1. The Islamic University of Gaza
Accounting Information Systems An Introduction
Dr. Hisham Madi

2. Introduction What is an Information System?
An information system is the set of formal procedures by which data are collected, processed into information, and distributed to users

3. Introduction Transactions A transaction is a business event.
Financial transactions economic events that affect the assets and equities of the organization (sales, and purchase).
Nonfinancial transactions all other events processed by the organization’s. adding new supplier of raw materials.

4. Introduction Financial Transactions User Information Decision System
Making
Information
Nonfinancial
Transactions 10

5. Introduction What is Accounting Information Systems?
Applying information technology (IT) to accounting systems
Financial accounting
Managerial accounting
Auditing
Taxation
It identifies, collects, processes, and communicates economic information about a firm using a wide variety of technologies

6. Introduction
Accounting information systems exists at the intersection of two important disciplines: (1) accounting and (2) information systems
An Accounting Information System (AIS)
Data and processing procedures
Creates needed information for users

7. Accounting Versus Management Information System
Accounting Information Systems (AIS) process
financial transactions; e.g., sale of goods
and nonfinancial transactions that directly affect the processing of financial transactions; e.g., addition of newly approved vendors.
Management Information Systems (MIS) process
nonfinancial transactions that are not normally processed by traditional AIS; e.g., tracking customer complaints, production planning, control, sales forecasting.

8. Accounting Versus Management Information SystemIS
AIS
GLS/FRS
TPS
MRS
MIS
Finance
Marketing
Production
HRS
Distribution
AIS versus MIS? 11

9. The General AIS Model

10. Information Versus Data
Raw facts
No organization or meaning
Have not processed (edited, summarized, or redefined)
Have no direct effect on the users.
Information
Processed data
Meaningful to users
Cause the user to take an action.

11. AIS Components

12. Transforming the Data into Information
Functions for transforming data into information according to the general AIS model: 1. Data Collection 2. Data Processing 3. Data Management 4. Information Generation

13. Transforming the Data into Information
Data Collection
Capturing transaction data
Recording data onto forms
Validating and editing the data
Data Processing
Merging
Calculating
Summarizing
Comparing

14. Transforming the Data into Information
Data Management
Storing
Retrieving
Deleting
Information Generation
Compiling
Arranging
Formatting
Presenting

15. Characteristics of Useful Information
Relevance: serves a purpose
Timeliness: no older than the time period of the action it supports
Accuracy: free from material errors
Completeness: all information essential to a decision or task is present
Summarization: aggregated in accordance with the user’s needs

16. The Importance of IT to Accountants
Accountants often help clients make software and hardware purchases
Auditors must evaluate computerized systems
Often asked to evaluate the efficiency and effectiveness of existing system
Understanding is vital to passing most certification exams

17. Introduction to Transaction Processing
An economic event that affects the assets and equities of the firm.
Similar types of transactions are grouped together into three transaction cycles:
the expenditure cycle,
the conversion cycle, and
the revenue cycle.

18. Introduction to Transaction Processing
Expenditure Cycle: time lag between the two due to credit relations with suppliers:
physical component (acquisition of goods)
financial component (cash disbursements to the supplier)
Conversion Cycle :
the production system (planning, scheduling, and control of the physical product through the manufacturing process)
the cost accounting system (monitors the flow of cost information related to production)
Revenue Cycle: time lag between the two due to credit relations with customers :
physical component (sales order processing)
financial component (cash receipts)

19. Manual System Accounting Records
Source Documents - used to capture and formalize transaction data needed for transaction processing Product Documents - the result of transaction processing Turnaround Documents - a product document one system that becomes a source document for system

20. Creation a source Document

21. A Product Document

22. A Turnaround Document

23. Manual System Accounting Records
Journals - a record of chronological entry
special journals - specific classes of transactions that occur in high frequency
general journal - nonrecurring, infrequent, and dissimilar transactions
Ledger - a book of financial accounts
general ledger - shows activity for each account listed on the chart of accounts
subsidiary ledger - shows activity by detail for each account type

24. Computer-Based Systems
Master File - generally contains account data (e.g., general ledger and subsidiary file)
Transaction File - a temporary file containing transactions since the last update (sales orders, cash receipt, and inventory receipt).
Reference File - contains relatively constant information used in processing (e.g., tax tables, customer addresses)
Archive File - contains past transactions for reference purposes

25. Documentation Techniques
Five common documentation techniques:
Entity Relationship Diagram
Data Flow Diagrams
Document Flowcharts
System Flowcharts

26. Data Flow Diagrams (DFD)
Use symbols to represent the processes, data sources, data flows, and entities in a system
Entities represent the sources of Data.
Entities may be external to the organization such as customer or supplier.
DFD shows what logical tasks are being done, but not how they are done or who is performing them

27. Data Flow Diagram Symbols
Entity
Name
Data Store
Name N
Process
Description
Direction of
data flow 25

28. Data Flow Diagram Symbols

29. Entity Relationship Diagram (ERD)
ERD is a documentation technique to represent the relationship between entities in a system
Entities are
Resources (cash, raw materials)
Events (release of raw materials into the production process)
Agents (inventory control clerk, vendor, production worker)

30. Entity Relationship Diagram (ERD)
Cardinality
Is numeric mapping between two entity
Relationship between tow entities.
one-to-one (1:1)
one-to-many (1: M)
many-to-many (M : M)

31. Cardinalities 1 1 1 M M M Assigned Places Supply Entity Relationship
Type
Sales-
person
Assigned 1 M
Customer
Places
Order M M
Vendor
Supply
Inventory 23

32. System Flowcharts
A system flowchart is the graphical representation of the physical relationships among key elements of a system.

34. Document Flowcharts
A document flowchart traces the physical flow of documents through an organization—i.e., from the departments, groups, or individuals who first create them to their final dispositions.
Constructing a document flowchart begins by identifying the different departments or groups that handle the documents of a particular system

35. Computer Operations Department
Sales Department
Computer Operations Department
Warehouse
Shipping Department
Customer A
Sales
Order1
Edit and
Credit Check
Credit File
Customer
Order
Sales
Order 3
Picks
Goods
Stock
Records
Sales
Order2
Sales
Orders
Terminal
AR File
Update
Program
Picks
Goods
Sales
Order1
Inventory
Customer
Order
Sales
Order2
Sales
Order3 N A N
Sales
Order1
Sales
Order 3
Sales
Order2
Sales
Order1
Customer
Finished System Flowchart Showing All Facts Translated into Visual Symbols

36. Computer-Based Accounting Systems
Two broad classes of systems:
batch systems
real-time systems

37. Batch Processing
A batch is a group of similar transactions that are accumulated over time and then processed together.
There is always a time lag between the point at which an economic event occurs and the point at which it is reflected in the firm’s accounts.
The amount of lag depends on the frequency of batch processing
A time lag exists between the event and the processing.

38. Advantages of Batch Processing
Organizations can increase efficiency by grouping large numbers of transactions into batches rather than processing each event separately.
Batch processing provides control over the transaction process via control figures.

39. Real-Time Systems
Process transactions individually at the moment the economic event occurs.
Have no time lag between the economic event and the processing

40. Why Do So Many AIS Use Batch Processing?
The processing of such high-volume checks can be done during an off-peak computer time.
This is one reason why batch processing maybe done using real-time data collection.