ACC 2343 Accounting Information Systems Department of Accounting Faculty of Management Studies and Commerce University of Sri Jayewardenepura

ACC 2343 Accounting Information Systems Department of Accounting Faculty of Management Studies and Commerce University of Sri Jayewardenepura.

How does IT impact on Accounting? What are the new changes happening in Accounting?.

Learning Objectives. Distinguish between data and information: (characteristics of useful information; the value of information) Explain fundamental decisions an organization makes: Understand basic information needed to make them. Identify the transactional information that passes between internal and external parties and an AIS. Describe the major business processes present in most companies. Explain what an accounting information system (AIS) is and describe its basic functions. Discuss how an AIS can add value to an organization. Explain how an AIS and corporate strategy affect each other. Explain the role an AIS plays in a company’s value chain..

Questions to be addressed in this chapter include: What is the meaning of system , data , and information ? What is an accounting information system (AIS)? Why is the AIS an important topic to study? What is the role of the AIS in the value chain? How does the AIS provide information for decision making? What are the basic strategies and strategic positions an organization can pursue?.

AG00221_. SYSTEMS, DATA, AND INFORMATION.

j0283760. SYSTEMS, DATA, AND INFORMATION. Most systems are composed of smaller subsystems . . . . . . and vice versa!.

SYSTEMS, DATA, AND INFORMATION. Every organization has goals. The subsystems should be designed to maximize achievement of the organization’s goals. Even to the detriment of the subsystem itself. EXAMPLE: The production department (a subsystem) of a company might have to forego its goal of staying within its budget in order to meet the organization’s goal of delivering product on time..

SYSTEMS, DATA, AND INFORMATION. Goal conflict Goal congruence.

SYSTEMS, DATA, AND INFORMATION. The systems concept encourages integration (i.e., minimizing the duplication of recording, storing, reporting, and processing). Data are facts that are collected, recorded, stored, and processed by an information system. Organizations collect data about: 1 2 3.

SYSTEMS, DATA, AND INFORMATION. Information is different from data. Information is data that have been organized and processed to provide meaning to a user. Usually, more information and better information translates into better decisions..

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, LKR 20 000, LKR 60 000.

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 (LKR) 99 3 20 000 Total Invoice Amount 60 000.

SYSTEMS, DATA, AND INFORMATION. However, when you get more information than you can effectively assimilate, you suffer from information overload. Example: Final exams week! When you’ve reached the overload point, the quality of decisions declines while the costs of producing the information increases..

Value of Information. 1- 14.

Benefits of information may include:. Benefits of information - Cost of producing information Value of information.

Costs may include time and resources spent:. Benefits of information - Cost of producing information Value of information.

Costs and benefits of information are often difficult to quantify, but you need to try when you’re making decisions about whether to provide information..

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 bias Complete: does not omit important aspects of events or activities Timely: information needs to be provided in time to make the decision.

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

Information is provided to both: External users Internal users.

External users primarily use information that is either: MANDATORY INFORMATION—required by a governmental entity, such as by the SEC; or ESSENTIAL INFORMATION—required to conduct business with external parties, such as purchase orders..

In providing mandatory or essential information, the focus should be on: Minimizing costs. Meeting regulatory requirements. Meeting minimum standards of reliability and usefulness..

Internal users primarily use discretionary information. The primary focus in producing this information is ensuring that benefits exceed costs, i.e., the information has positive value..

Organizational Decisions and Information Needed. Business organizations use business processes to get things done. These processes are a set of structured activities that are performed by people, machines, or both to achieve a specific goal. Key decisions and information needed often come from these business processes..

Transactional Information Between Internal and External Parties in an AIS.

Class Activity - S&S. After working for years as a regional manager for a retail organization, Scott Parry opened his own business with Susan Gonzalez, one of his district managers, as his partner. They formed S&S to sell appliances and consumer electronics. Scott and Susan pursued a “clicks and bricks” strategy by renting a building in a busy part of town and adding an electronic storefront. Scott and Susan invested enough money to see them through the first six months. They will hire 15 employees within the next two weeks—3 to stock the shelves, 4 sales representatives, 6 checkout clerks, and 2 to develop and maintain the electronic storefront. Scott and Susan will host S&S’s grand opening in five weeks. To meet that deadline, they have to address the following important issues: What decisions do they need to make to be successful and profitable? What information do Scott and Susan need to make those decisions? What business processes are needed, and how should they be carried out? What functionality should be provided on the website?.

Graphical user interface Description automatically generated with medium confidence.

Interactions Between AIS and Internal and External Parties.

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Basic Business Processes Transactions between the business organization and external parties fundamentally involve a “give–get” exchange. These basic business processes are:.

TABLE 1-3 Common Cycle Activities TRANSACTION CYCLE Revenue ExF1diture MAJOR ACTIVITIES IN THE CYCLE Receive and answer customer irquiries Take customer or&rs and enter elem into +.e AIS Approve sales Check inventory availabilÜ Initiate back orders for goods out of Pick and pack customer orders Ship gocds to customers or pedo rm services Bill customers for shipped or services performed update (increase) sales and •ccounts receivable Receive customer payments and deposit thern in bank update (reduce) accounts receivable Handle sales retrns, discounts, allowances, and bad debts Prepare managernent reports Send appropriate informaton to the offer cycles Request goods and services be purchased Prepare, approve, and serd purchase orders to verdors Receive goods ara services and complete a receiving report Store gc•ods Receive vendor invoices update (increase) accounts payable Approve vendor invoices for payment Pay vendors for goods and services update (reduce) accounts payable Handle purchase retums, discounts, ard allowances Prepare managernent reports Serd appropriate informaton to the offer cycles.

What Is an Accounting Information System?. It can be manual or computerized Consists of.

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How Does an AIS Add Value?. A well thought out AIS can add value through effective and efficient decisions. Having effective decisions means quality decisions Having efficient decisions means reducing costs of decision making.

WHY STUDY ACCOUNTING INFORMATION SYSTEMS?. It’s fundamental to accounting..

Other accounting courses focus on how the information is provided and used. An AIS course places greater emphasis on: How the data is collected and transformed. How the availability, reliability, and accuracy of the data is ensured. AIS courses are not number-crunching courses..

Auditors need to evaluate the accuracy and reliability of information produced by the AIS..

Tax accountants must understand the client’s AIS adequately to be confident that it is providing complete and accurate information for tax planning and compliance work..

In private industry and not-for-profit , systems work is considered the most important activity performed by accountants..

In management consulting , the design, selection, and implementation of accounting systems is a rapid growth area..

Other systems courses focus on design and implementation of information systems, databases, expert systems, and telecommunications. AIS courses focus on accountability and control..

WHY STUDY ACCOUNTING INFORMATION SYSTEMS?. It’s fundamental to accounting. The skills are critical to career success. The AIS course complements other systems courses..

WHY STUDY ACCOUNTING INFORMATION SYSTEMS?. It’s fundamental to accounting. The skills are critical to career success. The AIS course complements other systems courses. AIS topics impact corporate strategy and culture..

AIS and Strategy. An AIS is influenced by an organization’s strategy. A strategy is the overall goal the organization hopes to achieve (e.g., increase profitability). Once an overall goal is determined, an organization can determine actions needed to reach their goal and identify the informational requirements necessary to measure how well they are doing in obtaining that goal..

AIS. Occupational Culture. AIS and Strategy. Strategy.

Information technology affects the company’s choice of business strategy. To perform cost-benefit analyses on IT changes, you need to understand business strategy..

Although culture affects the design of the AIS, it’s also true that the AIS affects culture by altering the dispersion and availability of information..

ROLE OF THE AIS IN THE VALUE CHAIN. The objective of most organizations is to provide value to their customers. What does it mean to deliver value? Let’s peek in on a conversation at Joe’s pharmacy . . ..

Well, Mr. Pharmaceutical Salesman, your proposal looks good, but your prices are about 5% higher than your competitors..