Chapter 2
BUSINESS PROCESSES
AND AIS DATA
Role of Accountants in AIS


Evaluators
Designers
Accountants
Need to understand:
 a company’s business
process

how data are organized to
support those processes
Understanding transaction
cycles helps accountants ask
the right questions when
learning about an accounting
system.
Business Processes
and Events



Acquisition (purchasing)
cycle
Conversion cycle*
Revenue cycle
*Not covered in this text.
Acquisition Cycle
1. Consult with suppliers.
2. Process requisitions.
3. Develop agreements with
suppliers to purchase goods
or services in the future.
4. Receive goods or services
from the supplier.
5. Recognize claim for goods
and services received.
6. Select invoices for payment.
7. Write checks.
Revenue Cycle
1. Respond to customer
inquiries.
2. Develop agreements with
customers to provide
goods and services in the
future.
3. Provide services or ship
goods to the customer.
4. Bill customer.
5. Collect cash.
6. Deposit cash in the bank.
7. Prepare reports.
Identifying Events in
Business Processes
Guidelines for Recognizing
Events:
1. Recognize - first event
when a person or
department within an
organization becomes
responsible for an activity.
Identifying Events in
Business Processes
Guidelines for Recognizing
Events:
2. Ignore - activities that do
not require participation by
an internal agent.
3. Recognize - new event
when responsibility is
transferred from one
internal agent to another.
Identifying Events in
Business Processes
Guidelines for Recognizing
Events:
4. Recognize - new event when
process has been interrupted and
resumed later by the same internal
agent.
After the interruption, someone
outside the organization or the
process may restart the process.
Or the process may continue at a
scheduled time.
Continuing After a Break
Common ways:
A person/organization
outside the company
initiates the continuation of
the process.
 The process continues at a
scheduled time.

Identifying Events in
Business Processes
Guidelines for Recognizing
Events:
5. Use an event name and
description that reflects the
broad nature of the event.
Organizing Data in an AIS
(Manual System)

Source documents

Journals

General ledger

Subsidiary ledgers
Organizing Data in an AIS
(Computerized System)


Events that affect the
general ledger
Data organized by using
source documents, journals,
and the general ledger
Files in a Computerized AIS
File Concepts
 Entity
 Field
 Record
 File
 Transaction file
 Master file
 Reference data
 Reference field
 Summary data
 Summary field
Types of Files and Data

Master files

Transaction files
Master Files
Characteristics:
 Store relatively permanent
data about
 external agents,
 internal agents,
 or goods and services
 No details about individual
transactions
 Stored data - either
reference or summary
Master Files
Created to store reference
data about:
 Goods and services
 Internal agents
 External agents
Transaction Files
and Events
Transaction file characteristics:
 Store data about events
 Usually include a field for the
date of the transaction
 Usually include quantity and
price information
Events occur in a specific
sequence in the revenue and
acquisition cycles.
Events and Activities
Three types of activities help
in understanding an AIS:
 Recording events
 Updates
 File maintenance
Keyterms

Acquisition (purchasing)
cycle

Conversion cycle

Entity

Events

External agents

Field

File

File maintenance
Keyterms

Internal agent

Master file

Record

Recording

Reference data

Reference field

Revenue cycle
Keyterms

Subsidiary ledger

Summary data

Summary field

Transaction cycle

Transaction file

Update