You are on page 1of 21

Chapter 1

Accounting Information Systems: An Overview


1-1
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
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 and the information needed to make them.

 Identify the information that passes between internal and external parties and an AIS.

 Describe the major business processes present in most companies.

 Explain what an accounting information system (AIS) is and describe its basic functions.

 Discuss how an AIS can add value to an organization.

 Explain how an AIS and corporate strategy affect each other.

 Explain the role an AIS plays in a company’s value chain.

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-2


What Is a System?

 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

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-3


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 Information
make decisions. This is
known as Information
Overload.

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-4


Value of Information

Benefits Costs
 Reduce Uncertainty  Time & Resources

 Improve Decisions
 Produce Information
 Improve Planning  Distribute Information

 Improve Scheduling
Benefit $’s > Cost $’s

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-5


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.”

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-6


What Makes Information Useful?

 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).

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-7


Business Process

 Systems working toward


organizational goals Financing Revenue

Human
Expenditure
Resources

Production

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-8


Business Process Cycles

 Revenue

 Expenditure

 Production

 Human Resources

 Financing

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-9


Business Transactions

 Give–Get exchanges

 Between two entities

 Measured in economic terms

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-10


Business Cycle Give–Get

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-11


Accounting Information Systems

 Collect, process, store, and report data and information

 If Accounting = language of business

 AIS = information providing vehicle

 Accounting = AIS

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-12


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

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-13


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

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-14


AIS Value Add

 Improve Quality and Reduce Costs

 Improve Efficiency

 Improve Sharing Knowledge

 Improve Supply Chain

 Improve Internal Control

 Improve Decision Making

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-15


Improve Decision Making

 Identify situations that require action.

 Provide alternative choices.

 Reduce uncertainty.

 Provide feedback on previous decisions.

 Provide accurate and timely information.

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-16


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

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-17


Value Chain—Primary Activities

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-18


Value Chain—Support Activities

Firm
Infrastructure Technology

Human Purchasing
Resources

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-19


Value Chain

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-20


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

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1-21

You might also like