Professional Documents
Culture Documents
Accounting Information Systems
Accounting Information Systems
ARIEL A. CATAPAL
MBA – OLIVAREZ COLLEGE
S.Y. 2009 - 2010
Questions to be addressed in this chapter
include:
◦ What is the meaning of system, data, and
information?
◦ What is an accounting information system (AIS)?
◦ Why is the AIS an important topic to study?
◦ What is the role of the AIS in the value chain?
◦ How does the AIS provide information for decision
making?
◦ What are the basic strategies and strategic positions
an organization can pursue?
◦ What are the basic business activities in which an
organization engages?
What decisions must be made to undertake these
activities?
What information is required to make those
decisions?
◦ What role does the data processing cycle play in
organizing business activities and providing
information to users?
◦ What is the role of the information system and
enterprise resource planning in modern organizations?
◦ What is the purpose of documentation?
◦ Why do accountants need to understand
documentation?
◦ What documentation techniques are used in
accounting systems?
◦ What are data flow diagrams and flowcharts?
How are they alike and different?
How are they prepared?
A system is:
◦ A set of interrelated components
◦ That interact
◦ To achieve a goal
Most systems are composed of smaller
subsystems . . .
. . . And vice versa!
Every organization has goals.
◦ The subsystems should be designed to
maximize achievement of the organization’s
goals
◦ Even to the detriment of the subsystem itself
◦ EXAMPLE: The production department (a
subsystem) of a company might have to forego
its goal of staying within its budget in order to
meet the organization’s goal of delivering
product on time.
Goal conflict occurs when the activity of a
subsystem is not consistent with another
subsystem or with the larger system.
Goal congruence occurs when the
subsystem’s goals are in line with the
organization’s goals.
The larger and more complicated a
system, the more difficult it is to achieve
goal congruence.
The systems concept encourages integration
(i.e., minimizing the duplication of recording,
storing, reporting and processing).
Data are facts that are collected, recorded,
stored, and processed by an information
system.
Organizations collect data about:
◦ Events that occur
◦ Resources that are affected by those events
◦ Agents who participate in the events
Information is different from data.
Information is data that have been
organized and processed to provide
meaning to a user.
Usually, more information and better
information translates into better
decisions.
However, when you get more information
than you can effectively assimilate, you
suffer from information overload.
◦ Example: Final exams week!
When you’ve reached the overload point,
the quality of decisions declines while the
costs of producing the information
increases.
Benefits of information
- Cost of producing information
Value of information
• Accounting is an information-providing
activity, so accountants need to
understand:
– How the system that provides that
information is designed, implemented
and used.
– How financial information is reported
– How information is used to make
decisions
It’s fundamental to accounting.
• Other accounting courses focus on how
the information is provided and used.
• An AIS course places greater emphasis
on:
– How the data is collected and
transformed
– How the availability, reliability, and
accuracy of the data is ensured
• AIS courses are not number-crunching
courses
It’s fundamental to accounting.
The skills are critical to career success.
• Auditors need to evaluate the accuracy
and reliability of information produced
by the AIS.
It’s fundamental to accounting.
The skills are critical to career success.
AIS design is
affected by
information
AIS
technology, the
organization’s
strategy, and the
organization’s
culture. Information
Technology
Occupational
Culture Strategy
Information technology
affects the company’s AIS
choice of business strategy.
To perform cost-benefit
analyses on IT changes,
you need to understand
business strategy.
Information
Technology
Occupational
Culture Strategy
• Incomplete rules
• Require subjective assessments
• EXAMPLE: Deciding whether to sell auto
insurance to a customer with a tainted
driving history.
There is variation in the degree of
structure used to make decisions:
◦ Structured decisions
◦ Semistructured decisions
◦ Structured decisions
Give Get
Goods Cash
Many business activities are paired in give-get
exchanges
The basic exchanges can be grouped into five
major transaction cycles.
◦ Revenue cycle
◦ Expenditure cycle
◦ Production cycle
◦ Human resources/payroll cycle
◦ Financing cycle
The expenditure cycle involves interactions with
your suppliers.
You buy goods or services and pay cash.
Give Get
Cash Goods
Many business activities are paired in give-get
exchanges
The basic exchanges can be grouped into five
major transaction cycles.
◦ Revenue cycle
◦ Expenditure cycle
◦ Production cycle
◦ Human resources/payroll cycle
◦ Financing cycle
In the production cycle, raw materials and labor
are transformed into finished goods.
Give Get
Cash Labor
Many business activities are paired in give-get
exchanges
The basic exchanges can be grouped into five
major transaction cycles.
◦ Revenue cycle
◦ Expenditure cycle
◦ Production cycle
◦ Human resources/payroll cycle
◦ Financing cycle
The financing cycle involves interactions with
investors and creditors.
You raise capital (through stock or debt), repay
the capital, and pay a return on it (interest or
dividends).
Give Get
Cash cash
Thousands of transactions can occur within any
of these cycles.
But there are relatively few types of transactions
in a cycle.
EXAMPLE: In the revenue cycle, the basic give-
get transaction is:
◦ Give goods
◦ Get cash
Other transactions in the revenue cycle include:
• Handle customer inquiries • Update sales and Accts Rec.
• Take customer orders for sales
• Approve credit sales • Receive customer payments
• Check inventory availability • Update Accts Rec. for
• Initiate back orders collections
• Pick and pack orders • Handle sales returns,
• Ship goods discounts, & bad debts
• Bill customers • Prepare management reports
• Send info to other cycles
General Ledger
and Reporting The revenue cycle
System ◦ Gets finished goods
from the production
cycle
◦ Provides funds to
the financing cycle
Human Res./ ◦ Provides data to the
Financing
Payroll Cycle General Ledger and
Cycle Reporting System
Raw
Mats.
Revenue Expenditure Production
Cycle Cycle Cycle
Data
General Ledger
and Reporting The expenditure
System cycle
◦ Gets funds from the
financing cycle
◦ Provides raw
materials to the
Human Res./ production cycle
Financing
Payroll Cycle Cycle ◦ Provides data to the
General Ledger and
Reporting System
Finished Goods
Raw
Mats.
Revenue Expenditure Production
Cycle Cycle Cycle
General Ledger
and Reporting The production cycle:
System ◦ Gets raw materials
from the expenditure
cycle
◦ Gets labor from the
HR/payroll cycle
◦ Provides finished
Human Res./ Financing goods to the revenue
Payroll Cycle cycle
Cycle
◦ Provides data to the
General Ledger and
Reporting System
Revenue Expenditure Production
Cycle Cycle Cycle
General Ledger
and Reporting The HR/payroll
System cycle:
◦ Gets funds from the
financing cycle
◦ Provides labor to
the production cycle
Human Res./ Funds Financing ◦ Provides data to the
Payroll Cycle Cycle General Ledger and
Reporting System
Revenue Expenditure Production
Cycle Cycle Cycle
General Ledger
and Reporting The Financing
System cycle:
◦ Gets funds from the
revenue cycle
◦ Provides funds to
the expenditure and
HR/payroll cycles
Human Res./ Funds Financing ◦ Provides data to the
Payroll Cycle Cycle General Ledger and
Reporting System
Revenue Expenditure Production
Cycle Cycle Cycle
Data
General Ledger Information for
Internal & External Users
and Reporting
System
Data
The General Ledger
and Reporting
System:
Human Res./ Financing ◦ Gets data from all of
Payroll Cycle Cycle the cycles
◦ Provides information
for internal and
external users
BUSINESS CYCLES
◦ Verify transactions
TRANSACTION PROCESSING:
THE DATA PROCESSING CYCLE
The data processing cycle consists of four steps:
◦ Data input
◦ Data storage
◦ Data processing
◦ Information output
DATA STORAGE
Ledger
A ledger is a file used to store cumulative
information about resources and agents. We
typically use the word ledger to describe the set
of t-accounts. The t-account is where we keep
track of the beginning balance, increases,
decreases, and ending balance for each asset,
liability, owners’ equity, revenue, expense, gain,
loss, and dividend account.
DATA STORAGE
Ledger
◦ Following is an example of a ledger account
for accounts receivable:
GENERAL LEDGER
Ledger
General ledger
Ledger
General ledger
Ledger
General ledger
Subsidiary ledger
Ledger
General ledger
Subsidiary ledger
Ledger
General ledger
Subsidiary ledger
Coding techniques
Ledger
General ledger
Subsidiary ledger
Coding techniques
Ledger
General ledger
Subsidiary ledger
Coding techniques
• When block codes are used, blocks of numbers within a numerical
sequence are reserved for a particular category.
• EXAMPLE: The first three digits of a Social Security number make
up a block code that indicates the state in which the Social Security
number was issued:
– 001-003 New Hampshire
– 004-007 Maine
– 008-009 Vermont
DATA STORAGE
Ledger
General ledger
Subsidiary ledger
Coding techniques
• When group codes are used, two or more subgroups of digits are
used to code an item.
• EXAMPLE: The code in the upper, right-hand corner of many
checks is a group code organized as follows:
– Digits 1-2 Bank number
– Digit 3 Federal Reserve District
– Digits 4-7 Branch office of Federal Reserve
– Digits 8-9 State
DATA STORAGE
Ledger
General ledger
• Group coding schemes are often used in assigning general ledger
account numbers. The following guidelines should be observed:
Subsidiary ledger
– The code should be consistent with its intended use, so make
sure you know what users need.
Coding techniques
– Provide enough digits to allow room for growth.
– Keep it simple in order to:
• Minimize costs
• Facilitate memorization
• Ensure employee acceptance
– Make sure it’s consistent with:
• The company’s organization structure
• Other divisions of the organization
• The chart of accounts is a list of all general ledger accounts an organization
uses.
• Group coding is often used for these numbers, e.g.:
– The first section identifies the major account categories, such as asset,
liability, revenue, etc.
– The second section identifies the primary sub-account, such as current
Ledger
asset or long-term investment.
– The third section identifies the specific account, such as accounts
General ledger
receivable or inventory.
– The fourth section identifies the subsidiary account, e.g., the specific
Subsidiary ledger
customer code for an account receivable.
• The structure of this chart is an important AIS issue, as it must contain
Coding techniques
sufficient detail to meet the organization’s needs.
Chart of accounts
• In manual systems and some accounting packages, the first
place that transactions are entered is the journal.
– A general journal is used to record:
• Non-routine transactions, such as loan payments
• Summaries of routine transactions
Ledger • Adjusting entries
• Closing entries
General ledger
– A special journal is used to record routine transactions.
most common special journals are:
The
•
Subsidiary ledger
Cash receipts
• Cash disbursements
• Credit sales
Coding techniques
• Credit purchases
Chart of accounts
Journals
DATA STORAGE
Journals
Audit trail
DATA STORAGE
Review so far:
◦ When routine transactions occur, they are recorded in
special journals.
◦ When non-routine transactions occur, they are recorded in
the general journal.
◦ Periodically, the transactions in the special journal are totaled,
and a summary entry is made in the general journal.
◦ The individual line items in the special journal are posted to the
subsidiary ledger accounts.
◦ The items in the general journal are posted to the general
ledger.
◦ Periodically, the balances in the general ledger control
accounts are compared to the sums of the balances in the
related subsidiary accounts.
COMPUTER-BASED STORAGE
CONCEPTS
Now let’s moving on to discussing some
computer-based storage concepts, including:
◦ Entity
◦ Attribute
◦ Record
◦ Data Value
◦ Field
◦ File
◦ Master File
◦ Transaction File
◦ Database
COMPUTER-BASED STORAGE
CONCEPTS
An entity is something about which information
is stored.
In your university’s student information system,
one entity is the student. The student
information system stores information about
students.
What are some other entities in your student
information system?
COMPUTER-BASED STORAGE
CONCEPTS
Attributes are characteristics of interest with
respect to the entity.
Some attributes that a student information
system typically stores about the student entity
are:
◦ Student ID number
◦ Phone number
◦ Address
What are some other attributes about students
that a university might store?
COMPUTER-BASED STORAGE
CONCEPTS
A field is the physical space where an attribute is
stored.
The space where the student ID number is
stored is the student ID field.
Student Class
File File
Instructor
File
TRANSACTION PROCESSING:
THE DATA PROCESSING CYCLE
The data processing cycle consists of four
steps:
◦ Data input
◦ Data storage
◦ Data processing
◦ Information output
DATA PROCESSING
Batch processing:
◦ Source documents are grouped into batches,
and control totals are calculated.
◦ Periodically, the batches are entered into the
computer system, edited, sorted, and stored in
a temporary file.
◦ The temporary transaction file is run against
the master file to update the master file.
◦ Output is printed or displayed, along with error
reports, transaction reports, and control totals.
DATA PROCESSING
• Example of a data
flow diagram of the
Accounts
customer payment Receivable
process
Deposit
Bank
DATA FLOW DIAGRAMS
Deposit
Bank
DATA FLOW DIAGRAMS
Data flows
◦ Appear as arrows
◦ Represent the flow of data between sources and
destinations, processes, and data stores
DATA FLOW DIAGRAMS
• Data flows are shown in red.
• Does it appear that a data
flow can be two-way? Accounts
• If so, how is it handled? Receivable
Deposit
Bank
DATA FLOW DIAGRAMS
• Data flows should always be
labeled.
• The exception is a data flow Accounts
moving into or out of a data Receivable
store.
• What symbol is the data store?
Deposit
Bank
DATA FLOW DIAGRAMS
Update
General
Receiv-
Ledger
ables
DATA FLOW DIAGRAMS
Processes
◦ Appear as circles
◦ Represent the transformation of data
DATA FLOW DIAGRAMS
• The transformation processes are
shown in red.
• Every process must have at least
Accounts
one data inflow and at least one
Receivable
data outflow. Why?
• What do you notice about how the
processes are labeled?
Deposit
Bank
DATA FLOW DIAGRAMS
Data stores
◦ Appear as two horizontal lines
◦ Represent a temporary or permanent
repository of data
DATA FLOW DIAGRAMS
• The data store is shown in red.
• Notice that the inflows and
outflows to the data store are Accounts
not labeled. Receivable
Deposit
Bank
DATA FLOW DIAGRAMS
Data dictionary:
◦ Data flows and data stores are typically
collections of data elements.
◦ EXAMPLE: A data flow labeled student
information might contain elements such as
student name, date of birth, ID number,
address, phone number, and major.
◦ The data dictionary contains a description of
all data elements, data stores, and data flows
in a system.
DATA FLOW DIAGRAMS
Govt.
Depart- Agencies
ments
Bank
Human
Resources
Govt.
Depart- Agencies
ments
Bank
Human
Resources
Govt.
Depart- Agencies
ments
Bank
Human
Resources
We will not do the entire DFD, however, you could finish this
table by reading the remainder of the narrative in Table 3-1 in
your textbook. The portion of the table completed so far allows
us to draw the segment of the DFD that is highlighted on the
following slide.
DATA FLOW DIAGRAMS
Depart-
ments Employees
Employee
New employee Time paychecks
Human form cards
Resources
1.0
Update 2.0
Employee Payroll
empl. Pay
Change check
Payroll Employ- Bank
form
file ees
Payroll
Disburse-
3.0 5.0
ment data
Prepare Employee/ Update
reports Payroll file Gen.
Ledger
Payroll tax
Payroll disb. voucher
report
4.0 General
Pay Ledger
taxes Tax report
Manage- & payment
ment Govt.
Agencies
DATA FLOW DIAGRAMS
◦ Storage symbols
– An explanatory note
Document Symbol
◦ Represents a document or report that is prepared by
hand or printed by a computer.
INPUT/OUTPUT SYMBOLS
3
2
1
Input/Output; Journal/Ledger
◦ Can represent any input or output on a program
flowchart.
◦ Also represents accounting journals or ledgers in a
document flowchart.
INPUT/OUTPUT SYMBOLS
Display
◦ Represents information displayed by an online
output device such as a terminal, monitor, or
screen.
INPUT/OUTPUT SYMBOLS
Online Keying
◦ Represents data entry by an online device
such as a terminal or personal computer.
INPUT/OUTPUT SYMBOLS
Transmittal Tape
◦ Represents manually prepared control totals
which are to be compared to computer totals
for control purposes.
PROCESSING SYMBOLS
Computer Processing
◦ Represents a process performed by a computer, which
usually results in a change in data or information.
PROCESSING SYMBOLS
Manual Operation
◦ Represents a processing operation that is
performed manually.
PROCESSING SYMBOLS
Auxiliary Operation
◦ Represents a processing operation carried out
by a device other than a computer, e.g., an
optical character scanner.
PROCESSING SYMBOLS
Magnetic disk
◦ Represents data stored permanently on a
magnetic disk.
◦ Frequently used to represent master files and
databases.
STORAGE SYMBOLS
Magnetic Tape
◦ Represents data stored on a magnetic tape.
◦ Sometimes represents transaction files.
STORAGE SYMBOLS
Diskette
◦ Represents data stored on a floppy disk or zip
disk.
STORAGE SYMBOLS
Online Storage
◦ Represents data stored in a temporary online
file in a direct-access medium such as a
magnetic disk.
STORAGE SYMBOLS
File
◦ Represents a file of documents that are manually
stored and retrieved.
◦ Letter indicates the ordering sequence:
A = Alphabetic order
D = Date order
N = Numeric order
FLOW AND MISCELLANEOUS
SYMBOLS
Data/Information Flow
◦ Represents the direction of data/information
flow.
◦ Often used to show data being copied from
one document to another.
FLOW AND MISCELLANEOUS
SYMBOLS
Communication Link
◦ Represents the transmission of data from one
location to another via communication lines.
FLOW AND MISCELLANEOUS
SYMBOLS
On-page connector
◦ Connects processing from one location to
another on the same page.
◦ Used to avoid crisscrossing lines.
FLOW AND MISCELLANEOUS
SYMBOLS
Off-page connector
◦ Connects the processing flow between two
different pages.
◦ Signals the exit from one page and the
corresponding entrance on another page.
FLOW AND MISCELLANEOUS
SYMBOLS
Terminal
◦ Represents the beginning, end, or a point of
interruption in a process or program.
◦ Also used to indicate an external party.
FLOW AND MISCELLANEOUS
SYMBOLS
Decision
◦ Represents a decision-making step.
◦ Used in a program flowchart to show
branching to alternate paths.
FLOW AND MISCELLANEOUS
SYMBOLS
Annotation
◦ Provides for the addition of descriptive comments or
explanatory notes as clarification.
DOCUMENT FLOWCHARTS
1.0
Update Student
Student Records
Records
Enrollment
Forms
2.0
Prepare Bursar
Enrollment
Class Lists Forms
Class
Lists
Faculty
Registrar’s Office
Enrollment
Forms
Update Sorted
1.0 A Enrollment
Student
Update Student Records Forms
Student Records
Records
Enrollment Sorted
Forms Prepare
Enrollment Class
Forms Lists
2.0
Prepare Bursar Here’s a
Enrollment
Class Lists Forms flowchart Sorted
Class
that goes Lists
Enrollment
Class
Forms
Lists with the
story
Faculty
Faculty Bursar
FLOWCHARTS VS. DFDs
1.0 1.0
Update Student Update Student
Student Records Student Records
Records Records
Enrollment Enrollment
Forms Data
2.0 2.0
Prepare Bursar Prepare Bursar
Enrollment Enrollment
Class Lists Forms Class Lists Data
Class Class
Lists Lists
Faculty Faculty
Registrar’s Office Registrar’s Office
Enrollment Sort
Student Students Enrollment
Forms Forms
s Data
Sorted Prepare
Enrollment Class Bursar
Prepare
Forms Lists Student Class
Records Lists
Sorted
Class
Lists
Enrollment Here’s the revised Class
Forms
flowchart. How has it Lists
changed?
Faculty Bursar
Faculty
Original
Flowchart
FLOWCHARTS VS. DFDs