ACCOUNTING INFORMATION

SYSTEMS

The word accountant

comes from the French
word compter, which
means to count or score.
Over time, the p was
dropped in both spelling
and pronunciation.

Why study AIS?

It is important to us personally and to our long-term

success as an accountant.
This will help us reduce tedious work associated with
recordkeeping and data management.
It is essential to our success as accountants.

Technology and Accounting cannot

be separated in todays business.

Technology is rapidly changing

the nature of the work of most
accountants and auditors.

Accountants can be inventors?

Walter E. Diemer was an
accountant and inventor of
bubble gum. Born and
raised in Philadelphia,
Pennsylvania, Diemer was
working as an accountant
at Fleer in 1926 when the
company president sought
to cut costs by making
their own gum base.

Themes
Enterprise Systems integrate the business process
and information from all of an organizations functional
areas.
E-business is the application of electronic networks
to undertake business process between individuals
and organizations.

cont

Internal Control is a process designed to provide

reasonable assurance regarding achieving objectives
in efficiency and effectiveness of operations, reliability
of reporting, and compliance with applicable laws and
regulations.

DR and CR stands for

Debit Register and Credit
Register.

Do you think that a trial balance that does not balance is the most
serious problem you may face as an accountant?

Accounting Information System change the way

how the credit cards are processed from manual
to an automated way.

Components of
the Study of AIS

TECHNOLOGY
Technology
provides
the
foundation on which AIS and
business operations rest, and
knowledge
of
technology
is
critically
important
to
your
complete understanding of AIS
discipline.

DATABASES
Knowledge
of
Databases
is
important
to
a
complete
understanding of AIS.
To perform analysis
To
prepare
information
for
management decision making
To audit a firms financial records

REPORTING
To design reports generated by an
information
system,
the
accountant must know what
outputs are required or are
desirable.
GAAP-based financial statements
is one example considered in AIS.

CONTROL
As a practicing accountant, you
will spend much of your time
providing expertise on controlling
business processes.
CONTROL- the means by which we
make sure the intended actually
happens.
You
must
develop
an
understanding of control that is
specific to the situation at hand,
yet is adaptable for the future.

BUSINESS
OPERATIONS
An AIS operates in concert with
the ff. business operations:
Hiring employees
Purchasing Inventories
Collecting cash from customers
To advise management and to
prepare
reports
for
decision
making, an accountant must
understand the business nature.

EVENTS
PROCESSING
Examples of events:
Sales
Purchases
Data about this events must be
captured
and
recorded
to
monitor the business operations.
To design and use the AIS, an
accountant must know what
event data are processed and
how they are processed.

MANAGEMENT
DECISION MAKING

The information used for a

decision must be tailored to the
type
of
decision
under
consideration.
Many decision makers now use
INTELLIGENT SYSTEMS to help
them make decisions.

SYSTEM
DEVELOPMENT &
OPERATIONS

System development task that

can be accomplished by an
accountant;
Choosing the data for a report
designing that report

configuring an enterprise
system

COMMUNICATION

To present the result of their

endeavors effectively, accountants
must possess strong oral and
written communication skills.
Skills an ACCOUNTANT must have:
Straightforward
Consistent
Active listening
Fact-oriented

ACCOUNTING AND
AUDITING
PRINCIPLES

To design and operate the

accounting
system,
the
accountant must know the proper
accounting procedures and audits
to which information is subjected.

WHAT IS AN
ACCOUNTING
INFORMATION
SYSTEM

SYSTEMS AND
SUBSYTEMS

THE INFORMATION
SYSTEM (IS)
THE INFORMATION SYSTEM (or MANGEMENT INFORMATION
SYSTEM (MIS)
It is a man-made system that generally consists of an integrated set of
computer-based components and manual components established to collect,
store, and manage data and to provide output information to users.

ACCOUNTING INFORMATION
SYSTEM (AIS)
Historically, an IS incorporated a separate accounting information
system (AIS), which is a specialized subsystem of the IS. stovepipes
The purpose of this separate AIS was to collect, process, and report
information related to the financial aspects of business events.
AIS may be divided into components based on the operational
functions supported which are called as AIS business process or
AIS subsystems.

LOGICAL COMPONENTS
OF A BUSINESS PROCESS

MANAGEMENT USES OF
INFORMATION

DATA
vs.
INFORMATON

Data
Facts or figures in raw form
Represent the

measurements or
observations of objects and
events

Information
Is data presented in a form

that is useful in a decisionmaking activity

It has value to the decisionmaker because it reduces
uncertainty and increases
knowledge about a
particular area of concern

Storage

Input

Processin
g

Outpu
t

Users

(a)Functional model of an information system

Database

Data

Transformatio
n

Informatio
n

Users

(b) The same information system model with new labels

QUALITIES
OF
INFORMATION

EFFECTIVENESS
- deals with information being relevant
and pertinent to the business process as
well as being delivered in a timely, correct,
consistent, and usable manner.
EFFICIENCY
- concerns the provisions of information
through the optimal (most productive and
economical use of resources)

CONFIDENTIALITY
- concerns the protection of sensitive
information from unauthorized
disclosure
INTEGRITY
- relates to the accuracy and
completeness of information as well as
to its validity in accordance with
business values and expectations

AVAILABILITY
- relates to information being
available when required by the
business process now and in the future
COMPLIANCE
- deals with complying with the laws,
regulations, and contractual
arrangements to which the business
process is subject, that is, externally
imposed business criteria as well as
internal policies

RELIABILITY
- relates to the provision of
appropriate information for
management to operate the entity and
exercise the fiduciary and governance
responsibilities

Hierarchy of
Information
Qualities

Decision makers

Users of
information

Benefits > costs

Pervasive
Constraint

Decision
usefulness

Overall Quality

Understandabil
ity

User-Specific
Quality
Primary DecisionSpecific Qualities

Ingredients of
Primary Qualities
Secondary and
Interactive
Quality
Threshold for
Recognition

Reliabilit
y

Relevanc
e
Predictiv
e/
feedback
value

Timelines
s

Validit
y

Accurac
y

Comparability
(including
consistency)

Materiality

Complet
e-ness

Neutralit
y

Verifiabilit
y

DOCUMENTING INFORMATION
QUALITIES
MATRIX
- is a tool designed to help you
analyze a situation and relate
processes to desired results.

Information Qualities
Process
(with
Controls)

Effectivene
ss
(timeliness
)

Process 1

Validity

Accuracy

Process 2

Process 3

Process 4

Completene
ss

Conflicts Among the Information

Qualities
For some of the information

qualities, an increased level of

one requires a reduced level of
another.

MANAGEMENT
DECISION MAKING

Decision making

-is the process of making choices, which

is the central activity of all management.

Managers make decisions or choices

that include what products to sell, in
which markets to sell those products,
what organizational structure to use, and
how to direct and motivate employees.

Herbert A. Simon, a Nobel-prize-winning

economist, described decision making
as a three step process:
1.
2.
3.

Intelligence. Searching the environment

for conditions calling for a decision.
Design. Inventing, developing, and
analyzing possible courses of action.
Choice. Selecting a course of action.

Information from and about the

environment and the organization is
needed to recognize situations or
problems requiring decisions.

Information about inefficient or

overworked processes in the
organization should focus
managements attention on problems in
the organization.

Managers use information from inside

and outside the organization to design
courses of action.

Finally, a manager requires information

about the possible outcomes from
alternative courses of action.

Unstructured
decision

Structured
decision

It emphasizes that information flow and

operations are both horizontal and
vertical and that there are several levels
of management.

This information is narrow in scope,

detailed, accurate and comes largely
from within the organization. The data
captured at the operations and business
event-processing level constitute the
foundation for the vertical information
flows that service a multilevel
management function.

Tactical management requires

information that focuses on relevant
operational units and is more
summarized, broader in scope, and
need not be as accurate as the
information used by operations
management. Some external may be
required.

Strategic management requires

information to assess the environment
and to project future events and
conditions. Information is even more
summarized, broader in scope, and
comes from outside the organization
more than does the information used by
tactical management.

Structure

- the degree of repetition and routine in

the decision. Structure implies that you
have seen this very decision before and
have developed procedures for making
the decision.

Structured decision
Are those for which all three decision phases
(intelligence, design, and choice) are relatively
routine or repetitive.

Unstructured decision
None of the decision phases (intelligence,

design, or choice) are routine or repetitive.

INFORMATION
QUALITIES AND
DECISION MAKING
LEVEL

Strategic management

It may require information that is high in

predictive value. Information used for
strategic planning should help managers
see the future and thereby assist them
in formulating long-term plans.

Operation management

It must make frequent decisions, with

shorter lead times, and may therefore
require a daily sales report to be able to
react in a timely manner to changes in
sales patterns. It also may require timely
and accurate information and may not
be concerned about the predictive value
of the information.