copyright © 2015 pearson education, inc. accounting information systems: an overview chapter 1 1-1
TRANSCRIPT
Copyright © 2015 Pearson Education, Inc.
Learning Objectives• Distinguish between data and information:
▫Understand the characteristics of useful information.
▫Explain how to determine the value of information.
• Describe the major business processes present in most companies.
• Explain what an accounting information system (AIS) is and describe its basic functions.
• Explain the role an AIS plays in a company’s value chain. 1-2
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Systems, Data, and Information
•A system is a set of two or more interrelated components that interact to achieve a goal.
•Systems are almost always composed of smaller subsystems, each performing a specific function supportive of the larger system.
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Data vs. Information
•Data are facts stored in the system▫A fact could be a number, date, name, and so on.
For example: 2/22/14ABC Company, 123,99, 3, 20, 60
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Data vs. InformationThe previous slide just showed facts, if we put those facts 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 Price99 3 $20
Total Invoice Amount $60 1-5
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Systems, Data, and Information
•Usually, more information and better information translates into better decisions.
•However, when you get more information than you can effectively assimilate, you suffer from information overload.
•When you’ve reached the overload point, the quality of decisions declines while the costs of producing the information increases.
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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)
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What Makes Information Useful?There are seven general characteristics that make information useful:1. 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)
2. Reliable: information free from error and bias 3. Complete: does not omit important aspects of
events or activities 4. Timely: information needs to be provided in
time to make the decision
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What Makes Information Useful?
5. Understandable: information must be presented in a meaningful manner
6. Verifiable: two independent people can produce the same conclusion
7. Accessible: available when needed
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Transactional Information Between Internal and External Parties in an AIS
• Business organizations conduct business transactions between internal and external stakeholders.
• Internal stakeholders are employees in the organization (e.g., employees and managers).
• External stakeholders are trading partners such as customers and vendors as well as other external organizations such as Banks and Government.
• The AIS captures the flow of information between these users for the various business transactions.
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Interactions Between AIS and Internal and External Parties
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Basic Business Processes•Transactions between the business
organization and external parties fundamentally involve a “give–get” exchange. These basic business processes are:▫Revenue: give goods/service—get cash▫Expenditure: get goods/service—give cash▫Production: give labor and give raw
materials—get finished goods▫Payroll: give cash—get labor▫Financing: give cash—get cash
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What Is an Accounting Information System?
• It can be manual or computerized• Consists of
▫People who use the system▫Processes▫Technology (data, software, and information
technology)▫Controls to safeguard information
• Thus, transactional data is collected and stored into meaningful information from which business decisions are made and provides adequate controls to protect and secure the organizational data assets.
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How Does an AIS Add Value?
•A well thought out AIS can add value through effective and efficient decisions.▫Having effective decisions means quality
decisions▫Having efficient decisions means reducing
costs of decision making
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AIS in the Value Chain•The value chain shows how the different
activities within an organization provide value to the customer.
•These activities are primary and support activities. ▫Primary activities provide direct value to
the customer.▫Support activities enable primary activities
to be efficient and effective.
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ROLE OF THE AIS IN THE VALUE CHAIN
Pharmaceuticals, Inc.
Inbound LogisticsOperations
Outbound LogisticsMarketing & Sales
Service
Smith Supply Co.
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
Customer Pharmacy
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
The linking of these separate value chains creates a larger system known as a supply chain.
Information technology can facilitate synergistic linkages that improve the performance of each company’s value chain.
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THE AIS AND CORPORATE STRATEGY
•The authors believe:▫Accounting and information systems should
be closely integrated.▫The AIS should be the primary information
system to provide users with information they need to perform their jobs.
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The CITP Designation
•CITP: Certified Information Technology Professional
•Identifies CPAs who possess a broad range of technological knowledge and the manner in which information technology (IT) can be used to achieve business objectives
•Reflects the AICPA’s recognition of the importance and interrelationship of IT with accounting