1. ACCOUNTING INFORMATION SYSTEMS
Core Concepts of
ACCOUNTING INFORMATION SYSTEMS
Moscove, Simkin & Bagranoff
Developed by:
Marianne Bradford, Ph.D.
Bryant College
John Wiley & Sons, Inc.

2. Chapter 2 The Technology of Accounting Information Systems
Introduction
Input, Processing, and Output Devices
Secondary Storage Devices
Data Communications and Networks
Computer Software

3. The Components of Information Technology
AIS is a set of five interacting components:
Hardware
Software
Data
People
Procedures
If these items involve computerized data processing, they are collectively called information technology (IT).

4. The Importance of IT to Accountants
Information technology must be compatible with, and support, the other components of an AIS.
Accountants often help clients make hardware and software purchases.
Auditors must evaluate computerized systems.
Accountants may be asked to evaluate the efficiency and effectiveness of an existing AIS.
Information technology will effect the way future accountants will work.
Knowing how IT affects accounting systems is vital to passing most accounting certification examinations.

5. Input, Processing, and Output Devices
Devices that commonly surround the computer and help it process data are peripheral equipment.
Peripheral equipment can be classified as input, secondary storage, output and communications equipment.
Accounting transactions are processed by the input-processing-output cycle.

6. Input Devices
The starting point for collecting data is a source document.
Two advantages of using manually-prepared source documents is that they are human readable and easily completed on-site.
The main disadvantage of using manually- prepared source documents is that they are usually not machine readable.
Data transcription is inefficient because it is labor-intensive, time-consuming, costly, and nonproductive.
It is difficult to control inputs and audit systems using remote job entry (RJE).

7. Point of Sale Devices
POS Devices are “smart cash registers” that gather and record pertinent data electronically at the time a sale is made.
Bar Code Readers read universal product codes (UPC), which are vertical bars that identify a manufacturer and the item.
POS systems allow retailers to centralize price information in online computers and update prices when required.

8. Advantages of POS Systems
Clerical errors are detectable and may be automatically corrected.
The register/terminal can perform calculations.
Processing errors can be reduced.
Cash register can serve as an inquiry terminal.
Inventory/disbursement data collected.
Sales information is automatically collected.
May reduce personnel because of elimination of many manual procedures.

9. Magnetic Ink Character Recognition
Magnetic Ink Character Recognition uses magnetically-encoded paper containing standardized fonts to process transactions.
An advantage of MICR coding is that it is both machine readable and human readable.
Another advantage is that MICR coding is quite flexible.
A disadvantage is that the magnetic strength of the characters diminishes over time.

10. Optical Character Recognition
Optical Character Recognition (OCR) devices use optical rather than magnetic readers to interpret the data found on source documents.
Mark-sense media use rectangles or ovals as “characters” that a person blackens with a pencil.
Most OCR forms are turnaround documents which are prepared by a company, sent to individuals, and returned to the organization for further data processing.
Main advantage of OCR is that the documents are human-readable and machine-readable.

11. Plastic Cards with Magnetic Strips
Plastic Cards with magnetic strips store information about the user.
AISs use mag-strip cards to capture data at the time these cards are used.
Automated teller machines (ATM) examine account numbers and passwords encoded on mag-strip cards.

12. Microcomputer and Audio Input
Microcomputer input devices include mice, keyboards, audio, touch screens, joy sticks and light pens enable users to input data into the computer.
PDA (personal data assistant) devices enable users to maintain personal data such as address books, calendars, and check registers.
Audio input means communicating with a computer through audio frequencies.

13. Central Processing Unit
The central processing unit processes machine readable data into information of value.
The CPU has two major components:
primary memory
microprocessor
Microprocessors have two components:
arithmetic-logic unit
control unit
Processing speeds are measure in megahertz.

14. Primary Memory
Primary memory temporarily stores data and program instructions.
The larger the memory, the more data or instructions that can be stored.
The size of primary memory is measured in megabytes.

15. Microprocessors
The CPU’s microprocessor manipulates data and executes instructions.
The ALU performs arithmetic such as addition and subtraction and logic tasks such as comparisons.
The ALU performs these chores with special storage locations called registers.

16. Microprocessors
The Control Unit supervises the data processing activities.
Computer speed may be increased by increasing the size of the bus.
Cache memory is fast buffer memory that facilitates data transfers between primary memory and the microprocessor.

17. Computers, Processing Speeds, and AISs
Most computers are input/output bound because the speeds of I/O operations are slower than the speed of the processor.
Throughput can be increased by reducing hard-disk access times, using faster printers, or employing faster data transmission speeds on local area networks.

18. Output Devices Printers include dot-matrix, ink-jet and laser.
Video output is displayed using cathode ray tubes. Pixels are tiny, discrete dots arranged in a matrix.
Multimedia combines video, text, graphics, animation and sound to produce multidimensional output.

19. Secondary Storage Devices
Secondary storage devices include magnetic disks, floppy disks, CD-ROMs, DVD disks, and flash memories.
Common to all secondary storage media are the concepts of computer files, records, and fields.

20. Magnetic (Hard) Disks
Magnetic hard disks are direct access storage devices that have an oxide surface which can be magnetized to record information.
Advantages of hard disks:
large storage capacities
random access ability
data compression techniques
fast data transfer rates
Floppy disks are removable and are suitable for the backup of small files.

21. CD-ROMs
CD-ROM (compact disk-read only memory) are worm (write once, read many) devices.
Advantages:
Removable
Large storage capacity
Fast data transfer rates
Useful for archiving files securely
Disadvantages:
Worm media cannot be updated
CD-ROM encoders are expensive.

22. DVDs
A digital video disk (DVD) closely resembles a CD-ROM but has more storage capacity.
DVDs are currently used mostly for entertainment.
DVDs are predicted to become the medium of choice for distributing software or archiving data.

23. Image Processing
Image processing allows users to store graphic images in digital formats on secondary storage devices.
Advantages:
fast image capture rates
reduced physical storage space
convenience of storing images in computer records, which can be further manipulated
ability to store images in central files, which are available to multiple users.

24. Data Communications and Networks
Data communications refers to transmitting data to and from remote locations.
The path that data take in remote data communications is called a communication channel.
A modem translates the digital pulses of the sending equipment into analog.

25. Communication Channels and Protocols
Integrated services digital network lines (ISDN) are digital lines that transmit data at very fast rates.
A data communications protocol refers to settings that enable compatible transmission formats between sending and receiving stations.

26. Local Area Networks
Local-area networks are distributed networks created when computers within a small geographical area are linked.
LANs use a file servers to store centralized software and data files, and to coordinate data transmissions among LAN devices and users.

27. Wide Area Networks
Wide-area networks (WANs) are computer networks that span regional, national, or even global areas.
WANs often support electronic data interchange.
WANs may also enable organizations to create intranets.

28. Client/Server Computing
Client/server computing is an alternate technology to mainframe and/or hierarchical networks.
The overall objective is to achieve an enterprise network.

29. Client/Server Computing
Three components of a client/server network:
Presentation component
Application-logic component
Data management component
Advantages:
Flexibility of distributing hardware, software, data, and processing capabilities throughout the network
Reduced telecommunication costs
Ability to install thin-client systems

30. Software
Computer software includes the programs and routines that guide the hardware of a computer system in performing its varied operations and functions.
Two types of software:
Operating system - set of software programs that helps a computer run itself as well as the application programs designed for it.
Application software - refers to computer programs that help end users perform tasks.

31. Operating Systems
Windowing operating systems include a large number of software tools in one package and include graphical user interfaces (GUI).
Utility programs allow users to perform basic functions such as copying and converting files.
Today’s operating systems also come with antivirus software that guard against virus programs.

32. Application Software
Personal productivity software allows users to perform tasks relevant to their personal needs.
Accounting software enables the performance of accounting related tasks of a business.
Communications software allows separate computers to transmit data to one another.
Enterprise resource planning (ERP) software enables businesses and government agencies to integrate data on an organization-wide basis.

33. Programming Language
Application software packages are written in programming languages that a computer can understand and execute.
Object-oriented languages allow programmers to develop reusable code called “objects,” which are easier to develop, debug and modify.
Event-driven programming languages respond to user-controlled events.
A compiler translates source code to object code.

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35. Chapter 2