Chapter 1 Accounting System Insights ACCOUNTING INFORMATION SYSTEMS The Crossroads of Accounting & IT © Copyright 2012 Pearson Education. All Rights Reserved.

To provide information for decision making... Investors Creditors Management External agencies (IRS, SEC and so on) Society and Community Should I buy more stock? Should I make a loan? Should we raise prices? Does this company comply? Is this enterprise socially responsible? What is the Objective of the Accounting System? © Copyright 2012 Pearson Education. All Rights Reserved.

How Do I Navigate the Crossroads of Accounting and IT? In today’s business environment, the accounting professional stands at the crossroads of accounting and information technology. Having IT knowledge gives you a competitive advantage as an accounting professional. © Copyright 2012 Pearson Education. All Rights Reserved.

How Do I Navigate the Crossroads of Accounting and IT? S tore accounting data using people, processes, and technology. A nalyze accounting data to create intelligence for decisions. S afeguard information assets stored in the accounting system using security, controls, and risk management. S ystem design to plan and build an accounting system. © Copyright 2012 Pearson Education. All Rights Reserved.

Your Roadmap to AIS © Copyright 2012 Pearson Education. All Rights Reserved.

Accounting System Three aspects to the accounting system: Store accounting data Analyze accounting data Safeguard accounting data © Copyright 2012 Pearson Education. All Rights Reserved.

How Is the Accounting System Related to the Enterprise System? Activities in an enterprise are often interconnected, such as human resources and accounting working together to create your paycheck. An enterprise system supports people conducting business activities throughout the enterprise. © Copyright 2012 Pearson Education. All Rights Reserved.

Integrated Enterprise System An integrated enterprise system shares data across functional areas within the enterprise (HR, Accounting, and so on). © Copyright 2012 Pearson Education. All Rights Reserved.

Enterprise System Modules or subsystems of an enterprise system can include: Accounting Supply Chain Management (SCM) Operations/Production System (OPS) Human Resource Management (HRM) Customer Relationship Management (CRM) © Copyright 2012 Pearson Education. All Rights Reserved.

Enterprise System Three functions of an enterprise system are: Input: capturing information to store Process: sorting and storing information Output: summarizing information to generate reports © Copyright 2012 Pearson Education. All Rights Reserved.

Accounting System Three functions of an accounting system are: Input: capture accounting information about transactions Process: sort and store accounting information Output: summarize information to generate financial reports, such as a balance sheet. © Copyright 2012 Pearson Education. All Rights Reserved.

Business Processes To understand an enterprise system, first you must understand the underlying business processes. Business processes are related activities performed by an enterprise to create value by transforming input into output. The enterprise value chain is an organizing framework for business processes. © Copyright 2012 Pearson Education. All Rights Reserved.

Value Chain Value chain is a series of activities that create value. Innovation includes designing new services, products and experiences. © Copyright 2012 Pearson Education. All Rights Reserved.

Business Processes & Transaction Cycles The accounting system spans the value chain. Business processes in the value chain are associated with related accounting transactions known as transaction cycles: 1.Purchasing cycle 2.Payroll cycle 3.Sales cycle © Copyright 2012 Pearson Education. All Rights Reserved.

Baseline Accounting System © Copyright 2012 Pearson Education. All Rights Reserved.

Baseline Accounting System with Transactions © Copyright 2012 Pearson Education. All Rights Reserved.

Baseline Accounting System with Transaction Cycles © Copyright 2012 Pearson Education. All Rights Reserved.

All 3 Categories of Accounting Software Use Databases © Copyright 2012 Pearson Education. All Rights Reserved.

Database Essentials Fields: pieces of information about events, people, and objects Record: collection of related fields Table: collection of related records with a unique table name Database: collection of related tables © Copyright 2012 Pearson Education. All Rights Reserved.

Database Fields & Records Fields are shown in columns Records are shown in rows. © Copyright 2012 Pearson Education. All Rights Reserved.

Spreadsheets Spreadsheet as a 2-dimensional database © Copyright 2012 Pearson Education. All Rights Reserved.

Database Tables Database Tables in 3-D © Copyright 2012 Pearson Education. All Rights Reserved.

Database Essentials Relational Database: database tables are related or connected through fields common to two or more tables Primary Key: a unique identifier for each record in a database table © Copyright 2012 Pearson Education. All Rights Reserved.

Relational Database Customer Table with Primary Key Order Table with Primary Key Primary Key © Copyright 2012 Pearson Education. All Rights Reserved.

Database Essentials Database Forms: onscreen forms used for database input, such as onscreen checks Database Queries: used for database searches and inquiries Database Reports: used for database output either onscreen or printout © Copyright 2012 Pearson Education. All Rights Reserved.

From Data To Intelligence Transforms data to intelligence for better decision. Data: The amount of a single sale of an Apple computer would be accounting data. Information: Apple’s income statement for the year showing sales by type of customer would be information. Which customers purchased what products last year? Intelligence: Financial analytics and predictive modeling that allows Apple to predict the number of customers who will purchase a new product. Which customers will purchase what products next year? © Copyright 2012 Pearson Education. All Rights Reserved.

Business Intelligence Two general approaches to business intelligence: Shadow Data: Often consists of “homegrown” spreadsheets. Business Intelligence Technologies: Software applications that perform data mining and predictive analytics. © Copyright 2012 Pearson Education. All Rights Reserved.

3 Keys of Opportunity People: What is the impact of the opportunity on people? Processes: What is the impact of the opportunity on processes? Technology: How will the opportunity impact technology? © Copyright 2012 Pearson Education. All Rights Reserved.

3 Keys of Opportunity Pair and Share: Share with a classmate your response to the following: How can you use the three keys to triage an issue or opportunity that you are currently facing? People Processes Technology © Copyright 2012 Pearson Education. All Rights Reserved.