Untitled Quiz

Information Flows

• The business organization divides horizontally into several levels of activity.
• Business operations form the base of the pyramid.
• These activities consist of manufacturing, sales, and distribution.
• Operations management controls day-to-day operations.
• Middle management plans short-term and coordinates activities.
• Top management plans long-term and sets organizational objectives.

Internal Information Flows

• Horizontal flows capture transaction and operations data at the operations level and supports tasks with detailed transaction information.
• Includes data about sales, goods shipment, labor and material use, and internal resource transfers.
• Vertical flows include downward flows, instructions, quotas and budgets and upward flows, aggregated transaction and operations data.

External Users

• External users are broken into two groups trading partners and stakeholders.
• Exchanges: customer sales and billing information, purchase information for suppliers, and inventory receipts information with trading partners.
• User groups have unique information requirements.
• The higher the level of the organization, the greater the need for aggregated information with less detail.

Information in Business

• Information is a business resource that needs appropriate management and is vital for survival.
• Management information is summarized and oriented toward reporting overall performance and is used to identify potential problems for management to take corrective action.

Systems

• A system has components or subsystems serving a common purpose.
• A system becomes a subsystem when viewed as part of a larger system.
• A subsystem turns into a system when it is the focus of attention.
• A system must contain multiple components that are related and serve a purpose.

System Interdependency and Decomposition

• System Decomposition divides the system into smaller subsystem parts.
• System Interdependency means parts are not self-contained and rely on the functioning of other parts.
• The information system is how data is collected, processed, and distributed to users with formal procedures.

Transactions

• A transaction is a business event.
• Financial transactions are economic events affecting assets and equities of the organization.
• Airline ticket purchase example.
• Nonfinancial transactions are other events processed by the organization's information system.
• Airline reservation a non financial transaction as there is no commitment

Accounting Information Systems

• Accounting acts as an information system.
• It recognizes, gathers, processes, and communicates economic information using various technologies.
• It captures and documents the financial effects of transactions and distributes transaction information to coordinate operations.

AIS vs MIS

• AIS processes financial transactions like the sale of goods.
• Management Information Systems (MIS) process nonfinancial transactions not processed by AIS, such as tracking complaints.

AIS Subsystems

• Transaction Processing System (TPS) supports daily business operations.
• TPS converts economic events into financial transactions.
• Records the data in accounting records, e.g., journals and ledgers,
• TPS distributes to operations personnel to support daily operations.
• Includes three transaction cycles: revenue, expenditure, and conversion.
• General Ledger/ Financial Reporting System (GL/FRS) produces financial statements and reports.
• GLS updates general ledger control accounts after processing transaction cycle activity summaries.
• Management Reporting Systems (MRS) produces special-purpose reports for internal use.
• MRS reporting is discretionary because the organization decides what to report and how to present it.

General Model for AIS

• End users: External users include creditors, stockholders, investors, regulatory agencies, tax authorities, suppliers, and customers.
• Internal users include management at every level and operations personnel.
• Data: Facts that may or may not be processed and might not affect the user.
• Information: Causes the user to take action and is defined as processed data.

Data Attributes

• Database Management: The organization's physical repository for financial and nonfinancial data, such as a filing cabinet or a computer disk.
• Data Attribute an elemental piece of useful data.
• The attribute a relevant characteristic of an entity captured by the firm.
• A record is a set of attributes for a single occurrence within an entity class.
• A file is a complete set of records of an identical class.

Data Sources

• Data sources are financial transactions that enter the information system from internal and external sources.
• External financial transactions is the most common source of data for organizations.
• Includes sale of goods and services, purchase of inventory, receipt of cash, and disbursement of cash.
• Internal financial transactions the exchange or movement of resources.
• Includes movement of raw materials into work-in-process (WIP), application of labor and overhead to WIP, transfer of WIP into finished goods inventory, and depreciation of equipment.

Transforming Data into Information

• Functions for transformation according to the general AIS model.

Data Collection

• Capturing transaction data.
• Recording data onto forms.
• Validating and editing the data.

Data processing

• Classifying .
• transcribing .
• Sorting.
• Batching.
• Merging.
• Calculating.
• Summarizing.
• Comparing.

Data Management

• Storing assigns keys to new records and places them in the database.
• Retrieving locates and extracts a record for processing.
• The storage task restores the updated record.
• Deleting removes obsolete or redundant records.

Information Generation

• Compiling
• Arranging
• Formatting
• Presenting

Characteristics of Useful Information

• Useful information possesses relevance, timeliness, accuracy, completeness, and summarization, regardless of form or technology
• Feedback is output sent back to the system as data, internal or external, and is used to initiate or alter a process.

Information System Objectives

• The goal of an information system is to support the stewardship function of management, management decision making and day-to-day operations.
• Organizational Structure helps allocate responsibility, authority, and accountability.
• Common method for organizing is segmenting by business function.

Functional Areas

• Inventory/Materials Management plans and controls the company's materials inventory.
• Purchasing is responsible for ordering inventory from vendors when inventory falls to reorder points.
• Receiving accepts previously ordered inventory, counting and checking the physical condition of items.
• Stores takes physical custody of received inventory and releases these resources into the production process as needed.
• Production includes production planning, quality control, and maintenance.
• Marketing deals with strategic problems of product promotion, advertising, and market research.
• Distribution gets the product to the customer, and a critical step is the activity after the sale.
• Personnel manages competent and reliable employees as a valuable resource.
• Finance manages the financial resources through banking, treasury activities, portfolio management, credit evaluation, cash disbursements, and receipts.
• Accounting manages the financial information resource of the firm.
• It captures and records financial effects, and distributes transaction information to operations personnel.

Accounting Independence

• Information reliability requires accounting independence.
• Tasks must be independent of areas maintaining resources.
• Accounting supports functions with information but does not actively participate, ensuring information integrity.

Distributed Data Processing (DDP)

• DDP reorganizes computer services into small information processing units distributed to end-users.

Centralized Data Processing

• All data processing is performed by computers at a central site for all users
• Primary areas are database administration, data processing, systems development, and systems maintenance.
• DATABASE ADMINISTRATION centrally organizes and maintains data resources shared by all users.
• DATA PROCESSING manages computer resources for day-to-day transaction processing.
• SYSTEMS DEVELOPMENT AND MAINTENANCE meets the information needs through systems development and maintenance.

Advantages of DDP

• Cost reductions in hardware and data entry tasks
• Improved cost control responsibility
• Improved user satisfaction since control at user level
• Increased backup through use of multiple data storage sites

Disadvantages of DDP

• Loss of control and mismanagement of company resources
• Hardware and software incompatibility
• Redundant tasks and data
• Difficulty consolidating segregated tasks, difficulty attracting qualified personnel, and a lack of standards

Manual Process Model

• Transaction processing, information processing, and accounting performed physically by people using paper documents
• Helps link AIS to other accounting courses.
• Easier to understand when not shrouded by technology and facilitates the understanding of internal controls.

The Flat-File Model

• Each data files are unrelated.
• End users own their data meaning stand-alone applications perform data processing rather than integrated systems.

Data Redundancy Problems

• Data Storage incurs excessive storage costs,
• Data Updating requires multiple times meaning changes or additions must be done again,
• Currency of information poses potential updating failures,
• Task-Data Dependency hinders users abilities to obtain new information,
• Data Integration faces integration difficulties across multiple users.

The DATABASE MODEL

• Organizations address flat-file issues by implementing database models for data management.

REA Model

• A accounting framework for modeling the organization's:
• Economic resources are assets.
• Economic events affect changes in resources.
• Economic agents include individuals and departments that participate in an economic event.
• Interrelationships link resources, events, and agents.
• Entity-relationship diagrams (ERD) are often used to model these relationships.

Accountants as Information System Users

• Able to communicate to systems professionels, accountants must be able to convey needs to the systems pros who design the system.
• The accountant is active in systems development projects.

Accountants as System Auditors

• External Auditors attest to fairness of financial statements
• A broader assurance service compared to traditional attestation audits.
• IT Auditors evaluate IT as part of external audits.
• Internal Auditors give in-house IS and IT appraisal services.