Chapter 1

Accounting Information Systems: An Overview

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 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.

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 Bahan UTS - SIA

1. AIS: an Overview. Chp 1

2. Transaction Processing and ERP Systems. Chp 2

3. System documentation techniques. Chp 3

4. System documentation techniques. Chp 3

5. System documentation techniques. Chp 3

6. Control & AIS. Chp 7

7. Review & KUIS

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 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

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 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.

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 Value of Information

Benefits Costs
 Reduce Uncertainty  Time & Resources

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

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

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 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.”(Reduce
Uncertainity)
 Reliable
 “The quality of information that assures that information
is reasonably free from error and bias and faithfully
represents what it purports to represent.”(Dependable)
 Complete
 “The inclusion in reported information of everything
material that is necessary for faithful representation of
the relevant phenomena.”

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 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).

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Copyright 2012 © Pearson Education, Inc. publishing as Prentice Hall 1-9
 Business Process
A business process is a set of
related, coordinated, and
structured activities and tasks that
are performed by a person, a
computer, or a machine a
computer or a machine, and that
help accomplish a specific
organizational goal

Systems working toward

organizational goals

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 Business Transactions

 Transaction:
is an agreement between two entities to exchange goods or
services or any other event that can be measured in
economic terms by an organization
 Give–Get exchanges
 Between two entities
 Measured in economic terms

 Transaction Processing
The process that begins with capturing transaction
data and ends with informational output, such as the
financial statements

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 Business Process Cycles

 Revenue

 Expenditure

 Production

 Human Resources

 Financing

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 Business Cycle Give–Get

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 Business Process Cycles - Docs

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 Common Cycle Activities

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 Common Cycle Activities

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 Accounting Information Systems

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

 If Accounting = language of business

 AIS = information providing vehicle

 Accounting = AIS
Accounting is a data identification, collection, and storage
process as well as an information development,
measurement, and communication process.

 By definition, accounting is an information system, since

an AIS collects, records, stores, and processes accounting
and other data to produce information for decision
makers.

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 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

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 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

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 AIS Value Add

 Improve Quality and Reduce Costs: Monitor machinery

 Improve Efficiency: Just in time manufacturing require

UptoDate information

 Improve Sharing Knowledge: Provide competitive advantage.

Communicate between employees.

 Improve Supply Chain: Sharing warehouse & Order

information

 Improve Internal Control: Protect from fraud, error & disasters

 Improve Decision Making: To provide assistance & analytical

tools

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 Improve Decision Making

 Identify situations that require action. cost report

 Provide alternative choices.

 Reduce uncertainty.

 Provide feedback on previous decisions.

 Provide accurate and timely information.

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 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:

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 Value Chain—Primary Activities

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 Value Chain
Primary Activites

Support Activites

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 Value Chain

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 Supply Chain

An organization’s value
chain is a part of a larger
system called a supply
chain.

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 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

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