Chapter 1: Accounting Information Systems: An Overview

Chapter 1Accounting Information Systems: An OverviewCopyright © 2012 Pearson Education1-*Learning ObjectivesDistinguish between data and information.Discuss the characteristics of useful information.Explain how to determine the value of information.Explain the decisions an organization makes and the information needed to make them.Identify the information that passes between internal and external parties and an AIS. Describe the major business processes present in most companies.Explain what an accounting information system (AIS) is and describe its basic functions.Discuss how an AIS can add value to an organization. Explain how an AIS and corporate strategy affect each other. Explain the role an AIS plays in a company’s value chain. Copyright © 2012 Pearson Education1-*What Is a System?SystemA set of two or more interrelated components interacting to achieve a goalGoal ConflictOccurs when components act in their own interest without regard for overall goalGoal CongruenceOccurs when components acting in their own interest contribute toward overall goalCopyright © 2012 Pearson Education1-*Data vs. InformationData are facts that are recorded and stored.Insufficient for decision making.Information is processed data used in decision making.Too much information however, will make it more, not less, difficult to make decisions. This is known as Information Overload.Copyright © 2012 Pearson Education1-*Value of InformationBenefitsReduce UncertaintyImprove DecisionsImprove PlanningImprove SchedulingCostsTime & ResourcesProduce InformationDistribute Information1-*Benefit $’s > Cost $’sCopyright © 2012 Pearson EducationWhat Makes Information Useful?Necessary characteristics: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.”Copyright © 2012 Pearson Education1-*What Makes Information Useful?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.”AccessibleAvailable when needed (see Timely) and in a useful format (see Understandable).Copyright © 2012 Pearson Education1-*Business ProcessSystems working toward organizational goalsCopyright © 2012 Pearson Education1-*Business Process CyclesRevenueExpenditureProductionHuman Resources FinancingCopyright © 2012 Pearson Education1-*Business TransactionsGive–Get exchangesBetween two entitiesMeasured in economic termsCopyright © 2012 Pearson Education1-*Business Cycle Give–GetCopyright © 2012 Pearson Education1-*Accounting Information SystemsCollect, process, store, and report data and informationIf Accounting = language of businessAIS = information providing vehicleAccounting = AISCopyright © 2012 Pearson Education1-*Components of an AISPeople using the systemProcedures and InstructionsFor collecting, processing, and storing dataDataSoftwareInformation Technology (IT) InfrastructureComputers, peripherals, networks, and so onInternal Control and SecuritySafeguard the system and its dataCopyright © 2012 Pearson Education1-*AIS and Business FunctionsCollect and store data about organizational:Activities, resources, and personnelTransform data into information enablingManagement to:Plan, execute, control, and evaluateActivities, resources, and personnelProvide adequate control to safeguardAssets and dataCopyright © 2012 Pearson Education1-*AIS Value AddImprove Quality and Reduce CostsImprove EfficiencyImprove Sharing KnowledgeImprove Supply ChainImprove Internal ControlImprove Decision MakingCopyright © 2012 Pearson Education1-*Improve Decision MakingIdentify situations that require action.Provide alternative choices.Reduce uncertainty.Provide feedback on previous decisions.Provide accurate and timely information.Copyright © 2012 Pearson Education1-*Value ChainThe set of activities a product or service moves along before as output it is sold to a customerAt each activity the product or service gains valueCopyright © 2012 Pearson Education1-*Value Chain—Primary ActivitiesCopyright © 2012 Pearson Education1-*Value Chain—Support ActivitiesCopyright © 2012 Pearson Education1-*Value ChainCopyright © 2012 Pearson Education1-*AIS and Corporate StrategyOrganizations have limited resources, thus investments to AIS should have greatest impact on ROI.Organizations need to understand:IT developmentsBusiness strategy Organizational cultureWill effect and be effected by new AISCopyright © 2012 Pearson Education1-*