Accounting Information

Systems: An Overview

Chapter 1

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 1–1
 Learning Objective 1

Understand the related concepts

of transaction cycles and
internal control structure.

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 Overview

An accounting information system (AIS)

is a collection of resources designed to
transform data into information.
Accounting information systems
perform this transformation.
Manual

Computerized
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 Information and Decisions

Who are the two main users

of accounting information?

External users

Internal users

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 Information and Decisions

Who are the external users

of accounting information?
Stockholders
Investors
Creditors
Government agencies
Customers and vendors
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 Information and Decisions

Hierarchy of Internal Users

Top-Level
Management
Strategic
Middle Summarization
Management Tactical and Filtration
Lower-Level
Operational
Management
Transaction oriented

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 Information Systems

The term information system suggests the use

of computer technology in an organization.

Hardware
Data Information
Software

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 Information Systems

Electronic Data Processing System (EDP)

Data Processing System (DP)
Management Information System (MIS)
Decision Support System (DSS)
Expert System (ES)
Executive Information System (EIS)
Accounting Information System (AIS)

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 Business Processes

Organizational Logical time

Data
units sequence

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 Business Processes

Primary Business Processes

Inbound Outbound
sales sales Operations
logistics logistics

Marketing Service

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 Business Processes
Supporting Business Processes

Technology
Procurement
development

Human Firm
resources infrastructure

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 Transaction Processing Cycles

1. Revenue cycle

2. Expenditure cycle

3. Production cycle

4. Finance cycle

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 Internal Control Process

Reliability of financial reporting

Effectiveness and efficiency

Compliance

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 Internal Control Process

What are the elements of internal control?

Control environment
Risk assessment
Control activities
Information and communication
Monitoring

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 Internal Control Process

Segregation of Duties:
No individual or department should
control the accounting records
relating to its own operation.

Internal Auditing:
It is an independent appraisal
activity within the organization.
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 Learning Objective 2

Describe the organizational

structure of the information
system function in organizations.

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 The Information System Function

Chief
Information
Officer

Steering
Committee

Manager Manager Manager

Manager Manager
Systems Technical User
Programming Operations
Analysis Support Support

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 1 – 17
 The Information System Function

Manager
Manager
Systems
Programming
Analysis

Application Application
Analysts Programmers

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 The Information System Function

Manager
Operations
Maintenance
Programmers

Data
File Computer
Entry
Librarian Operators
Operators

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 The Information System Function

Manager
Technical
Support

Systems Communication Database

Programmers Analysts Administration

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 The Information System Function

Project organizations

Analysts Programmers

Application projects

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 Learning Objective 3

Discuss applications of
information technology
in organizations.

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 End-User Computing

End-user computing (EUC) is the

hands-on use of computers by end users.

Functional end users do their own

information processing activities.

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 EUC: Mainframe Application

Database
Accounts Receivable
Data

Query Language
User Report
Processor

User Submits Database

Query Language Access Control
Job Software

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 Data Processing for the End User

Traditional Approach

User Information System Data

Specialists Processing

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 Data Processing for the End User

End-User Computing Approach

User Database Software or Data

Personal Computer Processing

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 EUC: Stand-Alone PC Application

Mainframe Data Personal

or Report
Computer

User Prepared
Report
Data

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 Quick-Response Technology

Quick-response systems are essential

to the total quality performance
(TQP) movement in business.

TQP is also called TQM or

total quality management.

TQP emphasizes customer satisfaction.

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 Quick-Response Technology

Hardware and software standardization

Electronic data interchange (EDI)

Universal product code (UPC) bar

code identification of products
and scanning technologies

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 Quick-Response Technology

Retailer’s Computer System

Retail Sale Scan Bar

of Product Code

Electronic Data
Interchange

Ship Order
Vendor’s Computer System
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 Web Commerce

Sales via the World Wide Web are

an integral part of the economy.
What are some benefits?

Consumers No waiting in line

Merchants Cost savings

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 Electronic Data Interchange

Purchase Order

Retailer Supplier

Eliminates Saves
paper time

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 Extensible Business
Reporting Language

XBRL is a language that facilitates the

exchange over the Internet of all kinds of
business documents and financial statements.

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 Computer-Integrated
Manufacturing

What are the components of a CIM system?

Computer-aided design (CAD) workstations

Real-time production monitoring

and control systems

Order and inventory control system

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 Electronic Payment Systems (EFT)

Electronic funds transfer systems are

electronic payment systems in which
processing and communication are
primarily or totally electronic.

Banks can interface with

corporate EDI applications.

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 Learning Objective 4

Characterize the development

of information systems.

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 The Accountant and
Systems Development

Accountants may undertake systems

development activities either
internally or externally.

Systems development activities are

often encountered by internal and
external auditors during reviews
of information systems controls.

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 The Accountant and
Systems Development

Systems analysis

Systems design

Systems implementation

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 The Accountant and
Systems Development

What are the general objectives

of systems analysis?
To improve the quality of information

To improve internal control

To minimize cost, where appropriate

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 The Accountant and
Systems Development

Systems design is the process of

specifying the details of the solution
selected by the systems analysis process.

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 The Accountant and
Systems Development

Systems implementation is the process of

placing the revised or newly designed
procedures and methods into operations.
Testing the solution prior to implementation

Documenting the solution

Reviewing the system

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 1 – 41
 Systems Approach

What is the systems approach?

It is a general procedure for the
administration of a systems project.
Its purpose is to assist in the orderly
development of effective systems.
What are the six steps of the
systems approach process?
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 1 – 42
 Systems Approach

1 Statement of system objective(s)

2 Creation of alternatives
3 Systems analysis
4 Systems design
5 Systems implementation
6 Systems evaluation

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 Behavioral Considerations

A new information system

creates new work relationships
among existing personnel.

It creates changes in job content

and perhaps a change in the
formal organizational structure.

 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood 1 – 44
 Behavioral Considerations

The user cooperation needed to operate

the system successfully should be ensured
during the design of a system, not afterward.

A philosophy of user-oriented design fosters

a set of attitudes and an approach to systems
development that consciously considers
the organizational context.

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 End of Chapter 1

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