Chapter 2-2 Accounting Information Systems, 1 st Edition Foundational Concepts of the AIS
Chapter 2-3 1. 1.The interrelationships of business processes and the AIS 2. 2.Types of accounting information systems 3. 3.Accounting software market segments 4. 4.Input methods used in business processes 5. 5.The processing of accounting data 6. 6.Outputs from the AIS related to business processes 7. 7.Documenting processes and systems 8. 8.Client-server computing 9. 9.Ethical considerations at the foundation of accounting information systems Study Objectives
Chapter 2-4 SO 1 The interrelationships of business processes and the AIS Business Processes and the AIS Accounting Information System - a system that captures, records, processes, and reports accounting information. Business Process - a prescribed sequence of work steps completed in order to produce a desired result.
Chapter 2-5 Business Processes and the AIS Exhibit 2-1 Overall View of Transactions, Processes, and Resulting Reports SO 1 The interrelationships of business processes and the AIS
Chapter 2-6 b. Business processes may vary from company to company. 1. Which of the following statements is not true? c. Regardless of the extent of computerization, all accounting information systems must capture data from the transactions within business processes. d. Business processes categorized as expenditure processes are not intended to be processes that serve customers. SO 1 The interrelationships of business processes and the AIS Business Processes and the AIS a. Accounting information systems must maintain both detail and summary information. Concept Check
Chapter 2-7 SO 2 Types of accounting information systems Types of Accounting Information Systems Three categories of AIS : 1.Manual systems 2.Legacy systems 3.Modern, integrated IT systems
Chapter 2-8 SO 2 Types of accounting information systems Types of Accounting Information Systems Manual Systems Generally used by small organizations. Entirely manual system would require: Source document Turnaround document General ledger General journal Special journals Subsidiary ledgers
Chapter 2-9 SO 2 Types of accounting information systems Types of Accounting Information Systems Legacy Systems Existing system, often based on old technology. Advantages are that legacy systems: 1.Customized to specific needs. 2.Support unique business processes not inherent in generic accounting software. 3.Contain invaluable historical data that may be difficult to integrate into a new system. 4.Well supported and understood by existing personnel.
Chapter 2-10 SO 2 Types of accounting information systems Types of Accounting Information Systems Legacy Systems Disadvantages are that legacy systems: 1.Costly to maintain. 2.Often lack adequate supporting documentation. 3.Hardware needed to maintain may become obsolete. 4.Not usually based on user-friendly interfaces. 5.Tends to use software written in older computer languages. 6.Often difficult to modify to make user friendly. 7.Difficult to integrate when companies merge.
Chapter 2-11 SO 2 Types of accounting information systems Types of Accounting Information Systems Legacy Systems Decision whether to replace or update legacy systems. 1.Screen scrapers 2.Enterprise application integration 3.Complete replacement of legacy systems
Chapter 2-12 SO 2 Types of accounting information systems Types of Accounting Information Systems Modern, Integrated Systems New programs sold by software development companies are more user friendly than legacy accounting systems. Advantages to purchasing accounting software: Lower cost Shorter implementation time Fewer bugs
Chapter 2-13 b. subsidiary ledger. 2. In a manual system, an adjusting entry would most likely be initially recorded in a c. general journal. d. general ledger. a. special journal. SO 2 Types of accounting information systems Types of Accounting Information Systems Concept Check
Chapter 2-14 b. They contain invaluable historical data that may be difficult to integrate into newer systems. 3. Which of the following is not a disadvantage of maintaining legacy systems? c. Hardware or hardware parts may be unavailable for legacy systems. d. It can be difficult to integrate various legacy systems into an integrated whole. a. There are fewer programmers available to support and maintain legacy systems. SO 2 Types of accounting information systems Types of Accounting Information Systems Concept Check
Chapter 2-15 b. It is less costly. 4. Which of the following is a disadvantage of purchased accounting software, compared with software developed in-house? c. The implementation time is shorter. d. There are fewer bugs. a. It is custom designed for that company. SO 2 Types of accounting information systems Types of Accounting Information Systems Concept Check
Chapter 2-17 SO 3 Accounting software market segments Accounting Software Market Segments Exhibit 2-3 Popular Accounting Software Programs within the Market Segments
Chapter 2-18 b. Backoffice ware. 5. Which of the following is not a method of updating legacy systems? c. Screen scraper. d. Complete replacement. a. Enterprise application integration. SO 3 Accounting software market segments Accounting Software Market Segments Concept Check
Chapter 2-19 b. Midmarket. 6. When categorizing the accounting software market, a company with revenue of $8 million would most likely purchase software from which segment? Concept Check c. Beginning ERP. d. Tier 1 ERP. a. Small company. SO 3 Accounting software market segments Accounting Software Market Segments
Chapter 2-20 SO 4 Input methods used in business processes Input Methods for AIS Input methods used in organizations: Source documents and keying Bar coding Point of sale systems EDI E-business
Chapter 2-21 b. E-business. 7. An IT system that uses touch-screen cash registers as an input method is called c. Point of sale system. d. Source documents and keying. a. Electronic data interchange. SO 4 Input methods used in business processes Input Methods for AIS Concept Check
Chapter 2-22 SO 5 The processing of accounting data Processing Methods Batch Processing -Transactions are grouped. Advantages 1.Efficient for large volumes of like transactions. 2.Audit trail is maintained. 3.Generally use less costly hardware and software. 4.Hardware and software systems are not as complicated as on-line systems. 5.Generally easier to control than other types of computerized systems. 6.Personnel become specialized and efficient in processing routine transactions.
Chapter 2-23 SO 5 The processing of accounting data Processing Methods Batch Processing -Transactions are grouped. Disadvantages 1.Processing can take longer 2.Adding or deleting records takes much computer maintenance time. 3.Some data duplication is likely. 4.Integration across business processes is difficult in legacy systems that are batch oriented. 5.Lag while all transactions in a batch are collected. 6.May require that transaction and master files be sorted in the same sequential order.
Chapter 2-24 SO 5 The processing of accounting data Processing Methods Online and Real-Time Processing Advantages 1.System checks for input errors. 2.Information provided on a timely basis. 3.All files are constantly up to date. 4.The business processes are integrated into a single database so that a single system is achieved.
Chapter 2-25 SO 5 The processing of accounting data Processing Methods Online and Real-Time Processing Disadvantages 1.Hardware and software are more expensive than a batch systems. 2.A single database that is shared is more susceptible to unauthorized access of data. 3.Real-time systems can be difficult to audit.
Chapter 2-26 b. Real-time processing. 8. When similar transactions are grouped together for a specified time for processing, it is called Concept Check c. Batch processing. d. Group processing. a. Online processing. SO 5 The processing of accounting data Processing Methods
Chapter 2-27 SO 6 Outputs from the AIS related to business processes Outputs of the AIS General Categories of Outputs 1.Trading partner documents such as checks, invoices, and statements 2.Internal documents 3.Internal reports 4.External reports
Chapter 2-28 SO 7 Documenting processes and systems Documenting Systems Pictorial Representations of processes and systems include: 1.Process maps 2.System flowcharts 3.Document flowcharts 4.Data flow diagrams 5.Entity relationship diagrams (ER diagrams)
Chapter 2-29 Process Maps SO 7 Documenting processes and systems Documenting Systems Pictorial representations of business processes in which the actual flow and sequence of events in the process are presented in diagram form. Exhibit 2-5 Process Map Symbols
Chapter 2-30 System Flowcharts SO 7 Documenting processes and systems Documenting Systems Intended to depict the entire system, including inputs, manual and computerized processes, and outputs. Exhibit 2-7 Common System Flowchart Symbols
Chapter 2-31 Document Flowcharts Flow of documents and information among departments or units within an organization. Documenting Systems Exhibit 2-8 Payroll System Flowchart
Chapter 2-32 Documenting Systems Exhibit 2-9 Restaurant Process Map
Chapter 2-35 Documenting Systems Exhibit 2-11 Restaurant Data Flow Diagram Used to show the logical design of a system. Data Flow Diagrams
Chapter 2-36 Entity Relationship Diagrams SO 7 Documenting processes and systems Documenting Systems Pictorial representations of the logical structure of databases. Entities - items in the accounting system, such as employees, customers, vendors, and inventory items. Each entity has attributes, such as last name, first name, pay rate, and number of withholdings.
Chapter 2-37 Entity Relationship Diagrams SO 7 Documenting processes and systems Documenting Systems Cardinality refers to how many instances of an entity relate to each instance of another entity. 1.One to one: Each employee has one personnel file. 2.One to many: One supervisor has many employees. 3.Many to many: Each vendor can sell many items.
Chapter 2-38 Entity Relationship Diagrams Documenting Systems SO 7 Documenting processes and systems Exhibit 2-11 ERD of Internet Sales Entity Relationship Diagrams
Chapter 2-39 b. Process map. 10. In documenting systems, which pictorial method is described as a method that diagrams the actual flow and sequence of events? Concept Check c. Data flow diagram. d. Entity relationship diagram. a. System flowchart. SO 7 Documenting processes and systems Documenting Systems
Chapter 2-40 Two types of computers are networked together to accomplish the application processing. Characteristics: 1.Client and server computer are networked together. 2.System appears to users to be one integrated whole. 3.Individual parts of processing are shared between server and client. 4.Client computer participates in processing or data manipulation in some meaningful way. SO 8 Client-server computing Client–Server Computing
Chapter 2-41 Two Levels of Client-Server Computing: 1.Distributed presentation. 2.Distributed applications. SO 8 Client-server computing Client–Server Computing
Chapter 2-42 b. Distributed application. 12. In a client–server system, when the client PC manipulates data for presentation, but does not do any other significant processing, it is called Concept Check c. Distributed database. d. Distributed processing. a. Distributed presentation. SO 8 Client-server computing Client–Server Computing
Chapter 2-43 Accountants should be aware of opportunities for unethical behaviors within the various business processes. As a company chooses features and options for its accounting information systems, the importance of monitoring those systems should not be overlooked as a factor in decision making. SO 9 Ethical considerations at the foundation of accounting information systems Ethical Considerations of AIS