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Accounting Information Systems: An Overview

This document provides an overview of accounting information systems (AIS). It defines an AIS as a system consisting of people, procedures, data, software, and technology that performs important functions for an organization like collecting data, processing it into useful information, and providing controls. An effective AIS adds value by improving decision making, operations, and the efficiency of an organization's value chain and supply chain. It also discusses the role of an AIS in supporting an organization's strategy and strategic position.

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Zahed Ibrahim
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109 views

Accounting Information Systems: An Overview

This document provides an overview of accounting information systems (AIS). It defines an AIS as a system consisting of people, procedures, data, software, and technology that performs important functions for an organization like collecting data, processing it into useful information, and providing controls. An effective AIS adds value by improving decision making, operations, and the efficiency of an organization's value chain and supply chain. It also discusses the role of an AIS in supporting an organization's strategy and strategic position.

Uploaded by

Zahed Ibrahim
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Accounting Information

Systems: An Overview

Chapter 1
Introduction
 This chapter defines an accounting
information system (AIS).
 It discusses why AIS is an important topic
to study.
 It describes how an AIS adds to an
organization’s value chain.
 It describes and contrasts the basic
strategies that a business can pursue.
What Is An AIS?
 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.
 An accounting information system (AIS) consists
of:
 People
 Procedures
 Data
 Software
 Information technology infrastructure
What Is An AIS?
 What important functions does the AIS
perform in an organization?
1 It collects and stores data about
activities and transactions.
2 It processes data into information that
is useful for making decisions.
3 It provides adequate controls to
safeguard the organization’s assets.
Why Study AIS?
 To understand how the accounting
system works.
 How to collect data about an organization’s
activities and transactions
 How to transform that data into information
that management can use to run the
organization
 How to ensure the availability, reliability, and
accuracy of that information
Why Study AIS?
 Auditors need to understand the
systems that are used to produce a
company’s financial statements.
 Tax professionals need to understand
enough about the client’s AIS to be
confident that the information used for
tax planning and compliance work is
complete and accurate.
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
Ten Most Important Activities
Performed By Accountants
1. Accounting systems 6. Financial and
and financial reporting economic analyses
2. Long-term strategic 7. Process improvement
planning 8. Computer systems
3. Managing the and operations
accounting and 9. Performance
finance function evaluation
4. Internal Consulting 10. Customer and product
5. Short-term budgeting profitability analyses
Factors Influencing
Design of the AIS

Organizational
Strategy
Culture

AIS

Information
Technology
The Value Chain
 The ultimate goal of any business is to
provide value to its customers.
 A business will be profitable if the
value it creates is greater than the
cost of producing its products or
services.
The Value Chain
 An organization’s value chain consists of
nine interrelated activities that collectively
describe everything it does.
 The five primary activities consist of the
activities performed in order to create,
market, and deliver products and services
to customers and also to provide post-sales
services and support.
The Value Chain
Primary Activities

Inbound Outbound
Operations
Logistics Logistics

Marketing
Service
and Sales
The Value Chain

 The four support activities in the value


chain make it possible for the primary
activities to be performed efficiently
and effectively.

1-13
The Value Chain
Support Activities

Infrastructure Technology

Human
Purchasing
Resources
The Value System

 The value chain concept can be


extended by recognizing that
organizations must interact with
suppliers, distributors, and customers.
 An organization’s value chain and the
value chains of its suppliers,
distributors, and customers
collectively form a value system.
The Supply Chain
Raw Materials
Supplier

Manufacturer

Distributor

Retailer

Consumer
How An AIS Can Add Value
To An Organization
 An AIS adds value...
– by providing accurate and timely
information so that five primary value
chain activities can be performed more
effectively and efficiently.
How An AIS Can Add Value
To An Organization
– An AIS adds value by:
– improving the quality and reducing the costs
of products or services.
– improving efficiency.
– Improving decision making capabilities.
– increasing the sharing of knowledge.

A well-designed AIS can also help an


organization profit by improving the
efficiency and effectiveness of its supply
chain.
Information and
Decision Making
 What is information?
 The term data refers to any and all of
the facts that are collected, stored,
and processed by an information
system.
 Information is data that has been
organized and processed so that it is
meaningful.
Data Needs For Activities
Generic Example Agent
Resource Event
Agent
Sales Transaction
Customer
Inventory Sale
Sales
Payment to Supplier
Cash Payment Cashier

Supplier
Information and Decision
Making
Characteristics of Useful Information

Relevant Timely

Reliable Understandable

Complete Verifiable
Information and
Decision Making
 What is decision making? Decision
making involves the following steps:
1. Identify the problem.
2. Select a method for solving the problem.
3. Collect data needed to execute the decision
model.
4. Interpret the outputs of the model.
5. Evaluate the merits of each alternative.
6. Choose and execute the preferred solution.
Information and
Decision Making
Decisions can be categorized as
follows:
– in terms of the degree of structure that
exists
– by the scope of the decision
Decision Structure

 Structured decisions are repetitive,


routine, and understood well enough
that they can be delegated to lower-
level employees in the organization.
 An example is:
 Extending credit to customers.
Decision Structure
 Semistructured decisions are
characterized by incomplete rules for
making the decision and the need for
subjective assessments and
judgments to supplement formal data
analysis.
 An example is:
 Setting a marketing budget for a new
product.
Decision Structure

 Unstructured decisions are


nonrecurring and nonroutine.
 An example is:

 Choosing the cover for a


magazine.
Decision Scope
 Decisions vary in terms of the scope of
their effect.
 Operational control is concerned with the
effective and efficient performance of
specific tasks.
 Management control is concerned with the
effective and efficient use of resources for
accomplishing organizational objectives.
 Strategic planning is concerned with
establishing organizational objectives and
policies for accomplishing those objectives.
Information Technology
and Corporate Strategy
 New developments in IT affect the
design of an AIS.
 What basic requirements are needed
to evaluate the costs and benefits of
new IT developments?
Information Technology
and Corporate Strategy
 Develop a basic understanding of…
– corporate strategies.
– how IT developments can be used to
implement existing organizational
strategies.
– how IT developments can be used to
create an opportunity to modify
existing strategies.
Information Technology
and Corporate Strategy
 Because an AIS functions within an
organization, it should be designed to
reflect the values of that organizational
culture.
Strategy and
Strategic Positions
Two Basic Strategies

To be a lower-cost producer than competitors

To differentiate products and services


from competitors
Strategy and
Strategic Positions
Three Basic Strategic Positions

Variety-based strategic position

Need-based strategic position

Access-based strategic position


Strategy and
Strategic Positions
 What role does the AIS play in helping
organizations adopt and maintain a
strategic position?
– Data collection about each activity
– Transforming data into information
that can be used by management to
coordinate those activities
What is the Value
of Information?
 The value of information is the benefit
produced by the information minus the
cost of producing it.
The Role of the AIS
 The Internet makes strategy more
important than ever
 Enterprise resource planning (ERP)
systems integrate all aspects of a
company’s operations with its traditional
AIS.
 The key feature of ERP systems is the
integration of financial data and other
nonfinancial operating data.

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