Accounting Information Systems Fourteenth Edition, Global Edition Chapter 1 Accounting Information Systems: An Overview Copyright © 2018 Pearson Education, Ltd. All Rights Reserved 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: – The information needed to make them. – The major business processes present in most companies. • Explain how an AIS adds value to an organization. – How it affects and is affected by corporate strategy. – The role of AIS in a value chain. Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 2 Distinguishing Between Data and Information • Data are facts collected, recorded, and stored in the system – A fact could be a number, date, name, and so on. For example: 2/22/14 ABC Company, 123, 99, 3, 20, 60 Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 3 Data vs. Information The previous slide just showed data, if we organize the data within a context of a sales invoice, for example, it is meaningful and considered information. Invoice Date : 2/22/14 Invoice #: 123 Customer: ABC company Item # Qty Price 99 3 $20 Total Invoice Amount Copyright © 2018 Pearson Education, Ltd. $60 Chapter 1: Accounting Information Systems: An Overview Slide 1 - 4 Decision Quality • Information helps us make better decisions. • Too much information causing information overload can reduce decision quality. • Information Technology (IT) is used to help decision makers more effectively filter and condense information. Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 5 Value of Information • Information is valuable when the benefits exceed the costs of gathering, maintaining, and storing the data. Benefit (i.e., improved decision making) - Cost (i.e., time and resources used to get the information) = value of information Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 6 What Makes Information Useful? (1 of 2) There are seven general characteristics that make information useful: 1. 2. 3. 4. Relevant: information needed to make a decision (e.g., the decision to extend customer credit would need relevant information on customer balance from an A/R aging report) Reliable: information free from bias Complete: does not omit important aspects of events or activities Timely: information needs to be provided in time to make the decision Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 7 What Makes Information Useful? (2 of 2) 5. 6. 7. Understandable: information must be presented in a meaningful manner Verifiable: two independent people can produce the same conclusion Accessible: available when needed Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 8 Information Needs and Business Processes • Business organizations use business processes to get things done. A business process is a set of related, coordinated, and structured activities and tasks performed by people, machines, or both to achieve a specific organizational goal. • Key decisions and information needed often come from these business processes. Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 9 Transactional Information Between Internal and External Parties in an AIS • Business organizations conduct business transactions which is an agreement between two entities to exchange goods, services, or any other event that can be measured in economic terms by an organization. • Transaction data is used to create financial statements and is called transaction processing. • The flow of information between these users for the various business activities involves a give-get exchange grouped into business processes or transaction cycles. Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 10 Interactions Between AIS and Internal and External Parties Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 11 Basic Business Processes • Transactions between the business organization and external parties fundamentally involve a “give–get” exchange. These basic business processes are: – Revenue cycle: give goods / give service—get cash – Expenditure cycle: get goods / get service—give cash – Production cycle: give labor and give raw materials—get finished goods – Payroll cycle: give cash—get labor – Financing cycle: give cash—get cash Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 12 What Is an Accounting Information System (AIS)? • AIS is a system that collects, records, stores, and processes data to produce information for decision makers. • Consists of – – – – People who use the system Processes (procedures and instructions) Technology (data, software, and information technology) Controls to safeguard information • Thus, an AIS collects and stores data, transforms that data into information, and provides adequate controls. Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 13 How Does an AIS Add Value to an Organization? • A well thought out AIS can add value by: – Improving the quality and reducing the costs of products or services – Improving efficiency – Sharing knowledge – Improving efficiency and effectiveness of its supply chain – Improving the internal control structure – Improving decision making Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 14 AIS and Corporate Strategy • An AIS is influenced by an organization’s strategy. • A strategy is the overall goal the organization hopes to achieve (e.g., increase profitability). • Once an overall goal is determined, an organization can determine actions needed to reach their goal and identify the informational requirements (both financial and nonfinancial) necessary to measure how well they are doing in obtaining that goal. Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 15 AIS in the Value Chain • The value chain links together the different activities within an organization that provide value to the customer. – Value chain activities are primary and support activities. Primary activities provide direct value to the customer. Support activities enable primary activities to be efficient and effective. • A supply chain is an extended system that includes the organizations value chain as well as its suppliers, distributors, and customers. Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 16 Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 17 Key Terms • System • Revenue cycle • Goal conflict • Expenditure cycle • Goal congruence • Production (conversion) cycle • Data • Human resource/payroll cycle • Information • Financing cycle • Information technology (IT) • General ledger and reporting system • Information overload • Accounting information system (AIS) • Value of information • Predictive analysis • Business process • Value chain • Transaction • Primary activities • Transaction processing • Support activities • Give-get exchange • Supply chain Copyright © 2018 Pearson Education, Ltd. Chapter 1: Accounting Information Systems: An Overview Slide 1 - 18
