1. Accounting Information Systems: An Overview
Chapter 1

2. Learning Objectives Distinguish between data and information:
Understand the characteristics of useful information.
Explain how to determine the value of information.
Describe the major business processes present in most companies.
Explain what an accounting information system (AIS) is and describe its basic functions.

3. Systems, Data, and Information
A system is a set of two or more interrelated components that interact to achieve a goal.
Systems are almost always composed of smaller subsystems, each performing a specific function supportive of the larger system.

4. Systems
When the systems concept is used in systems development, changes in subsystems cannot be made without considering the effect on other subsystems and the system as a whole.
Goal conflict occurs when a decision or action of a subsystem is inconsistent with another subsystem or the system as a whole. 
Goal congruence is achieved when a subsystem achieves its goals while contributing to the organization’s overall goal.
Solar System – Sun, gravity and planets to create an orbit
Nervous System – Nerves and receptors to create movement

5. Data vs. Information Data are facts stored in the system
A fact could be a number, date, name, and so on.
For example:
2/22/14
ABC Company, 123,
99, 3, 20, 60

6. Data vs. Information
The previous slide just showed facts, if we put those facts within a context of a sales invoice, for example, it is meaningful and considered information.
Invoice Date : 2/22/14 Invoice #: 123
Customer: ABC company
Item # Qty Price
$20
Total Invoice Amount $60

7. Systems, Data, and Information
Usually, more information and better information translates into better decisions.
However, when you get more information than you can effectively assimilate, you suffer from information overload.
When you’ve reached the overload point, the quality of decisions declines while the costs of producing the information increases.

8. Value of Information
Information is valuable when the benefits exceed the costs of gathering, maintaining, and storing the data.
Benefit (i.e., improved decision making)
> Cost (i.e., time and resources used to get the information)

9. What Makes Information Useful?
There are seven general characteristics that make 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 error and bias
Complete: does not omit important aspects of events or activities
Timely: information needs to be provided in time to make the decision

10. What Makes Information Useful?
Understandable: information must be presented in a meaningful manner
Verifiable: two independent people can produce the same conclusion
Accessible: available when needed

11. Transactional Information Between Internal and External Parties in an AIS
Business organizations conduct business transactions between internal and external stakeholders.
Internal stakeholders are employees in the organization (e.g., employees and managers).
External stakeholders are trading partners such as customers and vendors as well as other external organizations such as Banks and Government.
The AIS captures the flow of information between these users for the various business transactions.

12. Interactions Between AIS and Internal and External Parties

13. Basic Business Processes
Transactions between the business organization and external parties fundamentally involve a “give–get” exchange. These basic business processes are:
Revenue: give goods/service—get cash
Expenditure: get goods/service—give cash
Production: give labor and give raw materials—get finished goods
Payroll: give cash—get labor
Financing: give cash—get cash

14. What Is an Accounting Information System?
It can be manual or computerized
Consists of :
people
procedures and instructions,
data
software
information technology infrastructure (computers, peripheral devices, and network communications devices)
internal controls and security measures
Thus, transactional data is collected and stored into meaningful information from which business decisions are made and provides adequate controls to protect and secure the organizational data assets.

15. What Is an Accounting Information System?
These six components enable an accounting information system to fulfill three important business functions:
Collect and store data about organizational activities, resources, and personnel.
Transform data into information that is useful for making decisions so management can plan, execute, control, and evaluate activities, resources, and personnel.
Provide adequate controls to safeguard the organization’s assets, including its data, to ensure that the assets and data are available when needed and the data are accurate and reliable.

16. The CITP Designation
CITP: Certified Information Technology Professional
Identifies CPAs who possess a broad range of technological knowledge and the manner in which information technology (IT) can be used to achieve business objectives
Reflects the AICPA’s recognition of the importance and interrelationship of IT with accounting