1. Accounting Information Systems: An Overview
Chapter 1
Accounting Information Systems: An Overview
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2. Learning Objectives Distinguish between data and information.
Discuss the characteristics of useful information.
Explain how to determine the value of information.
Explain the decisions an organization makes and the information needed to make them.
Identify the information that passes between internal and external parties and an AIS.
Describe the major business processes present in most companies.
Explain what an accounting information system (AIS) is and describe its basic functions.
Discuss how an AIS can add value to an organization.
Explain how an AIS and corporate strategy affect each other.
Explain the role an AIS plays in a company’s value chain.
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3. Goal What Is a System? System
A set of two or more interrelated components interacting to achieve a goal
Goal Conflict
Occurs when components act in their own interest without regard for overall goal
Goal Congruence
Occurs when components acting in their own interest contribute toward overall goal
Process1
Process2
Goal
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4. Data vs. Information Information
Data are facts that are recorded and stored.
Insufficient for decision making.
Information is processed data used in decision making.
Too much information however, will make it more, not less, difficult to make decisions. This is known as Information Overload.
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5. Benefit $’s > Cost $’s
Value of Information
Benefits
Costs
Reduce Uncertainty
Improve Decisions
Improve Planning
Improve Scheduling
Time & Resources
Produce Information
Distribute Information
Benefit $’s > Cost $’s
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6. What Makes Information Useful?
Necessary characteristics:
Relevant
“The capacity of information to make a difference in a decision by helping users to form predictions about the outcomes of past, present, and future events or to confirm or correct prior expectations.”
Reliable
“The quality of information that assures that information is reasonably free from error and bias and faithfully represents what it purports to represent.”
Complete
“The inclusion in reported information of everything material that is necessary for faithful representation of the relevant phenomena.”
Point out to students that these characteristics are from the SFAC #2 Quality of Accounting Information (maybe have them read it).
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7. What Makes Information Useful?
Timely
“Having information available to a decision maker before it loses its capacity to influence decisions.”
Understandable
“The quality of information that enables users to perceive its significance.”
Verifiable
“The ability through consensus among measurers to ensure that information represents what it purports to represent or that the chosen method of measurement has been used without error or bias.”
Accessible
Available when needed (see Timely) and in a useful format (see Understandable).
Point out to students that these characteristics are from the SFAC #2 Quality of Accounting Information (maybe have them read it).
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8. Business Process Systems working toward organizational goals Revenue
Expenditure
Production
Human Resources
Financing
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9. Business Process Cycles
Revenue
Expenditure
Production
Human Resources
Financing
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10. Business Transactions
Give–Get exchanges
Between two entities
Measured in economic terms
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11. Business Cycle Give–Get
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12. Accounting Information Systems
Collect, process, store, and report data and information
If Accounting = language of business
AIS = information providing vehicle
Accounting = AIS
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13. Components of an AIS People using the system
Procedures and Instructions
For collecting, processing, and storing data
Data
Software
Information Technology (IT) Infrastructure
Computers, peripherals, networks, and so on
Internal Control and Security
Safeguard the system and its data
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14. AIS and Business Functions
Collect and store data about organizational:
Activities, resources, and personnel
Transform data into information enabling
Management to:
Plan, execute, control, and evaluate
Provide adequate control to safeguard
Assets and data
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15. AIS Value Add Improve Quality and Reduce Costs Improve Efficiency
Improve Sharing Knowledge
Improve Supply Chain
Improve Internal Control
Improve Decision Making
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16. Improve Decision Making
Identify situations that require action.
Provide alternative choices.
Reduce uncertainty.
Provide feedback on previous decisions.
Provide accurate and timely information.
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17. Value Chain
The set of activities a product or service moves along before as output it is sold to a customer
At each activity the product or service gains value
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18. Value Chain—Primary Activities
Inbound Logistics
Operations
Outbound Logistics
Marketing/Sales
Service
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19. Value Chain—Support Activities
Firm Infrastructure
Human Resources
Technology
Purchasing
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20. Value Chain
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21. AIS and Corporate Strategy
Organizations have limited resources, thus investments to AIS should have greatest impact on ROI.
Organizations need to understand:
IT developments
Business strategy
Organizational culture
Will effect and be effected by new AIS
AIS
IT Developments
Business Strategy
Organizational Culture
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