Unit 6 The Accounting Information System & The Management Information System MANAGEMENT INFORMATION SYSTEMS 8/E Raymond McLeod, Jr. and George Schell 1-1

Chapter 11 The Accounting Information System MANAGEMENT INFORMATION SYSTEMS 8/E Raymond McLeod, Jr. and George Schell 11-2

What is Data Processing? n Manipulation or transformation of symbols for the purpose of increasing their usefulness. n Data processing (DP) and transaction processing (TP) are often used interchangeably. n Applied to business data 11-3

Accounting Information Systems (AIS) n Gathers data describing a firm’s activity n Transforms data into information n Makes information available to users inside and outside the firm 11-4

Environment A Model of an Accounting Information System Information Data Management Dataprocessingsoftware Transform AccountingInformationSystem Database Outputphysicalresources Inputphysicalresources Environment 11-5

Data Processing Tasks 1. Gather data –Each transaction is documented –What happened? –When did it happen? –How much (volume, value)? –Transactions describe 11-6

2.Manipulate data – Classify (use codes) – Sort – Calculate – Summarize Data Processing Tasks [cont.] 11-7

3. Store data –Describes each transaction –Represents most of the database Data Processing Tasks [cont.] 11-8

4. Document preparation –Triggers »By an action »By a time schedule –Hardcopy or on-screen Data Processing Tasks [cont.] 11-9

Characteristics of the AIS n Performs necessary tasks n Standard procedures n Detailed data n Historical focus n Provides minimal problem-solving information 11-10

Sample AIS The Distribution System n Users –Manufacturers –Wholesalers –Retailers n General in nature n Used in many different types of firms –Retailers –Manufacturing –Service 11-11

DFDs n Data flow diagram –Document a system in a hierarchical manner –Data flows, processes, environmental elements n Context level is overall system within environment n Leveled and Balanced DFDs 11-12

Customers Management Distribution system SuppliersMaterialsstockroom Sales orders Rejected sales order notices Invoices Statements Payments by customers Commitments Purchases orders Shipments Supplier invoices Supplier statements Payments to suppliers Stock Other reports Budgetreports Balance sheet Income statement A Context Diagram of the Distribution System 11-13

Customers Sales Orders Rejected sales order notices Invoices Statements Payments by customers Receivables ledger data 1. Fill Orders Inventory ledger data Payables ledger data Other reports Budget reports Balancesheet Income Incomestatement Management Received items items Purchasing data Commitments Purchase Orders 2. Order replenish- ment stock Shipments Supplier invoices Supplier statements Payments to suppliers Suppliers Stock Materialsstockroom A Figure 0 Diagram of the Distribution System 3. Maintain general ledger 11-14

Customers 1.3Billing 1.1OrderEntry 1.4Accountsreceivable 1.2Inventory Sales orders Rejected sales order notices Accepted orders Filled items Purchasing data Received items items Inventory Inventory ledger data Receivables ledger data Billed orders Statements Invoices Completed orders orders Payments by customers Payments by customers A Figure 1 Diagram of the Systems that Fill Customer Orders 11-15

Purchasing data Commitments Suppliers Suppliers Payments to suppliers Supplier statements Supplier invoices Payable ledger data Materialsstockroom Stock Stock Incurred obligations 2.2 Receiving Issued purchase order data Filledpurchaseorders Shipments Received items Received items Purchase orders Receivedpurchases 2.1 Purchasing 2.3 Accounts payable A Figure 2 Diagram of the Systems that Order Replenishment Stock

3.1 Update general ledger Receivables ledger data Receivables ledger data Inventory ledger data Inventory ledger data Payables ledger data Payables ledger data General ledger records Updated general ledger records Generalledger Management report data 3.2 Prepare management reports Other reports Budget reports Balance sheet Income statement Management A Figure 3 Diagram of the Systems That Perform General Ledger Processes

Fill Customer Orders n Order entry –Sales order form n Inventory –Process sales –Process receipts –Feed general ledger 11-18

Customers Customers Sales orders Edit rejects Sales order edit ejects edit ejects Sales order edit ejects edit ejects Edit order data Rejected Rejected sales order notices notices Editedorders Customer credit file credit fileCustomer Credit data Computer credit credit check check Computer credit credit check check Edited and checked orders Credit Rejects Sales order Sales order credit rejects Accepted orders orders Log in orders Order data Completed orders Mark filled orders Date filed Order log A Figure 1.1 Diagram of the Order Entry System

BackorderfileBackorderfile Check the balance on hand Check the balance on hand Check the reorder point Check the reorder point Add received items Add received items Provide general ledger data Provide general ledger data Item records Backorderrecords InventoryfileInventoryfile Itemsavailable Updated item records Filled items Purchasing data Inventory file additions Inventoryrecords Received items Inventory ledger data A Figure 1.2 Diagram of the Inventory System Acceptedorders 11-20

Billing n Invoice –Note: »1. Customer data »2. Item data 11-21

CustomersCustomers Obtain customer data Customerfile Prepare invoices Filleditems Customer data Invoicedata Billed orders Invoices Completedorders A Figure 1.3 Diagram of the Billing System

Accounts Receivable n Four separate triggers –Today's sales –Today's payments –Time to send statements –Need to provide general ledger data 11-23

Billed orders Billed orders AccountsreceivablefileAccountsreceivablefile Receivables ledger data Receivablesrecords to delete New receivables Receivables records Prepare statements Customers Payments by customers Paidreceivablesfile Paidreceivablesrecords Statement records Statements A Figure 1.4 Diagram of the Accounts Receivable System Add new receivables Provide general ledger data Delete paid receivables

Order Replenishment Stock n Purchasing –Emerging technologies »EDI »ISDN –Purchase order 11-25

Supplier file fileSupplier Outstanding purchase purchase order files order filesOutstanding purchase purchase order files order files Select suppliers Purchasing data Past performance data Inventory and supplier data Purchase order data Obtain verbal commitments Suppliers Prepare purchase orders Close out purchase orders Commitments Purchase Orders Issued purchase order data IncurredObligations Purchase order records Filled purchase Orders Purchase records to close out A Figure 2.1 Diagram of the Purchasing System PurchaseOrder history file PurchaseOrder Removed purchase order records 11-26

A Figure 2.2 Diagram of the Receiving System Suppliers Purchased items file Purchased process receipts Materialsstockroom Notify other systems Purchased item data Issuedpurchaseorderdata Shipments Stocks Receiptinformation Received items Filled purchase orders Received purchases 11-27

Accounts Payable n The firm pays suppliers when: 1.Stock was ordered (P.O. file copy) 2.Stock was received (Received purchases file) 3.Invoice 11-28

Paid Payables Records Paid Payables Records Paid Supplier Data AccountspayablefileAccountspayablefile ReceivedpurchasesfileReceivedpurchasesfile PaidpayablesfilePaidpayablesfile SuppliersSuppliers Invoice and statementfile statementfile ReceivedPurchases IncurredObligations New Payables data PayablesRecords Payables Ledger Data ReceiptData Payments to Suppliers Supplier Invoices Invoice Data Payables Records to delete A Figure 2.3 Diagram of the Accounts Payable System Paymentdata Supplierstatements Provide general ledger data Delete paid payables Set up supplier payables records Make supplier payments

AIS is the Foundation System n The AIS must be implemented first –MIS –DSS –ES Depends on a well-designed AIS 11-30

Summary n AIS maintains financial records of the firm n Data processing components –Data gathering –Data manipulation –Data storage –Document preparation n AIS Subsystems n AIS contributes to problem solving 11-31

Chapter 12 TheManagement Information System MANAGEMENT INFORMATION SYSTEMS 8/E Raymond McLeod, Jr. and George Schell Copyright 2001 Prentice-Hall, Inc

MIS Definition n A computer-based system that makes information available to users with similar needs. –Users are typically comprise a formal organizational entity –Describes what has happened in the past 12-33

Early MIS Efforts n Popular in business by the mid 1960s n Punched card and keydriven machines were used only for data processing n The first computers were applied the same way n Only a few computer literate people in the firms n Managers became aware of computer’s processes and power 12-34

MIS is an Organizational Resource n Information –Past, present, future –Periodic reports, special reports, simulations n Similar needs –Functional area –Management level –Managers and nonmanagers 12-35

An MIS Model n Database –AIS data and information –Environmental data and information n Interorganizational information systems (IOS) –Firms band together with other organizations such as suppliers 12-36

EnvironmentOrganizationalproblemsolvers Report writing software Mathematicalmodels ManagementInformationSystem An MIS Model Data Information Environment Database 12-37

Executive Information System (EIS) Organizational Information Systems Marketing information system Manufacturing information system Financial information system Human resource information system 12-38

Functional Information Systems n MIS tailored to meet users’ needs for information concerning functional areas –Manufacturing –HRIS –Others n Executive information systems (EIS) n Enterprise information system –Pulls functional ISs together –Enterprise resource planning (ERP)

Report Writing Software n Periodic and special reports may look the same n Difference is in what triggers the report –Periodic report »Produced on a schedule –Special report »Produced when something out of the ordinary occurs 12-40

Incorporating Management by Exception n Prepare the report only when exceptions occur n Use the report sequence to highlight exceptions n Group exceptions together n Show the variance from the norm 12-41

An Overtime Earnings Report OVERTIME EARNINGS REPORT FOR WEEK ENDING AUGUST 19 OVERTIME EARNINGS Department No. Department Name Current Month Year-to-Date Receiving $ 2, $ 5, Inspection $ 1, $ 4, Materials Handling $ 3, $12, Tooling $ $ 1, Assembly $ 0.00 $ Plating $ 3, $12, Shipping $ 5, $18, TOTALS $15, $55,

SALES BY PRODUCT FOR THE MONTH OF JUNE PRODUCT PRODUCT CURRENT MONTH YEAR-TO-DATE NUMBER NAME SALES SALES GASKET CENTER CASE $ 5, $ 31, MAINSHAFT 4, , ST MOTION SHAFT 1, , OIL SEAL REAR 11, , LAYGEAR 8, , HUB 5TH.00 13, SHIFT FORK , SYNCHRO RING 2ND 2, , BUSH SHIFT LEVER OIL SLINGER

AGED ACCOUNTS RECEIVABLE REPORT AS OF MAY CUSTOMER CURRENT OVER 90 TOTAL NUMBER NAME AMOUNT DAYS DAYS DAYS AMOUNT KELLY & MARLEY INC 1, KENNEDY ELECTRIC KENYON MACHINERY KEPNER DANA CO KERITE CO KEYMAN ASSOCIATES KIMBULIANS KIRSCH CO LEBEN DRILLING LEEMONT INC

SALES BY SALESPERSON REPORT FOR THE MONTH ENDING MARCH 31 SALESPERSON CURRENT-MONTH YEAR-TO-DATE NO. NAME QUOTA ACTUAL VARIANCE QUOTA ACTUAL VARIANCE 0120 JOHN NELSON LYNN SHERRY DARVIN UPSHAW JANIE EVANS TRAVIS BURKE CATHY HAGER STEVE JENNER SAM MOSELY TOTALS

Modeling n Models are abstractions n Models may be: –Physical –Narrative –Graphic –Mathematical 12-46

Mathematical Modeling n Most important to MIS users n Three dimensions –Influence of time –Degree of uncertainty –Ability to optimize 12-47

Mathematical Model Types n Static –Does not include time –Like a snapshot n Dynamic –Includes time –Like a motion picture 12-48

Mathematical Model Types (cont.) n Probabilistic –Includes probabilities of events occuring –0.00 to 1.00 n Deterministic –Events are certain –Not random 12-49

Mathematical Model Types (cont.) n Optimizing –Selects best solution –Requires structured problems n Suboptimizing –Also called satisficing –Model identifies outcomes for manager to select among 12-50

Simulation n Use of a model is called simulation n Scenario –Conditions that influence the simulation –Scenario data elements n Decision variables –Input values n Output format varies 12-51

Simulation (cont.) n Simulation Technique –Single scenario for optimizing model –What-if game for suboptimizing models –Change only single decision variable per run –Systematically discover answers to problems n Output format –Include both decision variables and outcomes on same report 12-52

Modeling Example n Use model to simulate the effect of: –Price of product –Amount of plant investment necessary to provide sufficient capacity –Amount to invest in marketing activity –Amount to invest in R & D n Enter model input n Review model outputs 12-53

More on Modeling n Advantages –Can be a learning experience –Speed allows consideration of more options –Provides predictive power –Less expensive than trial-and-error method n Disadvantages –Difficult to model a business system –High degree of mathematical skills required 12-54

INVENTORY PLANNING MODEL OCTOBER 11 SCENARIO: BEGINNING BALANCE: 200 DAILY SALES UNITS: 20 DECISIONS: 0RDER QUANTITY: 100 REORDER POINT: 175 LEAD TIME: 3 RESULTS: BEGINNING ENDING ORDER RECEIPT DAY BALANCE RECEIPTS SALES BALANCE QUANTITY DUE DATE

Graphic Output n Use graphics to –present a quick summary –detect trends over time –forecast activities –seek relatively simple impressions from a large volume of data 12-56

Graphical Output n Reports and model outputs can be produced in tabular or graphical form n Spreadsheets have encouraged the use of graphics n Can improve decision making capability 12-57

Which Graphs to Use n Line or bar charts are best to summarize data n Grouped line or bar charts show trends over time n Grouped bar charts are better for representing parts of a whole n Compare variables using horizontal, not vertical, bars n Use single line or bar charts to compare data points 12-58

Years (c) Years (a) GROUPED/MULTIPLE LINE CHART GROUPED BAR CHART Sales Revenue 12-59

Segmented Line Chart Years (b) Legend: Apples Oranges Peanuts Dollars in Millions 12-60

Segmented/Divided Bar Chart Sales Revenue Years (d) Dollars in Millions Legend: Apples Oranges Peanuts 12-61

Human Factors Consideration n Behavioral influences can affect employees in their computer-related tasks n Fear –Replacement of people by computers –Computer systems tailored to organizations, not individuals –Managers and line workers are affected 12-62

Minimizing Fear n Use computer as a means of achieving job enhancement n Use formal communications to keep employees aware of firm’s intentions n Build a relationship of trust with employees n Align employees’ needs with firm’s objectives 12-63

Putting the MIS in Perspective n The first attempt to make information available to management n Enjoyed its greatest prominence in the 1960s when it first originated n Now integrated throughout the firm 12-64

MIS and Problem Solving n Organizationwide information resources –Provides problems solving information –Sets stage for accomplishment in other areas such as DSS, the virtual office, and knowledge-based n Problem identification and understanding –Main idea is to keep information flowing to the manager –Manager uses MIS to signal impending problems n Main weakness is that it is not aimed at individual problem solvers 12-65

Summary n MIS is an organizational reason providing information to managers with similar needs n Functional MISs began to emerge n MIS subsystems –Report-writing software –Mathematical models n Management by exception can be incorporated 12-66

Summary [cont.] n Mathematical modeling –Only an approximation n Computer graphics n Behavioral influences n Quality of IS 12-67