1. Chapter 2: The Business Environment and the AIS
Accounting Information Systems: Essential Concepts and Applications Fourth Edition by Wilkinson, Cerullo, Raval, and Wong-On-Wing
Chapter 2: The Business Environment and the AIS
Slides Authored by Somnath Bhattacharya, Ph.D.
Florida Atlantic University

2. The Business Firm as a System
Organization
Information
System
Operational
Organization’s
functions
Business
Firm
Environment
of the Firm
AIS Transaction
Cycles
Business Events
from Operations
Figure 2-1

3. System Characteristics of Business Firms
Objectives
Environment
Constraints
Input-Process-Output
Feedback
Controls
Subsystems

4. Examples of AIS Subsystems (Merchandising)
Inventory
System
General
Ledger
Order entry
Sales
Billing/
A. Receivable
Cash Receipts
Purchasing/
A. Payable/
Cash Disb.
Human
Resource
Management
(Payroll)
Revenue
Cycle
Expenditure
Shipping
Receiving
Ext/Fin. reporting
Tax & req. reporting
Internal reporting
No Planning/Control, Investment, or Production Cycles reflected here

5. Examples of AIS Subsystems: Service Firm Revenue
General
Ledger
System
Human resource
Management
(payroll)
Service firm Revenue Cycle
Billing/
A.Receivables
Cash Receipts
No Purchasing, Production, Planning/Control, Investment Cycles
reflected here

6. Examples of AIS Subsystems: Production Cycle
Inventory
System
Human
Resource
Management
(Payroll
General
Ledger
Purchasing/
A. Payable/
Cash Disb.
Production
Production Cycle
No Revenue, and Investment Cycles reflected here

7. Organizational Structure in Business Firms
Hierarchical
Matrix: Blend functional and project-oriented structures
Decentralized
Network

8. A Networked Organizational Structure
Consultant
Training
Marketing
Consulting
Services
Consultant
Recruitment
Operation
Management
Customer
Project
Team
Customer
Services
Management
Figure 2-5

9. The Operational System of a Manufacturing Firm
Facilities
Labor
(human
services)
Data
Funds
Acquiring
Materials
Producing
Finished
Goods
Storing
Shipping to
Customer
Supporting
Operations
AIS
Information
Material
from
Supplier
Manufacturing Firm
Data and information flow
Physical flows
Figure 2-7

10. Useful Data Elements Concerning a Business Event
The nature of the element and when it occurred
Which “agents” were involved
What kinds of resources were involved and in what quantities
Where the event took place

11. Data Management: Some Specifics
Records {
File

12. Some More Specifics
The manual activity of journalizing transactions is equivalent to the computerized recording of transactions in a transaction file
In general, manual accounting journals are equivalent to computerized transaction files
Similarly, manual general ledger and subsidiary ledgers are equivalent to computerized Master files. e.g., There is typically 1 record in the general ledger for each account in an entity’s chart of accounts
Examples of Master files include:
Accounts Receivable Master File
Accounts Payable Master File
Inventory Master File 12

13. Basic Rules of Flowcharting - I
1) The flow begins at the upper left-hand corner of the sheet and generally moves from left to right and from top to bottom
2) All steps are clearly presented in a sequence, or a series of sequences. No obvious gaps in the procedure should be present
3) Symbols are used consistently throughout. Thus the symbol for manual processing (an inverted trapezoid) should appear each time a clerk performs a step in the procedure
Examples: What is what?
Figure 2-9

14. Basic Rules of Flowcharting - II
4) The dispositions of all documents and reports are shown. In fact, the final “resting place” of every copy of every of every prepared document should be specified. Typical dispositions include placing documents in files, sending documents to outside parties such as customers, forwarding documents to connecting procedures (such as a general ledger procedure), and distributing reports to managers. If the disposition consists of destroying a document, this action may be represented in the manner shown below:
Source Document
Destroy
From prior
processing
Figure continued

15. Basic Rules of Flowcharting - III
5) The “sandwich” rule is consistently applied. This rule states that a processing symbol should be sandwiched between an input symbol and an output symbol, in the manner shown below:
Input
document
Output
Manual
Process
Figure continued

16. Basic Rules of Flowcharting - IV
6) When a document crosses an organizational line within the flowchart, the document is pictured again in the new organizational unit. However, the repetition is not usually necessary in some instances if the organizational units are adjacent
7) All symbols contain a brief but specific label written inside the symbols
8) Multiple copies of documents are drawn as an overlapping group and are numbered in the upper right-hand corners; these numbers remain the copies during their flows through the procedure
Figure continued

17. Basic Rules of Flowcharting - V
9) Added comments are included within annotation symbols and are attached to appropriate symbols, such as the processing symbols to which the comments are related
10) Ample connections (cross-references) are provided. The symbols used in forming the connections depend on the situation. Thus, if two sheets are needed to to contain the flowchart, the flows between pages are formed by off-page connector symbols. In those cases where the procedure being flowcharted links to an adjoining procedure, the connection can be formed by a terminal symbol
Figure continued

18. Basic Rules of Flowcharting - VI
11) Exceptional Occurrences, such as back orders, are clearly noted. They may appear as (i) comments within annotation symbols, (ii) separate flowcharts, with references to the main flowchart, or (iii) decision branches, as shown below:
Customer
Credit
Satisfactory?
Reject
Order
Accept
Rejection
Letter
Acknowledgement
Sales Order
To Customer
To sales Order
Processing
From prior
processing
Figure continued

19. Accounting Information Systems: Essential Concepts and Applications Fourth Edition by Wilkinson, Cerullo, Raval, and Wong-On-Wing
Copyright © 2000 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.