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C HAPTER 2

Overview of Business

Processes

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INTRODUCTION

Questions to be addressed in this chapterinclude: What are the basic business activities in which an

organization engages? What decisions must be made to undertake these activities?

What information is required to make those decisions?

What role does the data processing cycle play inorganizing business activities and providing

information to users? What is the role of the information system and

enterprise resource planning in modernorganizations?

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INFORMATION NEEDS AND

BUSINESS ACTIVITIES

Businesses engage in a variety of activities,including: Acquiring capital

Buying buildings and equipment Hiring and training employees

Purchasing inventory

Doing advertising and marketing

Selling goods or services Collecting payment from customers

Paying employees

Paying taxes

Paying vendors

Each activity

requires

different types

of decisions!

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BUSINESS ACTIVITIES

Businesses engage in a variety of activities,including: Acquiring capital

Buying buildings and equipment Hiring and training employees

Purchasing inventory

Doing advertising and marketing

Selling goods or services Collecting payment from customers

Paying employees

Paying taxes

Paying vendors

Each decision

requires

different types

of information.

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Types of information needed for decisions:

Some is financial

Some is nonfinancial

Some comes from internal sources

Some comes from external sources

An effective AIS needs to be able tointegrate information of different types andfrom different sources.


BUSINESS ACTIVITIES

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INTERACTION WITH EXTERNAL AND

INTERNAL PARTIES

The AIS interacts with external parties,such as customers, vendors, creditors,and governmental agencies.

AIS

External

Parties

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INTERNAL PARTIES

The AIS also interacts with internal partiessuch as employees and management.

AIS

Internal

Parties

External

Parties

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INTERNAL PARTIES

The interaction is typically two-way, in thatthe AIS sends information to and receivesinformation from these parties.

AIS

Internal

Parties

External

Parties

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A t ransact ionis:

An agreement between two entities toexchange goods or services; OR

Any other event that can be measured ineconomic terms by an organization.

EXAMPLES:

Sell goods to customers Depreciate equipment

BUSINESS CYCLES

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The transaction cycle is a process:

Begins with capturing data about atransaction

Ends with an information output, such asfinancial statements

BUSINESS CYCLES

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Many business activities are paired ingive-get exchanges

The basic exchanges can be grouped into

five major transaction cycles. Revenue cycle

Expenditure cycle

Production cycle Human resources/payroll cycle

Financing cycle

BUSINESS CYCLES

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The revenue cycle involves interactionswith your customers.

You sell goods or services and get cash.

REVENUE CYCLE

Give

Goods GetCash

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Expenditure cycle


Financing cycle

BUSINESS CYCLES

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The expenditure cycle involvesinteractions with your suppliers.

You buy goods or services and pay cash.

EXPENDITURE CYCLE

Give

Cash GetGoods

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Expenditure cycle


Financing cycle

BUSINESS CYCLES

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In the production cycle, raw materials andlabor are transformed into finished goods.

PRODUCTION CYCLE

Give Raw

Materials &Labor

Get

FinishedGoods

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Expenditure cycle


Financing cycle

BUSINESS CYCLES

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Expenditure cycle


Financing cycle

BUSINESS CYCLES

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The financing cycle involves interactions withinvestors and creditors.

You raise capital (through stock or debt), repay

the capital, and pay a return on it (interest ordividends).

FINANCING CYCLE

Give

Cash Getcash

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Thousands of transactions can occurwithin any of these cycles.

But there are relatively few typesoftransactions in a cycle.

BUSINESS CYCLES

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EXAMPLE: In the revenue cycle, thebasic give-get transaction is:

Give goods

Get cash

BUSINESS CYCLES

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Other transactions in the revenue cycle include:

BUSINESS CYCLES

Handle customer inquiries

Take customer orders

Approve credit sales Check inventory availability

Initiate back orders

Pick and pack orders

Ship goods Bill customers

Update sales and Accts Rec.for sales

Receive customer payments Update Accts Rec. for

collections

Handle sales returns,discounts, & bad debts

Prepare management reports

Send info to other cyclesNote that the last activity in any

cycle is to send information to other

cycles.

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Click on the buttons below if you wish tosee the transactions that occur in the othercycles:

BUSINESS CYCLES

Expenditure

Cycle

Human Res./

Payroll Cycle

Production

Cycle

Financing

Cycle

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Every transaction cycle:

Relates to other cycles

Interfaces with the general ledger and

reporting system, which generates informationfor management and external parties.

BUSINESS CYCLES

Finished Goods

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General Ledger

and ReportingSystem

Revenue

Cycle

Expenditure

CycleProduction

Cycle

Human Res./

Payroll CycleFinancing

Cycle

The revenue cycle Gets finished

goods from theproduction cycle

Provides funds tothe financing cycle

Provides data tothe General Ledgerand ReportingSystem

Finished Goods

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General Ledger

and ReportingSystem

Revenue

Cycle

Expenditure

CycleProduction

Cycle

Human Res./


Cycle

The expenditurecycle

Gets funds fromthe financing cycle

Provides raw

materials to theproduction cycle


Raw

Mats.

Data

Finished Goods

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General Ledger

and ReportingSystem

Revenue

Cycle

Expenditure

CycleProduction

Cycle

Human Res./


Cycle

The production cycle: Gets raw materials

from the expenditurecycle

Gets labor from theHR/payroll cycle

Provides finishedgoods to the revenuecycle

Provides data to theGeneral Ledger andReporting System

Raw

Mats.

Finished Goods

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General Ledger

and ReportingSystem

Revenue

Cycle

Expenditure

CycleProduction

Cycle

Human Res./


Cycle

The HR/payrollcycle:

Gets funds fromthe financing cycle

Provides labor to

the productioncycle


Funds

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General Ledger

and ReportingSystem

Revenue

Cycle

Expenditure

CycleProduction

Cycle

Human Res./


Cycle

The Financing cycle: Gets funds from

the revenue cycle

Provides funds tothe expenditureand HR/payroll

cycles Provides data to

the General Ledgerand ReportingSystem

Funds

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General Ledger

and ReportingSystem

Revenue

Cycle

Expenditure

CycleProduction

Cycle

Human Res./


Cycle

The General Ledgerand Reporting System:

Gets data from all ofthe cycles

Provides informationfor internal and

external users

Information for

Internal & External Users

Data

Data

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Many accounting software packagesimplement the different transaction cyclesas separate modules.

Not every module is needed in everyorganization, e.g., retail companies dont havea production cycle.

Some companies may need extra modules. The implementation of each transaction cycle

can differ significantly across companies.

BUSINESS CYCLES

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However the cycles are implemented, it iscritical that the AIS be able to:

Accommodate the information needs of

managers Integrate financial and nonfinancial data.

BUSINESS CYCLES

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Accountants play an important role in dataprocessing. They answer questions such as:

What data should be entered and stored?

Who should be able to access the data? How should the data be organized, updated, stored,

accessed, and retrieved?

How can scheduled and unanticipated information

needs be met. To answer these questions, they must

understand data processing concepts.

TRANSACTION PROCESSING:

THE DATA PROCESSING CYCLE

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An important function of the AIS is toefficiently and effectively process the dataabout a companys transactions.

In manualsystems, data is entered into paperjournals and ledgers.

In computer-basedsystems, the series of

operations performed on data is referred to asthe data processing cycle.



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The data processing cycle consists of foursteps:

Data input

Data storage

Data processing

Information output



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Data input

Data storage

Data processing

Information output



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The first step in data processing is tocapture the data.

Usually triggered by a business activity.

Data is captured about:

The eventthat occurred

The resourcesaffected by the event

The agentswho participated

DATA INPUT

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A number of actions can be taken toimprove the accuracy and efficiency ofdata input:

Turnaround documents

DATA INPUT

EXAMPLE: The stub on your telephone bill that you tear off andreturn with your check when you pay the bill.

The customer account number is coded on the document, usuallyin machine-readable form, which reduces the probability of human

error in applying the check to the correct account.

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Source data automation

DATA INPUT

Capture data with minimal human intervention.

EXAMPLES: ATMs for banking

Point-of-sale (POS) scanners in retail stores

Automated gas pumps that accept your credit card

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Source data automation

Well-designed source documents and data

entry screens

DATA INPUT

How do these improve the accuracy and efficiency of datainput?

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Turnaround documents Source data automation

Well-designed source documents and dataentry screens

Using pre-numbered documents or havingthe system automatically assignsequential numbers to transactions

DATA INPUT

What does it mean if a document number is missing in thesequence?

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Turnaround documents Source data automation

Well-designed source documents and dataentry screens

Using pre-numbered documents or havingthe system automatically assignsequential numbers to transactions

DATA INPUT

What does it mean if there are duplicate documentnumbers?

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A number of actions can be taken to improve theaccuracy and efficiency of data input:


Source data automation Well-designed source documents and data entry

screens

Using pre-numbered documents or having the system

automatically assign sequential numbers totransactions

Verify transactions

DATA INPUT

EXAMPLE: Check for inventory availability beforecompleting an online sales transaction.

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Data input

Data storage

Data processing

Information output



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Data needs to be organized for easy andefficient access.

Lets start with some vocabulary termswith respect to data storage.

DATA STORAGE

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Ledger

DATA STORAGE

A ledgeris a file used to store cumulative

information about resources and agents. Wetypically use the word ledgerto describe the setof t-accounts. The t-account is where we keeptrack of the beginning balance, increases,

decreases, and ending balance for each asset,liability, owners equity, revenue, expense, gain,loss, and dividend account.

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Ledger

Following is an example of a ledger accountfor accounts receivable:

DATA STORAGE

ACCOUNT: Accounts Receivable Account Number: 120

Date Description Post Ref Debit Credit Balance

01/01/05 42,069.0001/03/05 Sales S03 1,300.00 43,369.00

01/13/05 Cash collections CR09 4,600.00 38,769.00

01/23/05 Sales S04 5,600.00 44,369.00

GENERAL LEDGER

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Ledger

General ledger

DATA STORAGE

The general ledger is the summary levelinformation for all accounts. Detail information isnot kept in this account.

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Ledger

General ledger

DATA STORAGE

Example: Suppose XYZ Co. has threecustomers. Anthony Adams owes XYZ $100. BillBrown owes $200. And Cory Campbell owesXYZ $300. The balance in accounts receivable

in the general ledger will be $600, but you will notbe able to tell how much individual customersowe by looking at that account. The detail isntthere.

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Ledger

General ledger

Subsidiary ledger

DATA STORAGE

The subsidiary ledgers contain the detailaccounts associated with the related generalledger account. The accounts receivable

subsidiary ledger will contain three separate t-accountsone for Anthony Adams, one for BillBrown, and one for Cory Campbell.

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Ledger

General ledger

Subsidiary ledger

DATA STORAGE

The related general ledger account is oftencalled a control account.

The sum of the subsidiary account balancesshould equal the balance in the controlaccount.

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Ledger

General ledger

Subsidiary ledger

Coding techniques

DATA STORAGE

Coding is a method of systematically assigning numbers orletters to data items to help classify and organize them. There

are many types of codes including: Sequence codes

Block codes

Group codes

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Ledger

General ledger

Subsidiary ledger

Coding techniques

DATA STORAGE

With sequence codes, items (such as checks or invoices) arenumbered consecutively to ensure no gaps in the sequence.

The numbering helps ensure that: All items are accounted for

There are no duplicated numbers, which would suggest errors orfraud

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Ledger

General ledger

Subsidiary ledger

Coding techniques

DATA STORAGE

When b lock co desare used, blocks of numbers within anumerical sequence are reserved for a particular category.

EXAMPLE: The first three digits of a Social Security numbermake up a block code that indicates the state in which the

Social Security number was issued:

001-003 New Hampshire

004-007 Maine

008-009 Vermont

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Ledger

General ledger

Subsidiary ledger

Coding techniques

DATA STORAGE

When group cod esare used, two or more subgroups ofdigits are used to code an item.

EXAMPLE: The code in the upper, right-hand corner of manychecks is a group code organized as follows:

Digits 1-2 Bank number

Digit 3 Federal Reserve District

Digits 4-7 Branch office of Federal Reserve

Digits 8-9 State

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Ledger

General ledger

Subsidiary ledger

Coding techniques

DATA STORAGE

Group coding schemes are often used in assigning generalledger account numbers. The following guidelines should be

observed:

The code should be consistent with its intended use, so makesure you know what users need.

Provide enough digits to allow room for growth.

Keep it simple in order to:

Minimize costs

Facilitate memorization

Ensure employee acceptance

Make sure its consistent with:

The companys organization structure

Other divisions of the organization

The char t of accountsis a list of all general ledger accounts an organizationuses

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Ledger

General ledger

Subsidiary ledger

Coding techniques

Chart of accounts

DATA STORAGEuses.

Group coding is often used for these numbers, e.g.:

The first sectionidentifies the major account categories, such as asset,liability, revenue, etc.

The second sectionidentifies the primary sub-account, such as currentasset or long-term investment.

The third sectionidentifies the specific account, such as accountsreceivable or inventory.

The fourth sectionidentifies the subsidiary account, e.g., the specific

customer code for an account receivable. The structure of this chart is an important AIS issue, as it must contain

sufficient detail to meet the organizations needs.

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Ledger

General ledger

Subsidiary ledger

Coding techniques

Chart of accounts

DATA STORAGE Table 2-4 in your textbook contains the chart of accounts for

S&S. What is the account number for federal unemployment taxes

payable?

What is the account number for cost of goods sold?

What is the range of account numbers for expenses?

With this chart of accounts, can S&S easily distinguish thecosts they incur for automobile insurance from the costs for

health insurance?

In manual systems and some accounting packages, thefirst place that transactions are entered is the journal

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Ledger

General ledger

Subsidiary ledger

Coding techniques

Chart of accounts

Journals

DATA STORAGEfirst place that transactions are entered is the journal.

A general journal is used to record:

Non-routine transactions, such as loan payments

Summaries of routine transactions

Adjusting entries Closing entries

A special journal is used to record routine transactions. Themost common special journals are:

Cash receipts

Cash disbursements Credit sales

Credit purchases

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Ledger

General ledger

Subsidiary ledger

Coding techniques

Chart of accounts

Journals Audit trail

DATA STORAGE

An audit trail exists when there is sufficientdocumentation to allow the tracing of a

transaction from beginning to end or from the

end back to the beginning.

The inclusion of posting references anddocument numbers enable the tracing oftransactions through the journals and ledgers

and therefore facilitate the audit trail.

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Now that weve learned some storageterminology, lets return to the datastorage process.

When transaction data is captured on asource document, the next step is torecord the data in a journal.

A journal entry is made for eachtransaction showing the accounts andamounts to be credited.

DATA STORAGE

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If you took a principles of financial accounting class, youprobably worked with journals that looked something likethis:

DATA STORAGE

01/15/04 Accounts receivable 2,200

Sales revenue 2,200

01/18/04 Cash 1,800

Accounts receivable 1,800

01/21/04 Salaries expense 900

Cash 900

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You may not have gotten much experience withspecial journals, but in most real-worldsituations, journal entries really work like this. Entries are originally made in the general journal only

for Non-rout inetransactions.

Summaries of routine transactions

Routine transactions are originally entered in specialjournals. The most common special journals are:

Credit sales

Cash receipts

Credit purchases

Cash disbursements

DATA STORAGE

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Lets work through an example with aspecial journal. In this case well use thesales journal.

DATA STORAGE

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On Dec. 1, a sale is made to Lee Co. for$800. Lee Co. was sent Invoice No. 201.

DATA STORAGE

Page 5

Date

Invoice

Number

Account

Debited

Account

Number Post Ref. Amount

12/01/04 201 Lee Co. 120-122 800.00

Sales Journal

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The general ledger account number for accountsreceivable is No. 120. Lee Co. was about the 122ndcustomer, so their subsidiary account number is 120-122.

DATA STORAGE

Page 5

Date

Invoice

Number

Account

Debited

Account


12/01/04 201 Lee Co. 120-122 800.00

Sales Journal

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The next sale on Dec. 1 was made to MayCo. for $700.

DATA STORAGE

Page 5

Date

Invoice

Number

Account

Debited

Account


12/01/04 201 Lee Co. 120-122 800.00

12/01/04 202 May Co. 120-033 700.00

Sales Journal

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The third and final sale on Dec. 1 wasmade to DLK Co. for $900.

DATA STORAGE

Page 5

Date

Invoice

Number

Account

Debited

Account


12/01/04 201 Lee Co. 120-122 800.00

12/01/04 202 May Co. 120-033 700.0012/01/04 203 DLK Co. 120-111 900.00

Sales Journal

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Suppose the company making these sales poststransactions at the end of each day.Consequently, at days end, they will post eachindividual transaction to the accounts receivablesubsidiary ledger:

An $800 increase in accounts receivable (debit) willbe posted to Lee Co.s subsidiary account (120-122).

A $700 debit will be posted to May Co.s subsidiaryaccount (120-033).

A $900 debit will be posted to DLK Co.s subsidiaryaccount (120-111).

DATA STORAGE

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Then a summary journal entry must be made tothe general journal. The sales for the period aretotaled. In this case, they add up to $2,400.

DATA STORAGE

Page 5

Date

Invoice

Number

Account

Debited

Account


12/01/04 201 Lee Co. 120-122 800.00

12/01/04 202 May Co. 120-033 700.0012/01/04 203 DLK Co. 120-111 900.00

TOTAL 2,400.00

120/502

Sales Journal

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The 120/502 that appears beneath the total indicatesthat a summary journal entry is made in the general

journal with a debit to accounts receivable (120) and acredit to sales (502).

DATA STORAGE

Page 5

Date

Invoice

Number

Account

Debited

Account


12/01/04 201 Lee Co. 120-122 800.00

12/01/04 202 May Co. 120-033 700.0012/01/04 203 DLK Co. 120-111 900.00

TOTAL 2,400.00

120/502

Sales Journal

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The entries in the general journal are periodically (orautomatically) posted to the general ledger. The $2,400debit to accounts receivable will be posted to theaccounts receivable control account, and the $2,400

credit will be posted to the general ledger account forsales.

DATA STORAGE

12/01/04 Accounts receivable 2,400

Sales revenue 2,400

12/01/04 Cash 1,800 Accounts receivable 1,800

12/01/04 Salaries expense 900

Cash 900

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From time to time, the subsidiary accountbalances will be added up, and this sumwill be compared to the balance of the

control account. What does it mean if they arent equal?

DATA STORAGE

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Click the button below if you wish togo through a summary of theremaining steps in the accounting

cycle:

DATA STORAGE

See Remainder

Of

Accounting Cycle

COMPUTER-BASED STORAGE

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Now lets moving on to discussing somecomputer-based storage concepts, including: Entity

Attribute

Record Data Value

Field

File

Master File Transaction File

Database


CONCEPTS


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An entityis something about which informationis stored.

In your universitys student information system,one entity is the student. The student

information system stores information aboutstudents.

What are some other entities in your studentinformation system?


CONCEPTS


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Attributesare characteristics of interest withrespect to the entity.

Some attributes that a student informationsystem typically stores about the student entity

are: Student ID number

Phone number

Address

What are some other attributes about studentsthat a university might store?


CONCEPTS


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A fieldis the physical space where an attribute isstored.

The space where the student ID number isstored is the student ID field.

COMPUTER BASED STORAGE

CONCEPTS

Col. 1-9 Col. 10-30 Col. 31-40 Col. 41-50

328469993 SIMPSON ALICE 4053721111

328500732 ANDREWS BARRY 4057440236

529036409 FLANDERS CARLA 4057475863


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A recordis the set of attributes stored for aparticular instance of an entity.

The combination of attributes stored for BarryAndrews is Barrys record.


CONCEPTS

Col. 1-9 Col. 10-30 Col. 31-40 Col. 41-50

328469993 SIMPSON ALICE 4053721111

328500732 ANDREWS BARRY 4057440236

529036409 FLANDERS CARLA 4057475863


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A data valueis the intersection of the row andcolumn.

The data value for Barry Andrews phonenumber is 405-744-0236.


CONCEPTS

Col. 1-9 Col. 10-30 Col. 31-40 Col. 41-50

328469993 SIMPSON ALICE 4053721111

328500732 ANDREWS BARRY 4057440236

529036409 FLANDERS CARLA 4057475863


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A fileis a group of related records. The collection of records about all students at

the university might be called the student file. Ifthere were only three students and four

attributes stored for each student, the file mightappear as shown below:


CONCEPTS

Col. 1-9 Col. 10-30 Col. 31-40 Col. 41-50

328469993 SIMPSON ALICE 4053721111

328500732 ANDREWS BARRY 4057440236

529036409 FLANDERS CARLA 4057475863


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A masterfileis a file that storescumulative information about anorganizations entities.

It is conceptually similar to a ledger in amanual AIS in that: The file is permanent

The file exists across fiscal periods

Changes are made to the file to reflect theeffects of new transactions.


CONCEPTS


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A transactionfileis a file that containsrecords of individual transactions (events)that occur during a fiscal period.

It is conceptually similar to a journal in amanual AIS in that: The files are temporary

The files are usually maintained for one fiscal

period


CONCEPTS


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A databaseis a set of interrelated, centrally-coordinated files.

When files about students are integrated withfiles about classes and files about instructors,

we have a database.


CONCEPTS

Student

FileClass

File

Instructor

File


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Data input

Data storage Data processing

Information output



DATA PROCESSING

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Once data about a business activity hasbeen collected and entered into a system,it must be processed.

DATA PROCESSING

DATA PROCESSING

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There are four different types of fileprocessing: Updating datato record the occurrence of an

event, the resources affected by the event,and the agents who participated, e.g.,recording a sale to a customer.

Changing data, e.g., a customer address

Adding data, e.g., a new customer. Deleting data, e.g., removing an old customer

that has not purchased anything in 5 years.

DATA PROCESSING

DATA PROCESSING

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Updating can be done through severalapproaches: Batch processing

DATA PROCESSING

DATA PROCESSING

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Batch processing: Source documents are grouped into batches,

and control totals are calculated.

Periodically, the batches are entered into thecomputer system, edited, sorted, and storedin a temporary file.

The temporary transaction file is run against

the master file to update the master file. Output is printed or displayed, along with errorreports, transaction reports, and control totals.

DATA PROCESSING

DATA PROCESSING

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2006 Prentice Hall Business Publishing Accounting Information Systems, 10/e Romney/Steinbart 100 of


On-line Batch Processing

DATA PROCESSING

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DATA PROCESSING

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On-line Batch Processing On-line, Real-time Processing

DATA PROCESSING

DATA PROCESSING

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On-line, Real-time Processing Transactions are entered into a computer

system as they occur.

The master file is immediately updated withthe data from the transaction.

Output is printed or displayed.

DATA PROCESSING

DATA PROCESSING

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On-line Batch Processing On-line, Real-time Processing

If youre going through enrollment,which of these approaches would you

prefer that your university was using?

Why?

DATA PROCESSING


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Data input

Data storage Data processing

Information output


INFORMATION OUTPUT

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The final step in the information process isinformation output.

This output can be in the form of:

Documents

INFORMATION OUTPUT

Documents are records oftransactions or other company data.

EXAMPLE: Employee paychecks orpurchase orders for merchandise

Documents generated at the end ofthe transaction processing activities

are known as operational documents(as opposed to source documents).

They can be printed or stored aselectronic images.

INFORMATION OUTPUT

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Documents

Reports

INFORMATION OUTPUT

Reports are used by employees tocontrol operational activities and by

managers to make decisions anddesign strategies.

They may be produced: On a regular basis

On an exception basis

On demand Organizations should periodically

reassess whether each report isneeded.

INFORMATION OUTPUT

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Documents

Reports

Queries

INFORMATION OUTPUT

Queries are user requests for specificpieces of information.

They may be requested: Periodically

One time

They can be displayed: On the monitor, called sof t copy

On the screen, called hard co py

INFORMATION OUTPUT

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Output can serve a variety of purposes: Financial statements can be provided to both

external and internal parties.

Some outputs are specifically for internal use: For planning purposes

INFORMATION OUTPUT

Examples of outputs for planningpurposes include:

Budgets Budgets are an entitys formal expression of

goals in financial terms

Sales forecasts

INFORMATION OUTPUT

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For management of day-to-day operations

INFORMATION OUTPUT

Example: delivery schedules

INFORMATION OUTPUT

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For control purposes

INFORMATION OUTPUT Performance reports are outputs that are

used for control purposes.

These reports compare an organizationsstandard or expected performance withits actual outcomes.

Management by exceptionis an

approach to utilizing performancereports that focuses on investigating andacting on only those variances that aresignificant.

INFORMATION OUTPUT

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For control purposes

For evaluation purposes

INFORMATION OUTPUT

These outputs might include: Surveys of customer satisfaction

Reports on employee error rates

INFORMATION OUTPUT

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Behavioral implications of managerialreports:

YOU GET WHAT YOU MEASURE!

INFORMATION OUTPUT

INFORMATION OUTPUT

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Suppose an instructor wants to improve studentlearning. He decides to encourage better attendance by

grading students on attendance (i.e., measuring it).

The result will be better student attendance, i.e., you

get what you measure. The improved attendance may or may not improve

learning outcomes.

Students may be getting better grades whenattendance is measured, but not learning more.

Some students may in fact reduce their studyingbecause they believe they can use the attendancescore to boost their grade. This behavior would bea dysfunctional result of the measurement.

INFORMATION OUTPUT

INFORMATION OUTPUT

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Budgets can cause dysfunctional behavior. EXAMPLE: In order to stay within budget, the IT

Department did not buy a security package for its

system.

A hacker broke in and devastated some of theirdata files.

Critical security measures were foregone in orderto meet budgetary goals.

The resulting costs far outweighed the savings.

INFORMATION OUTPUT

INFORMATION OUTPUT

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Budgeting can also be dysfunctional inthat the focus can be redirected to

creating acceptable numbers instead of

achieving organizational objectives. Does this mean organizations shouldnt

budget?

INFORMATION OUTPUT

INFORMATION OUTPUT

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The saying goes, Not many people sitaround and have a roast goose fall in their

lap.

In other words, if you want a roast goose,you have to aim.

With financial results, youre also unlikely toachieve when you dont aim.

Just be careful where you aim!

INFORMATION OUTPUT

ROLE OF THE AIS

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The traditional AIS captured financial data. Non-financial data was captured in other,

sometimes-redundant systems

Enterprise resource planning(ERP) systemsare designed to integrate all aspects of a

companys operations (including both

financial and non-financial information) with

the traditional functions of an AIS.

ROLE OF THE AIS

SUMMARY

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Weve learned about the basic business activitiesin which an organization engages, the decisions

that need to be made, and the information required

to make those decisions.

Weve reviewed the data processing cycle and itsrole in organizing business activities and

providing information to users.

Finally, weve touched on the role of the

information systems in modern organizations andintroduced the notion of enterprise resource

planning systems.

SUMMARY