Accounting Information Systems:
Essential Concepts and Applications
Fourth Edition by Wilkinson, Cerullo,
Raval, and Wong-On-Wing
The Study of Accounting
Information Systems
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.
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
SYSTEM
INPUT
PROCESS
FEEDBACK
OUTPUT
INFORMATION SYSTEM
INFORMATION
DATA
INPUT
PROCESS
FEEDBACK
OUTPUT
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.
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
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
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.
The Business Firm as a System
Environment
of the Firm
Business
Firm
Organization
Information
System
Operational
System
Organization’s
functions
AIS Transaction
Cycles
Business Events
from Operations
System Characteristics of
Business Firms
Objectives
Environment
Constraints
Input-Process-Output
Feedback
Controls
Subsystems
FUNCTIONS OF AN INFORMATION SYSTEM
ENVIRONMENT
Customers
Suppliers
ORGANIZATION
INFORMATION SYSTEM
INPUT
PROCESS
OUTPUT
FEEDBACK
Regulatory
Agencies
Stockholders
Competitors
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
HUMAN
RESOURCES
AIS as an MIS Subsystem
Sales/
Marketing
Production
Info
AIS
Personnel
Finance
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
No Planning/Control, Investment, 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
Funds
Examples of AIS
Subsystems: Production Cycle
Inventory
System
Production
System
Purchasing/
A. Payable/
Cash Disb.
System
Production Cycle
General
Ledger
System
Human
Resource
Management
(Payroll
System
No Revenue, and Investment Cycles reflected here
Organizational Structure in
Business Firms
Hierarchical
Matrix: Blend functional and project-
oriented structures
Decentralized
Network
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
Resources Required for an AIS
Processor(s): Manual or Computerized
Data Base(s): Data Repositories
Procedures: Manual or
Computerized
Input/Output Devices
Miscellaneous Resources
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
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.
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
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.
Ethical Standards for
Consulting
Professional competence
Exercise due professional care
Plan and supervise all work
Obtain relevant data to support reasonable
recommendations
Maintain integrity and objectivity
Understand and respect the responsibilities
of all parties
Disclose any conflicts of interest