Accounting Information Systems
CHAPTER III
The Study of Accounting
Information Systems
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What Is Accounting?
• It is the principal way of organizing and reporting financial
information. It has been called the “language of business.”
• Accounting and information systems comprise the functional
area of business responsible for providing information to the
other areas to enable them to do their jobs and for reporting
the results to interested parties.
• To that end, an accounting system is used to identify, analyze,
measure, record, summarize, and communicate relevant
economic information to interested parties.
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What Is a System?
• A System is an entity consisting of interacting
parts that are coordinated to achieve one or
more common objectives. Systems must
possess
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SYSTEM
INPUT
PROCESS
OUTPUT
FEEDBACK
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INFORMATION SYSTEM
INFORMATION
DATA
INPUT
PROCESS
OUTPUT
FEEDBACK
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Data Versus Information
• Data are raw facts and figures that are processed
to produce information
• Information is data that have been processed and
are meaningful and useful to users. The terms
“meaningful” and “useful” are value-laden terms
and usually subsume other qualities such as
timeliness, relevance, reliability, consistency,
comparability, etc.
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Functional Steps in Transforming Data into
Information
• Data collection - capturing, recording, validating and
editing data for completeness and accuracy
• Data Maintenance/Processing - classifying, sorting,
calculating data
• Data Management - storing, maintaining and retrieving
data
• Data Control - safeguarding and securing data and
ensuring the accuracy and completeness of the same
• Information Generation - interpreting, reporting, and
communicating information
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What Is an Information System?
• An Information system is a framework in which data is
collected, processed, controlled and managed through
stages in order to provide information to users
• It evolves over time and becomes more formalized as a firm
grows and becomes more complex. It can be a manual or
computerized system
• Firms depend on information systems in order to survive
and stay competitive
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The Universal Data Processing Model
Storage
Processing
Consumers
Exchange Events
Internal Events
Environmental Events
}
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Accounting Information System
• An Accounting Information System is a
unified structure that employs physical
resources and components to transform
economic data into accounting
information for external and internal
users.
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The Business Firm as a System
Environment
of the Firm
Business
Firm
Organization
Information
System
Operational
System
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Organization’s
functions
AIS Transaction
Cycles
Business Events
from Operations
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System Characteristics of Business Firms
•
•
•
•
•
•
•
Objectives
Environment
Constraints
Input-Process-Output
Feedback
Controls
Subsystems
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FUNCTIONS OF AN INFORMATION SYSTEM
ENVIRONMENT
Customers
Suppliers
ORGANIZATION
INFORMATION SYSTEM
INPUT
PROCESS
OUTPUT
FEEDBACK
Regulatory
Agencies
Stockholders
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Competitors
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TYPES OF INFORMATION SYSTEMS
KIND OF SYSTEM
GROUPS SERVED
STRATEGIC LEVEL
SENIOR
MANAGERS
MANAGEMENT LEVEL
MIDDLE
MANAGERS
KNOWLEDGE LEVEL
KNOWLEDGE
&
DATA WORKERS
OPERATIONAL
MANAGERS
SALES &
MARKETING
OPERATIONAL LEVEL
MANUFACTURING
FINANCE
ACCOUNTING
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HUMAN
RESOURCES
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AIS as an MIS Subsystem
Sales/
Marketing
Production
Info
AIS
Personnel
Finance
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Relationship of AIS & MIS
MIS
Finance
Sales/Marketing
Production
AIS
Personnel
Order entry/Sales
Billing/A.Rec./Cash receipts
Purchasing/A. Pay./Cash disb.
Inventory
Payroll
General ledger
Production
Examples of AIS Subsystems
(Merchandising)
Order entry
Sales
System
Shipping
Revenue
Cycle
Billing/
A. Receivable
Cash Receipts
System
Inventory
System
General
Ledger
System
Purchasing/
A. Payable/
Cash Disb.
System
Receiving
Expenditure
Cycle
Ext/Fin. reporting
Tax & req. reporting
Internal reporting
Human
Resource
Management
(Payroll)
System
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No Planning/Control, Investment,2015-2016
or Production Cycles reflected here
The Operational System of a
Manufacturing Firm
Manufacturing Firm
Facilities
Supporting
Operations
Labor
(human
services)
Material
from
Supplier
Acquiring
Materials
Producing
Finished
Goods
Storing
Finished
Goods
Data
Shipping
Finished
Goods
Goods
to
Customer
Information
AIS
Funds
Data and information flow
Physical
flows
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Funds
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Examples of AIS Subsystems: Production Cycle
Inventory
System
Production
System
Purchasing/
A. Payable/
Cash Disb.
System
Production Cycle
Human
Resource
Management
(Payroll
System
General
Ledger
System
No Revenue, and Investment Cycles reflected here
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Organizational Structure in Business
Firms
• Hierarchical
• Matrix: Blend functional and project-oriented
structures
• Decentralized
• Network
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Objectives and Users of AIS
• Support day-to-day operations
– Transaction processing
• Support Internal Decision-Making
– Trend Analyses
– Quantitative & Qualitative Data
– Non-transactional sources
• Help fulfill Stewardship Role
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Resources Required for an AIS
• Processor(s): Manual or Computerized
• Data Base(s): Data Repositories
• Procedures: Manual or
Computerized
• Input/Output Devices
• Miscellaneous Resources
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Reasons for Studying Accounting
Information Systems
• Career accountants will be users, auditors, and
developers of AIS
• Modern-day AIS are complex because of new
technologies
• Concepts studied in AIS are integrated into every other
accounting course
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Information-Oriented Professionals
• An array of professionally trained persons from
different fields of study have focused on providing
information to users
• These professionals include system and managerial
accountants and auditors, system analysts and
industrial engineers
• Professional certifications are increasing. These
include Certified Computing Professional, Certified
Information Systems Auditor, Certified Managerial
Accountant, Certified Fraud Examiner, etc.
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Roles of Accountants With Respect
to an AIS
• Financial accountants prepare
financial information for external
decision-making in accordance
with GAAP
• Managerial accountants prepare
financial information for internal
decision-making
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Roles of Accountants With Respect
to an AIS
• Auditors - evaluate controls and attest to the fairness of
the financial statements.
• Accounting managers - control all accounting activities of
a firm.
• Tax specialists - develop information that reflects tax
obligations of the firm.
• Consultants - devise specifications for the AIS.
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