Uaa - Acct 316 Accounting Information Systems Dr. Fred Barbee

Acct 316 Acct 316 Acct 316 Acct 316 Acct 316 Acct 316
Accounting
Information Systems
Acct 316 Acct 316 Acct 316
UAA – ACCT 316

Accounting Information Systems
Dr. Fred Barbee
Information
What is it?
Information as a Resource
In the past, organizations were said

to have five major resources . . .
Men
The
5
Ms
Oops . . .
that isn’t
Sorry about
politically
that!!! -
correct
Once more, organizations have five

major resources:
1. Men (i.e., people)
2. Machines
3. Money The
5
4. Materials
Ms
5. Management
Information
is now
regarded as
the sixth
resource.
Consider this
scenario . . .
It isn’t all that far-
fetched!
Quick Give me all
your ideas!
Functions
Functions of
of Management
Management
Planning
Planning
Decision
Decision
Controlling
Controlling Making
Making
Organizing
Organizing
Directing
Directing
Information . . .
After the human element . . .
Quality, and
Timely business information
is an executive’s most important

resource.
Information Anxiety
Source: Information Anxiety

Richard S. Wurman
New York, Doubleday, 1989
A weekend edition of the
NY Times contains more
information than the
average person was likely
to come across in a
lifetime in seventeenth-
century England.
More new information has
been produced in the last 30
years than in the previous
5,000.
About 1,000 books are
published internationally
every day, and the total of
all printed knowledge
doubles every eight years.
In a single year the average
America will . . .
Read or complete 3,000 notices and
forms;
Read 100 newspapers and 36

magazines;
Watch 2,463 hours of television;

In a single year the average
America will . . .
Listen to 730 hours of radio;
Talk on the phone for 61 hours; and
Read 3 books
Information Overload
Is it real?
How Much Information?

http://www.sims.berkeley.edu/research/projects/
how-much-info/summary.html
The world produces between
1 and 2 exabytes of unique
information per year, which
is roughly 250 megabytes
for every man, woman, and
child on earth.
Data Powers of Ten
Byte - 8 bits
Kilobyte – 1,000 bytes or 103 bytes
Megabyte – 1,000,000 bytes or 106 bytes
Gigabyte – 1,000,000,000 bytes
Terabyte – 1,000,000,000,000 bytes
Petabyte – 1,000,000,000,000,000 bytes
Exabyte – 1,000,000,000,000,000,000 bytes
Data Powers of Ten
Zettabyte –
1,000,000,000,000,000,000,000 bytes
Yottabyte –
1,000,000,000,000,000,000,000,000 bytes
Yearly Production of Published
Information
Item Titles Terabytes
Books 968,735 8
Newspapers 22,643 25
Journals 40,000 2
Magazines 80,000 10
Newsletters 40,000 .2
Yearly Production of Published
Information
Item Titles Terabytes
Office
7,500,000,000 195
Documents
Cinema 4,000 16
Music CDs 90,000 6
Data CDs 1,000 3
DVD-Video 5,000 22
Total 285
YES
Information Overload
Is it real?
Information Overload . . .
The theory of bounded rationality

(Simon, 1955).
Humans are organisms of limited

knowledge and computational
capacity.
Thus, simplifications (heuristics)
are deliberately introduced into the
choice mechanism.
The Challenge of
Information
`-
http://wip.monroecc.edu/wipdepts/library/lib100/lim0p3.htm
Information Storage
Date Method Characters/Cubic Inch
3,000 BC Clay Tablets 1 cci
1450 A.D. Printed Page 500 cci
1990s Optical Disk 125,000,000,000 cci

Computation Speed . . .
Date Method Speed in ips*

5,000 BC Abacus 2-4 ips
1945 A.D. Computer 100 ips
1960s Computer 100,000 ips
1970s Computer 1,000,000 ips
1980s Computer 10,000,000 ips
1990s Computer 1,000,000,000 ips
*Instructions per second.
Transmission Speed . . .
Date Medium Speed in wpm*

4,000 BC Messenger .01 wpm
1844 A.D. Telegraph 50 - 60 wpm
1980s Cable/Fibre 1,000,000,000 wpm
1990s Fibre 100,000,000,000 wpm
*Words per minute

Human Processing Speed . . .
Date Medium Speed in wpm*

4,000 BC Written 300 wpm
Today Written 300 wpm
4,000 BC Visual 100,000,000 bpg**
Today Visual 100,000,000 bpg
4,000 BC Spoken 120 wpm
Today Spoken 120 wpm
*Words per minute **Bits per glance
Dealing With
Information
Overload.
Information Processing
People are consistency seekers;
People are Information

Processors; and
People are Cognitive Misers

People as Consistency Seekers
Strive for consistency when

processing information.
Find support for

our beliefs.
People as Information
Processors
Actively seek out information,
Observe facts, and

Reason
People as Cognitive Misers
Minimize cognitive efforts, and
Take shortcuts.
Managers as Cognitive Misers
Managers must be selective in the

kinds of information they request.
The key to limiting

the flow of data is
to request only
relevant
information.
Stop and look
at Ackoff’s 1 st
Assumption.
Assumption 1:
Management needs more information.
`-
Stop and look
at Ackoff’s 2 nd
Assumption.
Assumption 2:
Managers need the information they
want
`-
What kind of
information do
managers
need?
To be information literate, a
person must be able to
recognize when information is
needed and have the ability
to locate, evaluate, and use
effectively the needed
information.
Source: Presidential Committee on Information Literacy
http://www.ala.org/acrl/nili/ilit1st.html
January 10, 1989
information.
January 10, 1989
information.
January 10, 1989
information.
January 10, 1989
Stop and look
at Ackoff’s 3 rd
Assumption.
Assumption 3:
Giving managers the information they
need improves their decision making.
`-
Information . . .
What is it?
What is information?
Let’s define the term.
Don’t worry about stating it in formal

terms. Just tell what it means to you.
Write a one sentence definition.
Then . . . we will compare.

What is
Information
Information . . .
The most generic definition

comes from philosophy . . .
. . . Information is knowledge for

the purpose of taking effective
action.
Information . . .
Webster says information is . . .

. . . the communication of news,
knowledge, etc., a fact or facts

told or communicated.
Information . . .
The American Library Association:

Information is all ideas, facts, and
imaginative works of the mind

which have been communicated,
recorded, published and/or
distributed formally or informally
in any format
Information . . .
John McChesney, National Public

Radio Reporter:
Data becomes information only

when it’s put into a context.
Information . . .
Gregory Bateson, 1984

Information is any difference
that makes a difference.

Information . . .
Zeroing in a bit more, information

can be defined as . . .
. . .Valuable processed data
What makes information

valuable?
Information = Valuable
Processed Data . . .
Information has value because it

is the basis for:
Making decisions,
Taking actions, and
Fulfilling legal actions
So . . . We could say:
Information is useful data,

organized such that correct
decisions can be based on it.

Information
Information Derived
Derived From
From Data
Data
Data Processing
ProcessingSteps
Steps Information
Within
Within
Information (Outputs)
(Inputs) InformationSystems
Systems
Raw
RawFacts,
Facts, Data
Datathat
that
Figures,
Figures, have
havebeen
been
Symbols,
Symbols, Transform transformed
transformed
Etc.
Etc. and
andmade
made
useful
useful
(valuable)
(valuable)
Information Vs. Data . . .
Data are facts and figures not

currently being used in a decision
process.
In contrast . . .
Information refers to the classified

or integrated data being used for
decision making.
Information Vs. Data . . .
Information affects behavior

Data does not
Either because of their format or

location relative to a potential user
at a particular time.
System
What is a System?
The word system is well used in our

society. We have . . .
Stereo systems
Computer systems
School systems
Transportation systems.
Let’s Define System . . .
Again, don’t worry about stating your

definition in formal terms.
Simply tell what “system” means to

you.
Write a one-sentence definition of
“system.”
Then we will compare.
What is
a System?
Webster Defines A
System as . . .
. . . An orderly,
interconnected,
complex
arrangement of
parts.
In the Abstract,
A System is:
A set of interacting
components that
operate within a
boundary for
some purpose.
First-Order
First-Order Feedback
Feedback System
System
Boundary Environment
Process
Inputs (Transfor- Outputs
mation)
Feedback Loop
Control Sensor
Information System . . .
Now . . .
We know what information is.
We know what a system is.

Information System . . .
Let’s put them together into an

information system.
If we did - what would be the

objectives?
Information System
Objectives
To provide information that

supports decision making
internal, and
external users
Information System
Objectives

supports day-to-day operations
Internal, and
External Users
Information System
Objectives

pertains to stewardship
External Users
An AIS . . .
Collects and stores data about

activities and transactions.
Processes data into information that

is useful for making decisions.
Provides adequate controls to
safeguard the organization’s assets,
including its data.
Information
Information System
System Functions
Functions
Information System
Data 4
Control
S 1 2 3
o Data Data Information U
u Collection Processing Generation s
r e
c 5 r
Data
e s
Management
s
6
Data
Security
Any
Questions?
Accounting
Information System
First-Order
First-Order Feedback
Feedback System
System
Process
mation)
Feedback Loop
Control Sensor
A transaction (event) is
“a happening with
Inputs economic
Process consequences
Outputs
(Transfor-
formation)
the firm.
The event must be:
Feedback Loopin nature

•Reliable
Control •Measurable Sensor in dollars
An AIS provides
Information. . .Process
mation)
•Scorekeeping
•Attention-Directing
•Decision MakingFeedback Loop
Control Sensor
Overview
of AIS
Overview
Overview of
of Accounting
Accounting Information
Information System
System
Decision
Decision
AIS
AIS Information
Information Makers
Makers
Manual Financial Managerial Stockholders

Computer Tax Creditors Governme
Govt & NFP Owners Manager
Banks
IRS Contributo
Taxpayers
Accounting Processing
Accounting
Processing
Non-Trans.
Non-Trans. Scorekeeping
Scorekeeping
Information Trans.
Trans.
Data
Data Information Processed
Processed
by
by
Standard
Standard
Methods
Methods
Attn-Directing
Attn-Directing
Inputs
Inputs Process
Process GAAP
GAAP
Information
Information
Transactions
Transactions Dec.
Dec.Making
Making Anything
Anything
or
orEvents
Events Information
Information Goes!
Goes!
Any
Questions?
Accounting Models
Accounting Models . . .
A model is a representation of reality.

An accounting information system
employs two types of models:
The Financial Accounting model

Managerial Accounting models
Financial Accounting Model
The financial accounting model

Assets = Liabilities + Owners’ Equity
Its major purpose is to generate

scorekeeping information for use by
external parties.
Financial Accounting Model
Outputs from the financial accounting

model include . . .
Balance Sheet
Income statement
Statement of Cash Flows
Statement of Retained Earnings
Accounting
Processing
External
External Scorekeeping
Scorekeeping External
External
Trans.
Trans. Information
Information Fin
FinStmts
Stmts
Bal
BalSheet
Sheet
Fin. Inc.
Inc.Stmt
Fin.Acct.
Acct.Model
Model SCF
Stmt
SCF
GAAP
GAAP
Attn-Directing
Attn-Directing
AIS
AIS Outputs
Outputs Information
Information
Non-Trns
Non-Trns Dec.Making
Dec.Making
Data
Data Information
Information
Managerial Accounting Models
Managerial accounting provides

financial information to the internal
users of a firm.
A wide variety of models are used:

Cost-Volume-Profit models,
Cost-Variance Analysis models, and
Cash-Flow Forecasting models
Accounting
Processing
External
External Scorekeeping
Scorekeeping External
External
Trans.
Trans. Information
Information Fin
FinStmts
Stmts
Bal
BalSheet
Sheet
Fin. Inc.
Inc.Stmt
Fin.Acct.
Acct.Model
Model SCF
Stmt
SCF
GAAP
GAAP
Attn-Directing
Attn-Directing
AIS
AIS Outputs
Outputs Information
Information
Internal
Internal
Mgr.
Mgr.Acct.
Acct.Model
Model Mgmt
MgmtRpt
Rpt
Variance
Variance
Budget
Budget
Non-Trns Dec.Making
Dec.Making No
Non-Trns NoGAAP
GAAP
Data
Data Information
Information
Stop and look
at Ackoff’s 5 th
Assumption.
Assumption 5:
Managers need only to understand how
to use an information system.
`-

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Acct 316 Acct 316 Acct 316 Acct 316 Acct 316 Acct 316

UAA – ACCT 316

In the past, organizations were said

Once more, organizations have five

It isn’t all that far-

After the human element . . .

Timely business information

is an executive’s most important

Source: Information Anxiety

Read 100 newspapers and 36

Watch 2,463 hours of television;

Talk on the phone for 61 hours; and

How Much Information?

The theory of bounded rationality

Humans are organisms of limited

Date Method Characters/Cubic Inch

3,000 BC Clay Tablets 1 cci

1450 A.D. Printed Page 500 cci

1990s Optical Disk 125,000,000,000 cci

Date Method Speed in ips*

Date Medium Speed in wpm*

*Words per minute

Date Medium Speed in wpm*

People are consistency seekers;

People are Information

People are Cognitive Misers

Strive for consistency when

Find support for

Observe facts, and

Minimize cognitive efforts, and

Managers must be selective in the

The key to limiting

Let’s define the term.

Don’t worry about stating it in formal

terms. Just tell what it means to you.

Write a one sentence definition.

Then . . . we will compare.

The most generic definition

. . . Information is knowledge for

Webster says information is . . .

knowledge, etc., a fact or facts

The American Library Association:

imaginative works of the mind

John McChesney, National Public

Data becomes information only

Gregory Bateson, 1984

that makes a difference.

Zeroing in a bit more, information

. . .Valuable processed data

What makes information

Information has value because it

Information is useful data,

decisions can be based on it.

Data are facts and figures not

Information refers to the classified

Information affects behavior

Either because of their format or

The word system is well used in our

Again, don’t worry about stating your

Simply tell what “system” means to

We know what a system is.

Let’s put them together into an