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The document discusses key concepts about accounting information systems (AIS). It defines an AIS and its components, and explains how an AIS supports business functions and decision making. An AIS collects, processes, stores and reports financial data to provide useful information for management. It can add value by improving quality, efficiency and decision making throughout a company's value chain. An organization's AIS and strategy should be aligned given limited resources.

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15 views

01 INTRO

The document discusses key concepts about accounting information systems (AIS). It defines an AIS and its components, and explains how an AIS supports business functions and decision making. An AIS collects, processes, stores and reports financial data to provide useful information for management. It can add value by improving quality, efficiency and decision making throughout a company's value chain. An organization's AIS and strategy should be aligned given limited resources.

Uploaded by

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

1-2
What Is a System?

 System
 A set of two or more interrelated components
interacting to achieve a goal
 Goal Conflict
 Occurs when components act in their own
interest without regard for overall goal Process1

 Goal Congruence
 Occurs when components acting in their own
interest contribute toward overall goal Goal
Process2

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Data vs. Information
 Data 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 data
make decisions. This is known as data
Information Overload.
data

Information

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Value of Information

Benefits Costs
 Time & Resources
 Reduce Uncertainty

 Improve Decisions  Produce Information


 Improve Planning  Distribute
Information
 Improve Scheduling

Benefit $’s > Cost $’s

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What 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.”

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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.”
 Accessible
 Available when needed (see Timely) and in a useful format (see
Understandable).

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Business Process

 Systems working toward


organizational goals Financing Revenue

Human
Expenditure
Resources

Production

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Business Process Cycles

 Revenue
 Expenditure
 Production
 Human Resources
 Financing

1-9
Business Transactions

 Give–Get exchanges
 Between two entities
 Measured in economic terms

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Business Cycle Give–Get

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Accounting Information Systems

 Collect, process, store, and report data and information


 If Accounting = language of business
 AIS = information providing vehicle
 Accounting = AIS

1-12
Components of an AIS

 People using the system

 Procedures and Instructions


 For collecting, processing, and storing data
 Data

 Software

 Information Technology (IT) Infrastructure


 Computers, peripherals, networks, and so on
 Internal Control and Security
 Safeguard the system and its data

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AIS and Business Functions

 Collect and store data about organizational:


 Activities, resources, and personnel
 Transform data into information enabling
 Management to:
 Plan, execute, control, and evaluate
 Activities, resources, and personnel
 Provide adequate control to safeguard
 Assets and data

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AIS Value Add

 Improve Quality and Reduce Costs


 Improve Efficiency
 Improve Sharing Knowledge
 Improve Supply Chain
 Improve Internal Control
 Improve Decision Making

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Improve Decision Making

 Identify situations that require action.


 Provide alternative choices.
 Reduce uncertainty.
 Provide feedback on previous decisions.
 Provide accurate and timely information.

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Value Chain

 The set of activities a product or service moves along before as output


it is sold to a customer
 At each activity the product or service gains
value

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Value Chain—Primary Activities

Inbound Logistics Operations Outbound Logistics Marketing/Sales Service

1-18
Value Chain—Support Activities

Firm
Infrastructure Technology

Human Purchasing
Resources

1-19
Value Chain

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AIS and Corporate Strategy

Organizations have limited resources,


thus investments to AIS should have
greatest impact on ROI. IT Developments
Organizations need to understand:
IT developments
Business strategy
Organizational culture AI
Will effect and be effected by new
AIS
Organizational
S Business
Culture Strategy

1-21

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