INTRODUCTION TO

ACCOUNTING INFORMATION
SYSTEM – ACTIVITY 1
BY MARY JOY M. CALAGUI
QUESTION #1

Contrast the responsibilities of operations

management, middle management, and t
op
management. Explain the different
information needs for each level of manag
ement.
Answer:
Operations management is directly responsible for controlling da
y-to-day operations. Operations managers require detailed information
on individual transactions such as sales, shipment of goods, usage of l
abor and materials in the production process, and internal transfers of r
esources from one department to another. Budgeting information and in
structions flow downward from top and middle management to operatio
ns management.
Middle managers perform short-term planning and coordination o
f activities necessary to accomplish organizational objectives. Middle m
anagement requires information that is more summarized and oriented
toward reporting on overall performance and problems, rather than rout
ine operations.
Top management is responsible for longer-term planning and sett
ing organizational objectives. Information provided to top management i
s highly summarized.
QUESTION #2

Explain the difference betwee

n data and information.
Answer:

Data Information
Facts which may or may not Processed data that causes
be processed the user to take action.

Data have no particular

impact on the user.
QUESTION #3

Why do accountants need to

understand the organizational
structure of the business?
Answer:
The structure of an organization reflects the
distribution of responsibility, authority, and acco
untability throughout the organization. Accounta
nts need to understand this distribution pattern i
n order to assess the information needs of user
s, and to design the Accounting Information Sy
stem to meet those needs.
QUESTION #4

Several disadvantages of
distributed data processing
have been discussed.
Discuss at least three.
Answer:
• Distributing the control of information resources can lead to
mismanagement of organizational resources. Hardware and
software incompatibility can result.

• Distribution of responsibility can result in many users perfor

ming redundant tasks. Individual user control can lead to inte
rnal control concerns when users perform incompatible dutie
s. Small organizational units may have difficulty hiring qualifi
ed IT professionals.

• Distribution of decision making can result in a lack of standar

ds.
QUESTION #5

Name and explain the purpose

of the three major subsystems
of the AIS:
Answer:
 Transaction Processing System (TPS) – it
s purpose is to record the financial transactio
ns of the firm
 General Ledger System and Financial Re
porting System (GL/FRS) – its purpose is t
o produce the financial statements required
by law
 Management Reporting System (MRS) – it
s purpose is to provide information to internal
management for decision making
QUESTION #6

What are the three primary

functions performed by the
transaction processing system
?
Answer:
The three primary functions performed by the tr
ansaction processing system are:
1) converting economic events into financial tr
ansaction;
2) recording financial transaction in the accoun
ting records (journals and ledgers);
3) and distributing essential financial informati
on to operations personnel to support daily
operations.
QUESTION #7

The most commonly stated

benefits of DDP are cost savings,
increased user satisfaction, and
improved operational efficiency.
Explain.
Answer:
The costs of both processing and data storage
have declined significantly in the time since early au
tomation. In addition, data entry can be distributed
and application complexity reduced. Users are typic
ally more satisfied when they can control the resour
ces that affect their profitability. Also users want sys
tems people who will respond to their needs and inv
olve them in development and implementation of th
eir own systems. Delegation of cost control to indivi
dual units leads to more efficient use of unit resourc
es.
QUESTION #8

Data redundancy is described

as a problem in flat-file system
s due to data storage, updatin
g,
and currency issues. Explain.
Answer:
Data that is stored 100 different times
takes up 100 times the storage space of
data stored once. If data is stored in mul
tiple files, each file must be updated whe
n a change occurs. If the issue of update
s is mismanaged in a flat-file environme
nt, some data may be unchanged, theref
ore be non-current and lead to incorrect
decisions.
QUESTION #9

Explain the elements of the RE

A model and give an example
of
each.
Answer:
The following are the elements of REA model:
 Economic resources are the assets of the orga
nization. They are objects that are scarce and un
der the control of the organization. They do not i
nclude accounts receivable. An example is inven
tory.
 Economic events are actions that affect change
s is resources. An example is a sale to a custom
er.
 Economic agents are individuals and business
units that participate in economic events. An exa
mple is a sales clerk.
QUESTION #10

Distinguish between the

accounting information
system and the managemen
t information system.
Answer:
Accounting Management
Information System Information System
Processes financial and nonfinancial Processes additional nonfinancial
transactions that directly affect the transactions that contribute to the
processing of the financial transac- decision making of managers.
tion.

These are handled by the three

major subsystems: transaction
processing, general ledger/financial
reporting, and management repor-
ting.
QUESTION #11

Why have re-engineering effor

ts been made to integrate AIS
and MIS?
Answer:
Managers of all areas typically need dat
a from both the AIS and the MIS. If the data
needed by managers for decision-making p
rocesses are located in two or more data se
ts, the preparation of reports is both ineffici
ent and expensive. Further, a lack of coordi
nation between the two data sets can result
in data that is not consistent and is unreliabl
e.
QUESTION #12

Why is it important to
organizationally separate the
accounting function from othe
r functions of the organization
?
Answer:
The accounting function provides record-ke
eping services for all of the operations and day-
to-day activities of other departments, which aff
ect the financial position of the organization. Re
cord keeping tasks must be kept separate from
any area that has custody over assets. Thus, th
e accounting function must remain independent
so that the protection of the firm’s assets is carr
ied out in an environment with minimum possibi
lities for theft.
QUESTION #13
The REA model is based on the
premise that “business data must not be
preformatted or artificially constrained an
d must reflect all
relevant aspects of the underlying
economic events.” What does this mean a
nd how is it applied?
Answer:
The REA model requires that accounting pheno
mena be characterized in a manner consistent with
the development of multiple user views not simply t
hose of the accounting function. As such, REA proc
edures and databases are structured around events
rather than accounting artifacts such as journals, le
dgers, charts-of-accounts, and double entry accoun
ting. Under the REA model, business organizations
prepare financial statements directly from the event
database.
QUESTION #14
Enterprise Resource Planning
systems are comprised of a highly
integrated set of standardized
modules. Discuss the advantages
and potential disadvantages of th
is approach.
Answer:
Advantages of ERP
 Enterprise Resource Planning (ERP) systems enable org
anizations to automate and integrate key business proce
sses.
 ERPs break down traditional functional barriers by facilit
ating data sharing.
 ERP software embodies and supports the best business
practices of a given industry thus encouraging positive c
hanges in the way firms do business.
 Organizations experience internal efficiencies by employi
ng standard business practices among all organizational
units.
Answer:
Disadvantages of ERP
The implementation of an ERP system can be a massive undertaking
that can span several years.
Because of their complexity and size, few organizations are willing or able
to commit the necessary financial resources and incur the risk of developin
g an ERP system in-house. Hence, virtually all ERPs are commercial prod
ucts designed to solve standardized business problems. Many organizatio
ns have unique needs that require customized systems.
Organizations that implement an ERP often need to modify their busi
ness processes to suit unique business functions, particularly industry-spe
cific tasks. These applications, often called bolt-ons, are not always design
ed to communicate with ERP packages.
ERP packages are enormously expensive. Organization management sho
uld exercise great care in deciding which, if any, ERP is best for them.
QUESTION #15

Distinguish between the

centralized and distributed
approaches to organizing the
computer services function.
Answer:
In a centralized data processing approach, the compute
r services function is centrally located. The databases are hous
ed in one place where all of the data processing occurs by one
or more main computers. All systems development and mainte
nance work for the entire organization is performed by systems
professionals. End users wishing to have new systems or featu
res must submit a formal request to this group and are usually
prioritized and placed in a queue.
In a distributed data processing approach, the CPUs ar
e spread out and control over data and processing is at the info
rmation processing unit (IPU) level. Thus, end users have more
influence over the systems development projects, which are typ
ically handled by systems professionals at the IPU level.