Accounting 3603HAPTER 1
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What is the meaning of system, data, and information?
What makes information useful?
What is an accounting information system (AIS)?
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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.
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SYSTEMS, DATA, AND INFORMATION
Data are facts that are collected, recorded, stored, and processed by an information system.
Information is different from data.
Information is data that have been organized and processed to provide meaning to a user.
Usually, more information and better information translates into better decisions.
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SYSTEMS, DATA, AND INFORMATION
However, when you get more information than you can effectively assimilate, you suffer from information overload.
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Relevant
“The capacity of information to make a difference in a decision by helping users to form predictions about the outcomes of past, present, and future events or to confirm or correct prior expectations.”
Reliable
“The quality of information that assures that information is reasonably free from error and bias and faithfully represents what it purports to represent.”
Complete
“The inclusion in reported information of everything material that is necessary for faithful representation of the relevant phenomena.”
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Timely
“Having information available to a decision maker before it loses its capacity to influence decisions.”
Understandable
“The quality of information that enables users to perceive its significance.”
Verifiable
“The ability through consensus among measurers to ensure that information represents what it purports to represent or that the chosen method of measurement has been used without error or bias.”
Accessible
Available when needed (see Timely) and in a useful format (see Understandable).
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BUSINESS PROCESSES
A transaction is:
An agreement between two entities to exchange goods or services; OR
Any other event that can be measured in economic terms by an organization.
EXAMPLES:
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BUSINESS PROCESSES
Basic exchanges can be grouped into five major transaction cycles:
Revenue cycle
Expenditure cycle
Production cycle
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BUSINESS PROCESSES
MAJOR GIVE-GET
OTHER TRANSACTIONS
Receive customer payments
Handle sales returns, discounts, and bad debts
Prepare management reports
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BUSINESS PROCESSES
MAJOR GIVE-GET:
OTHER TRANSACTIONS
Receive goods and services
Approve invoices for payment
Handle purchase returns, discounts, and allowances
Prepare management reports
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BUSINESS PROCESSES
MAJOR GIVE-GET:
Evaluate and promote employees
Prepare and distribute payroll
Prepare management reports
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BUSINESS PROCESSES
MAJOR GIVE-GET:
OTHER TRANSACTIONS
Design products
Requisition raw materials
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BUSINESS PROCESSES
MAJOR GIVE-GET:
Retire debt
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WHAT IS AN AIS?
An AIS is a system that collects, records, stores, and processes data to produce information for decision makers.
It can:
Be something in between.
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Collect and store data about events, resources, and agents.
Transform that data into information that management can use to make decisions about events, resources, and agents.
Provide adequate controls to ensure that the entity’s resources (including data) are:
Available when needed
Accurate and reliable
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ROLE OF THE AIS IN THE VALUE CHAIN
The objective of most organizations is to provide value to their customers.
What does it mean to deliver value?
It may mean:
Making it faster
Providing better service or advice
Providing something in limited supply (like O-negative blood or rare gems)
Providing enhanced features
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ROLE OF THE AIS IN THE VALUE CHAIN
Value is provided by performing a series of activities to a product or service before it is sold to a customer. These include:
Primary activities
Support activities
These activities are sometimes referred to as “line” and “staff” activities respectively.
At each activity the product or service gains value.
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Value Chain
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Pharmaceuticals, Inc.
Inbound Logistics
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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Improve Efficiency
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The authors believe:
Accounting and information systems should be closely integrated.
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CITP: Certified Information Technology Professional
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