1. Accounting System Insights
ACCOUNTING INFORMATION SYSTEMS
The Crossroads of Accounting & IT 2nd Ed
Chapter 1
Accounting System Insights
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2. Can you imagine how the data stored in your accounting system can make millions of dollars for your business? Meet Business Intelligence.
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3. Business Intelligence
Analyzes data to glean insights for improved decisions and performance.
Example: Travelocity uses BI to personalize customer service, increasing bookings and earnings by 100 percent in the first year.
Discussing a few of the company cases in the chapter opener about businesses using data stored to make better decisions emphasizes the value of accounting systems beyond just for preparing reports. Companies investing millions in systems and wanting a better return on investment than just to file required financial reports.
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4. What is the Objective of the Accounting System?
To provide information for decision making...
Investors
Creditors
Management
External agencies (IRS, SEC and so on)
Society and Community
Should I buy more stock?
Should I make a loan?
One of the primary purposes of the accounting system is to provide information for decision making. There are many different types of decisions that accounting and financial data is used for.
Should we raise prices?
Does this company comply?
Is this enterprise socially responsible?
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5. How Do I Navigate the Crossroads of Accounting and IT?
In today’s business environment, the accounting professional stands at the crossroads of accounting and information technology.
Having IT knowledge gives you a competitive advantage as an accounting professional.
Most facets of accounting today are affected by technology.
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6. How Do I Navigate the Crossroads of Accounting and IT?
Remember AIS is SASSY:
Store accounting data using people, processes, and technology.
Analyze accounting data to create intelligence for decisions.
Safeguard information assets stored in the accounting system using security, controls, and risk management.
SYstem design to plan and build an accounting system.
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7. Your Roadmap to AIS: SASSY
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8. Accounting System Three aspects to the accounting system:
Store accounting data
Analyze accounting data
Safeguard accounting data
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9. How Is the Accounting System Related to the Enterprise System?
Activities in an enterprise are often interconnected, such as human resources and accounting working together to create your paycheck.
An enterprise system supports people conducting business activities throughout the enterprise.
The accounting system is a subsystem of the larger enterprise system.
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10. Enterprise System
Modules or subsystems of an enterprise system can include:
Accounting
Supply Chain Management (SCM)
Operations/Production System (OPS)
Human Resource Management (HRM)
Customer Relationship Management (CRM)
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11. Enterprise System Three functions of an enterprise system are:
Input: capturing information to store
Process: sorting and storing information
Output: summarizing information to generate reports
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12. Integrated Enterprise System
An integrated enterprise system shares data across functional areas within the enterprise (HR, Accounting, and so on).
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13. Accounting System Three functions of an accounting system are:
Input: capture accounting information about transactions
Process: sort and store accounting information
Output: summarize information to generate financial reports, such as a balance sheet.
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14. Business Processes
To understand an enterprise system, first you must understand the underlying business processes.
Business processes are related activities performed by an enterprise to create value by transforming input into output.
The enterprise value chain is an organizing framework for business processes.
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15. Value Chain Value chain is a series of activities that create value.
Innovation includes designing new services, products and experiences.
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16. Business Processes & Transaction Cycles
The accounting system spans the value chain.
Business processes in the value chain are associated with related accounting transactions known as transaction cycles:
Purchasing cycle
Payroll cycle
3.Sales cycle
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17. Transaction Cycles
Notice how the accounting system is interrelated to the other subsystems: Supply Change Management/Purchasing Cycle; Operations/Payroll; Customer Relationship Management/Sales Cycle.
Also notice how the accounting system spans the ENTIRE value chain.
Pair and Share: Share with a classmate your response to the following question:
Of all the systems, why is the accounting system the most indispensable in the integrated enterprise system?
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18. © Copyright 2014 Pearson Education. All Rights Reserved.

19. Satellite Mapping
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20. or zoom in....
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21. zoom in further
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22. zoom in....
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23. zoom into details of streets and street signs.....
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24. A satellite mapping approach can be used with accounting systems.
Example: QuickBooks Home Page can be compared to the global view. It shows all the modules in the system with a map of how data flows through the system.
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25. Then you can zoom in for specific transactions, such as write checks.
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26. Click on the icon to zoom in further.
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27. You can zoom in to the detail of a specific check.
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28. Baseline Accounting System
To assist you in using satellite mapping with accounting systems, we provide you with a baseline model.
The baseline model is an overview for the entire accounting system.
The baseline accounting system typically consists of the following modules that most enterprises use:
Vendors module
Customers module
Employees module
Banking module
Financial module
Reports module
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29. Baseline Accounting System
with Transactions
The typical transactions common to most accounting systems are shown in the baseline model.
Notice how the data is input on the left and flows through to output (reports) on the right.
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30. Baseline Accounting System with Transaction Cycles
At a glance we can see the transactions that make up the transactions cycles:
Purchasing Cycle
Sales Cycle
Payroll Cycle
Notice that some call the Purchasing Cycle: Purchasing Transactions or Purchasing Transaction Cycle
The Sales Cycle is sometimes called Sales Transactions or Sales Transaction Cycle
The Payroll Cycle may be referred to as Employee Transactions.
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31. ABCs of Accounting Systems
Once you have a baseline accounting system, you can customize the baseline accounting system to fit the enterprise’s specific needs. An easy way to remember this is:
ABCs of Accounting Systems:
Accounting System = Baseline System + Customized System
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32. When entering accounting information into an accounting system, debits and credits are usually NOT used. Typically, debits and credits are used for journal entries only to make adjustments and corrections.
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33. Instead, accounting information is typically entered using onscreen forms, such as onscreen checks, onscreen invoices, purchase orders, etc.
How many purchase online? Think about the forms that you complete online when you are purchasing something. You are actually completing the sales order information into an onscreen form - instead of an employee having to enter all the information.
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34. When we enter information into an accounting system, almost all accounting systems use databases to store the information. We may never see the database onscreen or have any indication the accounting system is using a database.
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35. All 3 Categories of Accounting Software Use Databases
All 3 categories of accounting software (small, mid-size, and large-scale) use databases.
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36. If you need to trace an error, make a correction, or find data that was lost, you will need to understand the database that is behind the screen of your accounting system.
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37. Database Essentials
Fields: pieces of information about events, people, and objects
Record: collection of related fields
Table: collection of related records with a unique table name
Database: collection of related tables
To keep it simple when learning databases, let’s start with the database essentials:
Essentials about databases that accounting professionals need to understand in order to understand the databases behind their computer screen.
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38. One easy way to think about how databases function and how to design a database that is useful, is to begin by thinking about how the information will be used.
So instead of starting with the inputs that will go into the database, we want to begin by thinking about the outputs that will be required from the database. What reports will the users need? For example, if you need to all your customers in a specific zip code, you will need to be able to sort by ZIP.
So this is a starting point for identifying the fields that the database needs to have. We know that we will need a field for ZIP code so we can sort on ZIP.
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39. Database Fields & Records
How many have used spreadsheet software before?
Sometimes spreadsheets are called flat databases.
So when thinking about a database, you can begin by visualizing a spreadsheet.
The fields are shown in columns
Records are shown in rows.
Fields are shown in columns
Records are shown in rows.
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40. Spreadsheets Spreadsheet as a 2-dimensional database
Spreadsheets can be thought of as a 2-dimensional database (columns and rows, fields and records).
Spreadsheet as a 2-dimensional database
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41. Database Tables Database Tables in 3-D
Databases use database tables that add a third dimension.
So databases are 3 dimensional.
Imagine layering or stacking the database tables.
Spreadsheets permit you to see both dimensions on the screen. Databases with 3 dimensions often require you to mentally visualize the database rather than being able to see it on the screen.
Database Tables in 3-D
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42. Database Essentials
Relational Database: database tables are related or connected through fields common to two or more tables
Primary Key: a unique identifier for each record in a database table
Accounting systems typically use a relational database to store accounting data.
Relational databases use database tables that are related or connected.
The database tables are connected to each other through common fields that appear in two or more tables.
Each database table must have a primary key. The primary key is a unique identifier for each record in a database table.
The unique identifier is required to be able to identify and retrieve the records. For example, if you used last name and you had two Smiths in the database table, how would you be able to retrieve the correct Smith?
Have you ever received a utility bill or phone bill? What was the unique identifier on the bill?
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43. Relational Database Primary Key Customer Table with Primary Key
Notice that the customer table uses a primary key of customer number.
The order table also contains a field for customer number.
Customer number is the common field that connects or relates these two tables, the customer table and the order table.
Also notice that the Order table has a primary key: Invoice No.
Customer Table with Primary Key
Order Table with Primary Key of the Customer Table
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44. Database Essentials
Database Forms: onscreen forms used for database input, such as onscreen checks
Database Queries: used for database searches and inquiries
Database Reports: used for database output either onscreen or printout
Three more database essentials that accounting professionals need to know are database forms, queries, and reports.
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45. Study Less. Learn More. Make Connections.
My Connection
Study Less. Learn More. Make Connections.
Tech Ex 1.37
EspressoCoffee has given you the following work assignment.
Using spreadsheet software and the information from Tech Ex 1.37, create a Customer table for EspressoCoffee.
Identify the primary key by highlighting the column in yellow.
Populate the Customer table by entering the customer information from your book Tech Ex 1.37.
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46. Study Less. Learn More. Make Connections.
My Connection
Study Less. Learn More. Make Connections.
Tech Ex 1.40
Using spreadsheet software, construct a table that will collect data for an application of your choice (e.g., data regarding dogs for a dog walking business).
Identify the appropriate fields.
Identify the primary key.
Populate at least two records with test data.
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47. Accounting Insight No 7 relates to the A in SASSY: Analyze accounting data.
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48. From Data To Intelligence
Transforms data to intelligence for better decision.
Data: The amount of a single sale of an Apple computer would be accounting data.
Information: Apple’s income statement for the year showing sales by type of customer would be information. Which customers purchased what products last year?
Intelligence: Financial analytics and predictive modeling that allows Apple to predict the number of customers who will purchase a new product. Which customers will purchase what products next year?
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49. Business Intelligence
Two general approaches to business intelligence:
Shadow Data: Often consists of “homegrown” spreadsheets.
Business Intelligence Technologies: Software applications that perform data mining and predictive analytics.
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50. Information assets include information contained within the information system including electronic records, files and databases.
Information stored in the accounting system often is highly confidential and the target of cyberattacks (such as customer credit card numbers). So there must be appropriate measures in place to safeguard the information stored in the accounting system.
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51. 3 Keys of Opportunity
People: What is the impact of the opportunity on people?
Processes: What is the impact of the opportunity on processes?
Technology: How will the opportunity impact technology?
People, processes and technology are three keys used to evaluate and resolve issue and capitalize on opportunities.
For example, how will a new accounting system impact people? Processes? Technology?
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52. 3 Keys of Opportunity
Pair and Share: Share with a classmate your response to the following: How can you use the three keys to triage an issue or opportunity that you are currently facing?
People
Processes
Technology
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