1. Accounting Information Systems An Introduction
Chapter 1
Accounting Information Systems An Introduction

2. The Information Environment

3. Information System Objectives
To support the stewardship function of management. Stewardship refers to management’s responsibility to properly manage the resources of the firm. The information system provides information about resource utilization to external users via traditional financial statements and other mandated reports.
To support management decision making. The information system supplies managers with the information they need to carry out their decision-making responsibilities.
To support the firm’s day-to-day operations. The information system provides information to operations personnel to assist them in the efficient and effective discharge of their daily tasks.

4. What is a System?
A group of interrelated multiple components or subsystems that serve a common purpose

5. What is an Information System?
An information system is the set of formal procedures by which data are collected, processed into information, and distributed to users

6. An Information Systems Framework
Financial
Transactions
Information
System
User
Decision
Making
Information
Nonfinancial
Transactions 10

7. An Information Systems Framework
Transactions
A transaction is a business event.
Financial transactions economic events that affect the assets and equities of the organization (sales, and purchase).
Nonfinancial transactions all other events processed by the organization’s. adding new supplier of raw materials

8. An Information Systems Framework
Financial transactions and nonfinancial transactions are closely related and are often processed by the same physical system……?
For example
a financial portfolio management system that collects and tracks stock prices (nonfinancial transactions).
When the stocks reach a threshold price, the system places an automatic buy or sell order (financial transaction).

9. AIS versus MIS Accounting Information Systems (AIS)
financial transactions; e.g., sale of goods
and nonfinancial transactions that directly affect the processing of financial transactions; e.g., addition of newly approved vendors.
Management Information Systems (MIS) process
nonfinancial transactions that are not normally processed by traditional AIS; e.g., tracking customer complaints

10. AIS Subsystems Transaction processing system (TPS)
converts economic events into financial transactions, recording financial transactions in the accounting records (journals and ledgers), and distributing essential financial information to operations personnel to support their daily operations.
The management reporting system (MRS), provides internal management with special-purpose financial reports and information needed for decision making such as budgets, variance reports, and responsibility reports

11. AIS Subsystems Management reporting system (MRS)
provides internal management with special-purpose financial reports and information needed for decision making IS
AIS
GLS/FRS
TPS
MRS
MIS
Finance
Marketing
Production
HRS
Distribution

12. The General AIS Model

13. Information Versus Data
Raw facts
No organization or meaning
Have not processed (edited, summarized, or redefined)
Have no direct effect on the users.
Information
Processed data
Meaningful to users
Cause the user to take an action.

14. Data sources
Data sources are financial transactions that enter the information system from internal and external sources.
External financial transactions are the most common source of data for most organizations.
E.g., sale of goods and services, purchase of inventory, receipt of cash, and disbursement of cash (including payroll).
Internal financial transactions involve the exchange or movement of resources within the organization.
E.g., movement of raw materials into work-in-process (WIP), application of labor and overhead to WIP, transfer of WIP into finished goods inventory, and depreciation of equipment

15. Transforming the Data into Information
Data Collection
Capturing transaction data
Recording data onto forms
Validating and editing the data
Two rules govern the design of data collection procedures: relevance and efficiency.
data that ultimately contribute to information are relevant
Efficient data collection procedures are designed to collect data only once

16. Transforming the Data into Information
Data Processing
Merging
Calculating
Summarizing
Comparing
Data Management
Storing
Retrieving
Deleting

17. What Makes Information Useful?
Relevant: information needed to make a decision (e.g., the decision to extend customer credit would need relevant information on customer balance from an A/R aging report)
Reliable: information free from bias
Complete: does not omit important aspects of events or activities
Timely: information needs to be provided in time to make the decision
Summarization: aggregated in accordance with the user’s needs

18. The Role of the Accountant
Accountants As System Designers
The accounting function is responsible for the conceptual system, while the computer function is responsible for the physical system
The conceptual system determines the nature of the information required, its sources, its destination, and the accounting rules that must be applied

19. The Role of the Accountant
Accountants As System Auditors
External Auditors
Auditing is a form of independent attestation performed by an expert—the auditor—who expresses an opinion about the fairness of a company’s financial statements External Auditing attest to fairness of financial statements.
IT Auditors
evaluate IT, often as part of external audit, The IT auditor attests to the effectiveness of a client’s IT controls to establish their degree of compliance with prescribed standards

20. End of Chapter 1