AIS615 CHAPTER 1

Accounting Information Systems:

An Overview
LECTURED BY,
Nur Afiqah

• Fifteenth Edition, Global Edition

• Copyright © 2021 Pearson Education, Ltd. All Rights Reserved
LEARNING OUTCOME
Explain the decisions an
organization makes
The information needed to
make them.
The major business processes
present in most companies.
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www.yourcompany.com
Distinguish between data
and information:
Discuss the characteristics
of useful information.
Explain how to determine
the value of information.
Explain how an AIS adds
value to an organization.
How it affects and is affected
by corporate strategy.
The role of AIS in a value
chain.
2
DISTINGUISHING BETWEEN DATA AND INFORMATION
SEO INFOGRAPHICS 6
www.yourcompany.com

Data are facts collected,

recorded, and stored in the
system

A fact could be a number,

date, name, and so on.

For example:
2/22/14
ABC Company, 123,
99, 3, 20, 60

Company Logo 2
 DATA VS. INFORMATION www.yourcompany.com

The previous slide just showed data, if we

organize the data within a context of a
sales invoice, for example, it is meaningful
and considered information.

Invoice Date : 2/22/14 Invoice #: 123

Customer: ABC company

Item # Qty Price

99 3 $20

Total Invoice Amount $60

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 DECISION QUALITY
www.yourcompany.com

Information helps us make better decisions.

Too much information causing information

overload can reduce decision quality.

Information Technology (IT) is used to help

decision makers more effectively filter and
condense information.

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VALUE OF INFORMATION www.yourcompany.com

Information is valuable when the

benefits exceed the costs of gathering,
maintaining, and storing the data.

Value of information
= Benefit – Cost
= Improved decision making - Time and
resources used to get the information

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WHAT MAKES INFORMATION USEFUL?
www.yourcompany.com

(1 OF 2)

RELEVANT TIMELY
information needed to make a decision information needs to be provided
(e.g., the decision to extend customer in time to make the decision
credit would need relevant information
on customer balance from an A/R
aging report) General UNDERSTANDABLE
Characteristics
information must be presented in a
That Make meaningful manner
RELIABLE Information
information free from bias Useful
VERIFIABLE
ACCESSIBLE two independent people can produce
available when needed the same conclusion

COMPLETE does not omit important aspects of events or

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activities
 POP QUIZ!
Data differ from information in which way?
A. Data are facts about a sale
B. Information is data organized to provide meaning
C. Data are meaningful bits of information
D. There is no difference

ANSWER : B
 POP QUIZ!
• Which of the following is not a characteristic that makes information
useful?
A. It is reliable
B. It is timely
C. It is inexpensive
D. It is relevant

ANSWER : C
 www.yourcompany.com

MACHINE-READABLE FORMAT

Data is most useful when it is in a machine-readable format that can be

read and processed by a computer.

XBR L (eXtensive Business Reporting Language) is an example of

a machine-readable format that can improve many of the
characteristics that make information useful.

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 www.yourcompany.com

NFORMATION NEEDS AND BUSINESS PROCESS

Business organizations use business processes to get things done. A

business process is a set of related, coordinated, and structured activities
and tasks performed by people, machines, or both to achieve a specific
organizational goal.

Key decisions and information needed often come from these

business processes.

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 www.yourcompany.com

Figure 1.1 The Components of an Information

System
 TRANSACTIONAL INFORMATION BETWEEN www.yourcompany.com

INTERNAL AND EXTERNAL PARTIES IN AN AIS

Business organizations conduct business transactions which is an
agreement between two entities to exchange goods, services, or any other
event that can be measured in economic terms by an organization.

Transaction data is used to create financial statements and is

called transaction processing.

The flow of information between these users for the various

business activities involves a give-get exchange grouped into
business processes or transaction cycles.

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INTERACTIONS BETWEEN AIS AND
www.yourcompany.com

INTERNAL AND EXTERNAL PARTIES

2
 POP QUIZ!
What information needs are generally associated with the acquire
inventory business process?
A. Market Analysis
B. Vendor Performance
C. Inventory status reports
D. All of the above

ANSWER : D
BASIC BUSINESS PROCESSES www.yourcompany.com

Transactions between the business organization REVENUE CYCLE

and external parties fundamentally involve a give goods / give service—get cash
“give–get” exchange. These basic business
processes are:

PAYROLL CYCLE EXPENDITURE CYCLE

give cash—get labor get goods / get service—give cash

FINANCING CYCLE PRODUCTION CYCLE

give cash—get cash give labor and give raw materials
—get finished goods

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 POP QUIZ!
Which transaction cycle includes interactions between an organization
and its suppliers?
A. Revenue cycle
B. Expenditure cycle
C. Human resources/payroll cycle
D. General ledger and reporting system
 

ANSWER : B
 POP QUIZ!
In which cycle does a company ship goods to customers?
A. Production cycle
B. Financing cycle
C. Revenue cycle
D. Expenditure cycle

ANSWER : C
 WHAT IS AN www.yourcompany.com

ACCOUNTING INFORMATION SYSTEM (AIS)?

AIS is a system that collects, records,
stores, and processes data to produce
information for decision makers.

Consists of
• People who use the system
• Processes (procedures and instructions)
• Technology (data, software, and information technology)
• Controls to safeguard information

Thus, an AIS collects and stores data, transforms

that data into information, and provides adequate
controls. 2
 POP QUIZ!
Which of the following is a function of an AIS?
A. Reducing the need to identify a strategy and strategic position.
B. Transforming data into useful information.
C. Allocating organizational resources.
D. Automating all decision making.

ANSWER : B
 HOW DOES AN AIS ADD VALUE www.yourcompany.com

TO AN ORGANIZATION?
Improving the quality and reducing the costs of products
01
or services

02 Improving efficiency

A well thought 03 Sharing knowledge

out AIS can add Improving efficiency and
04
value by: effectiveness of its supply chain

05
Improving the internal control structure

06
Improving decision making
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 POP QUIZ!
An AIS provides value by:
A. Improving products or services through information that increases
quality and reduces costs
B. Providing timely and reliable information to decision makers
C. Creating new products
D. Both A and B

ANSWER : D
 www.yourcompany.com

ARTIFICIAL INTELLIGENCE

Artificial intelligence (A I) is the use of computer systems to simulate

human intelligence processes such as learning, reasoning, and self-
improvement.

A I can be used in the following fields

Business
Education
Finance
Healthcare

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 www.yourcompany.com

DATA ANALYTICS

Data analytics is the use of software and algorithms to find and solve
problems and improve business performance.

Analytics can help improve decision making by

• Identifying a problem/issue for management to
resolve.
• Collecting the data needed to solve the problem,
analyze it, and make recommendations to management
on how to resolve it.
• Integrating actionable insights into the systems used to
make decisions.

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 www.yourcompany.com

BLOCKCHAIN

Blockchain represents individual digital records, called blocks, linked

together using cryptography in a single list, called a chain.

Blockchain has several significant advantages,

including
• accuracy, transparency, data consistency, trust,
• no need for third parties, single set of books, reduced
cost,
• decentralization, efficiency, privacy, security, and
provenance
There are also significant challenges to its adoption including political
and regulatory issues.
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CLOUD COMPUTING, VIRTUALIZATION AND www.yourcompany.com

INTERNET OF THINGS (IoT)

Cloud computing is the use of a browser to remotely access software, data
storage, hardware, and applications.
Virtualization is the running of multiple systems simultaneously on one
physical computer.
Internet of Things (IoT) refers to the embedding of sensors in a multitude
of devices (lights, heating and air conditioning, appliances, etc.) so that
those devices can now connect to the Internet.

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AIS AND CORPORATE STRATEGY
www.yourcompany.com

An AIS is influenced
Once an overall goal is by an organization’s
determined, an strategy.
organization can
determine actions
needed to reach their
goal and identify the
informational
requirements (both A strategy is the
financial and overall goal the
nonfinancial) organization
necessary to measure hopes to achieve
how well they are (e.g., increase
doing in obtaining that profitability).
goal.
 AIS IN THE VALUE CHAIN www.yourcompany.com

VALUE CHAIN

The value chain links together the SUPPLY CHAIN

different activities within an
organization that provide value to
the customer.
is an extended system
VALUE CHAIN that includes the
ACTIVITIES organizations value chain
as well as its suppliers,
• Primary activities provide direct value distributors, and
to the customer. customers.
• Support activities enable primary
activities to be efficient and effective.
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 SUPPORT ACTIVITIES

Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 29
 POP QUIZ!
The value chain concept is composed of the following two types of
activities:
A. Primary and technology
B. Primary and support
C. Support and value
D. Technology and support

ANSWER : B
 POP QUIZ!
Which of the following is a primary activity in the value chain?
A. Purchasing
B. Accounting
C. Post-sales service
D. Human resource management

ANSWER : C
 POP QUIZ!
Which of the following is a support activity in the value chain?
A. Purchasing
B. Manufacturing
C. Post-sales service
D. Receiving materials

ANSWER : A
 KEY TERMS
www.yourcompany.com

• System • Human resource/payroll

•
cycle
Goal conflict
• Goal congruence • Financing cycle
• Data • General ledger and
reporting system

THANK
• Information
• Accounting information
• Information technology (IT)
system (AIS)
• Information overload

YOU
• Predictive analysis
• Value of information
• Blockchain
• Business process
• Cloud computing
• Transaction
• Virtualization
• Transaction processing
• Give-get exchange
• Internet of Things
• Revenue cycle • Value chain
• Expenditure cycle • Primary activities
• Production (conversion) cycle • Support activities 2

• Supply chain