Lecture 1

- What are Accounting Information Systems (AISs)?

(AISs) are defined as systems of people, data records and activities that process data and information
in an organization.

- What an accounting information system (AIS) consists of? Or, what are the components of an
accounting information system (AIS)?
1. People
2. Procedures
3. Data
4. Software
5. Hardware
6. Information technology infrastructure

- The basic and important functions that Accounting Information System performs in an
organization:
1. It collects and stores data about activities and transactions.
2. It processes data into information that is useful for making decisions.
3. It provides adequate controls to safeguard the organization’s assets.

- The strategic positions which an organization might adopt are variety-based, access-based, and
needs-based.

- The values that AIS adds to an organization are:

1. Control outputs for defects to increase product quality
2. Providing more timely information
3. Providing more accurate information
4. Sharing expertise
5. Control outputs for defects to reduce the amount of waste.

- What is data?
The data is all of the facts that are collected, stored, and processed by an information system.

1
Figure 1 is to show the difference between data and information:

Difference between Data and Information

Data Information
 Raw facts of things  Data with exact meaning
 No contextual meaning  Processed data and organized context
 Just numbers and text

The main difference between data and information can be shown as below in figure 2:

Main Difference Between Data and Information

The main difference between data and information is that data is raw material that is to be processed
and information is the processed data.

2
Lecture 2
Information Technology Infrastructure Components

Data
Networking
Hardware
Management
Services
Software

Figure 1: IT Infrastructure Components

Overview of an accounting information system

All business processes have either direct or indirect effect on the accounting records and must be
recorded in the AIS. For each business, the AIS must:

1. Capture resulting accounting data

2. Record the data
3. Classify the data
4. Summarize the data, and consolidate the data
5. And generates reports

Below exhibit shown the AIS with various business processes.

The Accounting Information System

Various Business Processes

Data Storage

Processing of Data Outputs

Inputs (Recording. Classifying. (Checks. Reports.
Summarizing. Consolidating) Documents)

Reports used as feedback to monitor and control processes

3
What is information?

Information is the data that have been processed to be meaningful in order to improve the decision-
making.

Information technology (IT) is used to help decision to filter and condense information.

Value of information is the benefit produced by the information minus the cost producing it.

A benefit of information is to reduce uncertainty, improved decisions, and improved ability to plan and
schedule activities.

Cost of information the time and resources spent to produce and distribute the information.

Characteristics of useful/ valuable information are:

1. Relevant
2. Reliable
3. Complete
4. Timely
5. Understandable
6. Verifiable
7. Accessible
8. Simple

Relevant: It reduces uncertainty, improves decision making, or confirms or corrects prior expectations.

Reliable: It is Free from error or bias, accurately represents organization activities.

Complete: It does not omit important aspects of the events or activities it measures.

Timely: It provided in time for decision makers to make decisions.

Understandable: It presented in a useful and intelligible format.

Verifiable: Tow independent, knowledgeable people produce the same information.

Accessible: That means it is available to users when they need it and in a format they can use.

Simple: Information should be simple to find and understand.

4
What are the components of an information technology infrastructure?

1. Hardware
2. Software
3. Data management
4. Networking
5. Services

Various business processes

1. Inputs
2. Processing of Data
- Recording
- Classifying
- Summarizing
- Consolidating
3. Outputs
- Checks
- Reports
- Documents

5
Lecture 3
1. Data are:
a. Facts entered, stored, and processed by an information system.
b. Processed outputs that is useful to decision makers.
c. Another word for information.
d. Quantitative facts that are not qualitative by nature.

2. Which of the following statements below shown the contrast between data and information?
a. Data is the output of an AIS.
b. Information is the primary outputs of an AIS.
c. Data is more useful in decision-making than information.
d. Data and information are the same.

3. The value of information can best be defined as:

a. How useful it is to decision makers.
b. The benefit produced by possessing and using the information minus the cost of producing
it.
c. How relevant it is.
d. The extent to which it maximizes the value chain.

4. The benefit produced by the information minus the cost of producing it:
a. Goal congruence.
b. Information.
c. Information overload.
d. Value of information.

5. An accounting information system (AIS) processes……….to provide users with………

a. Data: information.
b. Data: transactions.
c. Information: data.
d. Data: benefits.

6. How many components are found in an AIS?

a. Three.
b. Four.
c. Five
d. Six.

7. Information that reduced uncertainty, improves decision makers, ability to make predictions,
or confirms or corrects their prior expectations, is said to be:
a. Complete.
b. Relevant.
c. Reliable.
d. Timely.

6
8. Information that is free from error or bias and accurately represents the events or activities of
the organization is:
a. Relevant.
b. Reliable.
c. Verifiable.
d. Timely.

9. Information that does not omit important aspects of the underlying events or activities that it
measures is:
a. Complete.
b. Accessible.
c. Relevant.
d. Timely.

10. When tow knowledgeable people acting independently each produce the same information,
this information is said to be:
a. Complete.
b. Relevant.
c. Reliable.
d. Verifiable.

11. Data must be converted into information to be considered useful and meaningful for decision-
making. There are eight characteristics that make information both useful and meaningful. If
information is free from error or bias and accurately represents the events or activities of the
organization, it is representative of the characteristics of:
a. Relevancy.
b. Timeliness.
c. Understandability.
d. Reliability.

12. The primary consideration when producing this type of information is that its benefits exceed
its costs:
a. Discretionary information.
b. Essential information.
c. Mandatory information.
d. Value of information.

13. An AIS is a system of six interrelated components that interact to achieve a goal. One of these
components, which includes both manual and automated activities that involve collecting,
processing, and storing data, is known as:
a. Information or data.
b. Procedures and instructions.
c. Software.
d. Information technology infrastructure.

7
14. An accounting information system must be able to perform which of the following tasks?
a. Collect transaction data.
b. Process transaction data.
c. Provide adequate controls.
d. All of the above.

15. Which of the following is not an example of a common activity in an AIS?

a. Buy and pay for goods and services.
b. Sell goods and services and collect cash.
c. Summarize and report results to interested parties.
d. Recording of sales calls for marketing purposes.

8
Lecture 4
Factors influencing Design of the AIS are shown as below:

Factors Influencing Design of the AIS

Organizational Culture Strategy

AIS

Information Technology

The role of the AIS in the value Chain

To provide value to their customers, most organizations performs a number of different activities. Figure
below shown that those activities can be conceptualized as forming a value chain consisting of five
primary activities that directly provide to customers:

1. Inbound logistics consists of receiving, storing, and distributing the materials an organization
uses to create the services and products it sells. For example, an automobile manufacturer
receives, handles, and stores steel, glass, and rubber.
2. Operations activities transform inputs into final products or services. For example, assembly line
activities convert raw materials into a finished car.
3. Outbound logistics activities distribute finished products or services to customers. An example is
shipping automobiles to car dealers.
4. Marketing and sales activities help customers buy the organization’s products or services.
Advertising is an example of a marketing and sales activity.
5. Service activities provide post-sale support to customers. Examples include repair and
maintenance services.

9
Support activities allow the five primary activities to be performed efficiently and effectively. They are
grouped into four categories:

1. Firm infrastructure is the accounting, finance, legal, and general administration activities that
allow an organization to function. The AIS is part of the firm infrastructure.
2. Human resources activities include recruiting, hiring training, and compensating employees.
3. Technology activities improve a product or service. Examples include research and development,
investments in IT, and product design.
4. Purchasing activities procure raw materials, supplies, machineries, and the buildings used to
carry out the primary activities.

Value Chain

Firm infrastructure
Human resources
Technology
Purchasing

Support Activities

Operations Marketing and sales Service

Inbound logistics Outbound logistics
Advertising,
Receiving and storing material Distribution, shipping
Manufacturing, repackaging selling repair, maintenance

Primary Activities

10
What are the factor influencing design of the AIS?

1. Organizational culture.
2. Strategy.
3. Information technology.

1. Data differ from information in which way?

a. Data are output, are information is input.
b. Information is output, and data are input.
c. Data are meaningful bits of information.
d. There is no difference.

2. Which of the following is NOT a characteristic that makes information useful?

a. It is reliable.
b. It is timely.
c. It is inexpensive.
d. It is relevant.

3. Which of the following is a primary activity in the value chain?

a. Purchasing.
b. Accounting.
c. Post-sales service.
d. Human resource management.

4. Which of the following is a function of an AIS?

a. Reducing the need to identify a strategy and strategic position.
b. Transformation data into useful information.
c. Allocating organizational resources.
d. Automating all decision making.

11
What are the Primary Activities in the value chain?
1. Inbound logistics: Receiving and Storing materials.
2. Operations: Manufacturing, Repackaging.
3. Output logistics: Distribution, Shipping.
4. Marketing and sales: Advertising, Selling.
5. Service: Repair, Maintenance.

What are the Support Activities in the value chain?

1. Firm infrastructure.
2. Hunan resources.
3. Technology.
4. Purchasing.

12
Lecture 5
In the value chain concept, upgrading IT is considered what kind of activity?
a. Primary activity [Incorrect. Investing in IT is a support activity].
b. Support activity [Correct. Technology activities, including investing in IT, are considered
a support activity].
c. Service activity [Incorrect. The value chain includes only primary and support activities. A
service activity is I type of primary activity].
d. Structured activity [Incorrect. The value chain includes only primary and support
activities. A structured activity is neither a primary nor a secondary activity].

Overview of Transaction Processing and Enterprise Resource Planning Systems.

The first section discusses the data processing cycle and its role in organizing business activities
and providing information to users.
Transaction Processing: The Data Processing Cycle:
Accountants and other system users play a significant role in the data processing cycle. For
example, they interact with systems analysts to help answer questions such as these: What data
should be entered and stored by the organization, and who should have access to them?
How should data be organized, updated, stored, accessed, and retrieved? How can scheduled
and unanticipated information needs be met? To answer these and related questions, the data
processing concepts explained in this chapter must be understood.
One important AIS function is to process company transactions efficiently and effectively. In
manual (non-computer-based) system, data are entered into journals and ledgers maintained
on paper. In computer-based systems, data are entered into computers and stored in files and
databased. The operations performed on data to generate meaningful and relevant information
are referred to collectively as the data processing cycle.

13
 Data Processing Cycle
Data Storage

Data Input Data Processing Information Output

Data Input
The first step in processing input is to capture transaction data and enter them into the system.

The data capture process is usually triggered by a business activity. Data must be collected about three
facets of each business activity:

1. Interest of each activity.

2. The resource(s) affected by each activity.
3. The people who participate in each activity.

For example, the most frequent revenue cycle transaction is a sale either for cash or on credit. S&S may
find it useful to collect the following data about a sales transaction:

 Data and time the sale occurred.

 Employee who made the sale and the checkout clerk who processed the sale.
 Checkout register where the sale was processed.
 Item(s) sold.
 Quantity of each item sold.
 List price and actual price of each item sold.
 Total amount of the sale.
 Delivery instructions.
 For credit sales: customer name, customer bill-to and ship-to addresses.

Historically, most businesses used paper source documents to collect data about their business activities.
They later transferred that data into the computer. When the data is entered using computer screens,
they often retain the same name and basic format as the paper source document it replaced.

From the above, we also can understand these things:

14
Data Processes Cycle: The four operations (data input, data storage, data processing, and information
output) performed on data to generate meaningful and relevant information.

Source Documents: Documents used to capture transaction data at its source – when the transaction
takes place. Examples include sales orders, purchase orders, and employee time cards.

The second step in processing input is to make sure captured data are accurate and complete. One way
to do this is to use source data automation.

The third step in processing input is to make sure company policies are followed, such as approving or
verifying a transaction.

Questions
1. How data is entered into the manual (non-computer-based) systems in the data processing cycle?
Data are entered into journals and ledgers maintained on paper.

2. How data is entered into computer-based-systems in the data processing cycle?

Data are entered into computers and stored in files and databased.

3. What are the three steps in processing inputs in the data processing cycle?
a. Capture transaction data and enter them into the system.
b. Make sure captured data are accurate and complete.
c. make sure company policies are followed.

4. What are data must be collected about three facets of each business activity?
a. Interest of each activity.
b. The resources affected by each activity.
c. The people who participate in each activity.

15
1. Which of the following is not one of the facets that must be collected each business activity?
a. Interest of each activity.
b. The resources affected by each activity.
c. Post-sale service for each activity.
d. The people who participate in each activity.

2. The most frequent transaction for revenue cycle is?

a. on credit.
b. on cash.
c. Cash or on credit.
d. None of the above.

3. The operations performed on data to generate meaningful and relevant information are referred
to collectively as:
a. Organizational culture.
b. Firm infrastructure.
c. The data processing cycle.
d. Primary activities.

16