fall to their pre-established reorder points, the system sends an inventory reorder report to
the purchasing agent.

Report Attributes
Effective management report attributes are characteristics that make a report valuable and useful
for managers. A report must possess the following attributes:
i. Relevance: Each element of information in a report must support the manager’s decision.
ii. Summarization: Reports should be summarized according to the level of the manager within
the organizational hierarchy.
iii. Exception Orientation: Control reports should identify activities that are at risk of going out of
control and should ignore activities that are under control.
iv. Accuracy: Information in reports must be free of material errors. A material error will cause the
user to make the wrong decision (or fail to make a required decision).
v. Completeness: Information must be as complete as possible.
vi. Timeliness: If managers always had time on their side, they may never make bad decisions.
vii. Conciseness: Information in the report should be presented as concisely as possible.