2. Accounting Information Systems, 1st Edition
Foundational Concepts of the AIS
Accounting Information Systems, 1st Edition

3. Study Objectives
The interrelationships of business processes and the AIS
Types of accounting information systems
Accounting software market segments
Input methods used in business processes
The processing of accounting data
Outputs from the AIS related to business processes
Documenting processes and systems
Client-server computing
Ethical considerations at the foundation of accounting information systems
1. On the topic, “Challenges Facing Financial Accounting,” what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements?
Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases).
Forward-looking Information
Soft Assets (a company’s know-how, market dominance, marketing setup, well-trained employees, and brand image).
Timeliness (no real time financial information)

4. Business Processes and the AIS
Accounting Information System - a system that captures, records, processes, and reports accounting information.
Business Process - a prescribed sequence of work steps completed in order to produce a desired result.
SO 1 The interrelationships of business processes and the AIS

5. Types of Accounting Information Systems
Three categories of AIS:
Manual systems
Legacy systems
Modern, integrated IT systems
SO 2 Types of accounting information systems

6. Types of Accounting Information Systems
Manual Systems
Generally used by small organizations. Entirely manual system would require:
Source document
Turnaround document
General ledger
General journal
Special journals
Subsidiary ledgers
SO 2 Types of accounting information systems

7. Types of Accounting Information Systems
Legacy Systems
Decision whether to replace or update legacy systems.
Screen scrapers
Enterprise application integration
Complete replacement of legacy systems
SO 2 Types of accounting information systems

8. Types of Accounting Information Systems
Modern, Integrated Systems
New programs sold by software development companies are more user friendly than legacy accounting systems.
Advantages to purchasing accounting software:
Lower cost
Shorter implementation time
Fewer bugs
SO 2 Types of accounting information systems

9. Accounting Software Market Segments
Exhibit 2-2
Accounting Software Market Segments
SO 3 Accounting software market segments

10. Input Methods for AIS Input methods used in organizations:
Source documents and keying
Bar coding
Point of sale systems
EDI
E-business
SO 4 Input methods used in business processes

11. Processing Methods Batch Processing -Transactions are grouped.
Advantages
Efficient for large volumes of like transactions.
Generally use less costly hardware and software.
Online and Real-Time Processing
Advantages
Information provided on a timely basis. All files are constantly up to date.
The business processes are integrated into a single database so that a single system is achieved.
SO 5 The processing of accounting data

12. Outputs of the AIS General Categories of Outputs
Trading partner documents such as checks, invoices, and statements
Internal documents
Internal reports
External reports
SO 6 Outputs from the AIS related to business processes

13. Documenting Systems
Pictorial Representations of processes and systems include:
Process maps
System flowcharts
Document flowcharts
Data flow diagrams
Entity relationship diagrams (ER diagrams)
SO 7 Documenting processes and systems

14. Documenting Systems System Flowcharts
Exhibit 2-7
Common System Flowchart Symbols
Documenting Systems
System Flowcharts
Intended to depict the entire system, including inputs, manual and computerized processes, and outputs.
SO 7 Documenting processes and systems

15. Client–Server Computing
Two Levels of Client-Server Computing:
Distributed presentation.
Distributed applications.
SO 8 Client-server computing

16. Copyright
Copyright © 2008 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.

17. Business Processes and the AIS
Concept Check
1. Which of the following statements is not true?
a. Accounting information systems must maintain both detail and summary information.
b. Business processes may vary from company to company.
c. Regardless of the extent of computerization, all accounting information systems must capture data from the transactions within business processes.
d. Business processes categorized as expenditure processes are not intended to be processes that serve customers.
SO 1 The interrelationships of business processes and the AIS

18. Types of Accounting Information Systems
Concept Check
2. In a manual system, an adjusting entry would most likely be initially recorded in a
a. special journal.
b. subsidiary ledger.
c. general journal.
d. general ledger.
SO 2 Types of accounting information systems

19. Concept Check Input Methods for AIS a. Electronic data interchange.
7. An IT system that uses touch-screen cash registers as an input method is called
a. Electronic data interchange.
b. E-business.
c. Point of sale system.
d. Source documents and keying.
SO 4 Input methods used in business processes

20. Concept Check Processing Methods a. Online processing.
8. When similar transactions are grouped together for a specified time for processing, it is called
a. Online processing.
b. Real-time processing.
c. Batch processing.
d. Group processing.
SO 5 The processing of accounting data

21. Concept Check Documenting Systems a. System flowchart. b. Process map.
10. In documenting systems, which pictorial method is described as a method that diagrams the actual flow and sequence of events?
a. System flowchart.
b. Process map.
c. Data flow diagram.
d. Entity relationship diagram.
SO 7 Documenting processes and systems

22. Client–Server Computing
Concept Check
12. In a client–server system, when the client PC manipulates data for presentation, but does not do any other significant processing, it is called
a. Distributed presentation.
b. Distributed application.
c. Distributed database.
d. Distributed processing.
SO 8 Client-server computing