Accounting Essay 2 pages must answer all questions
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romney_ais14_stppt_01.pptxAccounting Information Systems
Fourteenth Edition
Chapter 1
Accounting Information Systems: An Overview
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Copyright © 2018 Pearson Education, Inc.
Chapter 1: Accounting Information Systems: An Overview
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Learning Objectives
Distinguish between data and information:
Discuss the characteristics of useful information.
Explain how to determine the value of information.
Explain the decisions an organization makes:
The information needed to make them.
The major business processes present in most companies.
Explain how an AIS adds value to an organization.
How it affects and is affected by corporate strategy.
The role of AIS in a value chain.
Copyright © 2018 Pearson Education, Inc.
Chapter 1: Accounting Information Systems: An Overview
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Distinguishing Between Data and Information
Data are facts collected, recorded, and stored in the system
A fact could be a number, date, name, and so on.
For example:
2/22/14
ABC Company, 123,
99, 3, 20, 60
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Chapter 1: Accounting Information Systems: An Overview
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Data vs. Information
The previous slide just showed data, if we organize the data 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 Price
99 3 $20
Total Invoice Amount $60
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Chapter 1: Accounting Information Systems: An Overview
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Decision Quality
Information helps us make better decisions.
Too much information causing information overload can reduce decision quality.
Information Technology (IT) is used to help decision makers more effectively filter and condense information.
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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) = value of information
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What Makes Information Useful? (1 of 2)
There are seven general characteristics that make information useful:
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)
Reliable: information free from bias
Complete: does not omit important aspects of events or activities
Timely: information needs to be provided in time to make the decision
Copyright © 2018 Pearson Education, Inc.
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What Makes Information Useful? (2 of 2)
Understandable: information must be presented in a meaningful manner
Verifiable: two independent people can produce the same conclusion
Accessible: available when needed
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Chapter 1: Accounting Information Systems: An Overview
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Information Needs and Business Processes
Business organizations use business processes to get things done. A business process is a set of related, coordinated, and structured activities and tasks performed by people, machines, or both to achieve a specific organizational goal.
Key decisions and information needed often come from these business processes.
Copyright © 2018 Pearson Education, Inc.
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Transactional Information Between Internal and External Parties in an AIS
Business organizations conduct business transactions which is an agreement between two entities to exchange goods, services, or any other event that can be measured in economic terms by an organization.
Transaction data is used to create financial statements and is called transaction processing.
The flow of information between these users for the various business activities involves a give-get exchange grouped into business processes or transaction cycles.
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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 cycle: give goods / give service—get cash
Expenditure cycle: get goods / get service—give cash
Production cycle: give labor and give raw materials—get finished goods
Payroll cycle: give cash—get labor
Financing cycle: give cash—get cash
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What Is an Accounting Information System (AIS)?
AIS is a system that collects, records, stores, and processes data to produce information for decision makers.
Consists of
People who use the system
Processes (procedures and instructions)
Technology (data, software, and information technology)
Controls to safeguard information
Thus, an AIS collects and stores data, transforms that data into information, and provides adequate controls.
Copyright © 2018 Pearson Education, Inc.
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How Does an AIS Add Value to an Organization?
A well thought out AIS can add value by:
Improving the quality and reducing the costs of products or services
Improving efficiency
Sharing knowledge
Improving efficiency and effectiveness of its supply chain
Improving the internal control structure
Improving decision making
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AIS and Corporate Strategy
An AIS is influenced by an organization’s strategy.
A strategy is the overall goal the organization hopes to achieve (e.g., increase profitability).
Once an overall goal is determined, an organization can determine actions needed to reach their goal and identify the informational requirements (both financial and nonfinancial) necessary to measure how well they are doing in obtaining that goal.
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AIS in the Value Chain
The value chain links together the different activities within an organization that provide value to the customer.
Value chain activities are primary and support activities.
Primary activities provide direct value to the customer.
Support activities enable primary activities to be efficient and effective.
A supply chain is an extended system that includes the organizations value chain as well as its suppliers, distributors, and customers.
Copyright © 2018 Pearson Education, Inc.
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Copyright © 2018 Pearson Education, Inc.
Chapter 1: Accounting Information Systems: An Overview
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Copyright © 2018 Pearson Education, Inc.
Chapter 1: Accounting Information Systems: An Overview
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Key Terms
System
Goal conflict
Goal congruence
Data
Information
Information technology (IT)
Information overload
Value of information
Business process
Transaction
Transaction processing
Give-get exchange
Revenue cycle
Expenditure cycle
Production (conversion) cycle
Human resource/payroll cycle
Financing cycle
General ledger and reporting system
Accounting information system (AIS)
Predictive analysis
Value chain
Primary activities
Support activities
Supply chain
Copyright © 2018 Pearson Education, Inc.
Chapter 1: Accounting Information Systems: An Overview
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Copyright © 2018 Pearson Education, Inc.
Chapter 1: Accounting Information Systems: An Overview
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