MANAGEMENT INFORMATION SYSTEMS 7/E Raymond McLeod, Jr.

The Accounting Information System

Copyright 1998 Prentice Hall, Inc.

y An accounting information system (AIS) consists

of:
y y y y y

People Procedures Data Software Information technology infrastructure

y What important functions does the AIS

perform 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.

y To understand how the accounting system

works.
y How to collect data about an organization s

activities and transactions y How to transform that data into information that management can use to run the organization y How to ensure the availability, reliability, and accuracy of that information

1. 2. 3.

4. 5.

Accounting systems and financial reporting Long-term strategic planning Managing the accounting and finance function Internal Consulting Short-term budgeting

6. Financial and economic analyses 7. Process improvement 8. Computer systems and operations 9. Performance evaluation 10. Customer and product profitability analyses
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Primary Activities Inbound Logistics Operations Outbound Logistics

Marketing and Sales

Service
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y The four support activities in the value chain

make it possible for the primary activities to be performed efficiently and effectively.

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Support Activities Infrastructure Technology

Human Resources

Purchasing
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Raw Materials Supplier Manufacturer

Distributor

Retailer

Consumer
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y What is information? y The term data refers to any and all of the facts

that are collected, stored, and processed by an information system. y Information is data that has been organized and processed so that it is meaningful.

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y Manipulation or transformation of symbols for the

purpose of increasing their usefulness. y We will use the same general model format for all 5 computer-based information systems subsystems. y Data processing and transaction processing are often used interchangeably.

Generic Example Resource Sales Transaction Inventory Sale Event

Agent Agent Customer Sales

Payment to Supplier Cash Payment Cashier Supplier Hall Business 2003 Prentice
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Characteristics of Useful Information Relevant Reliable Complete Timely Understandable Verifiable

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Decisions can be categorized as follows: in terms of the degree of structure that exists by the scope of the decision

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y Structured decisions are repetitive, routine, and

understood well enough that they can be delegated to lower-level employees in the organization. y An example is:
y Extending credit to customers.

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y Semistructured decisions are characterized by

incomplete rules for making the decision and the need for subjective assessments and judgments to supplement formal data analysis. y An example is:
y Setting a marketing budget for a new product.

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y Unstructured decisions are

nonrecurring and nonroutine. y An example is:

y Choosing the cover for a magazine.

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y Decisions vary in terms of the scope of their

effect. y Operational control is concerned with the effective and efficient performance of specific tasks. y Management control is concerned with the effective and efficient use of resources for accomplishing organizational objectives. y Strategic planning is concerned with establishing organizational objectives and policies for accomplishing those objectives.
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y Describe and contrast the basic strategies

and strategic positions that a business can adopt.

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y New developments in IT affect the design of

an AIS. y What basic requirements are needed to evaluate the costs and benefits of new IT developments?

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y Develop a basic understanding of

corporate strategies. how IT developments can be used to implement existing organizational strategies. how IT developments can be used to create an opportunity to modify existing strategies.

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y Because an AIS functions within an

organization, it should be designed to reflect the values of that organizational culture.

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Two Basic Strategies To be a lower-cost producer than competitors

To differentiate products and services from competitors

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Three Basic Strategic Positions Variety-based strategic position Need-based strategic position Access-based strategic position
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y What role does the AIS play in helping organizations

adopt and maintain a strategic position? Data collection about each activity Transforming data into information that can be used by management to coordinate those activities

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y The value of information is the benefit produced by

the information minus the cost of producing it.

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y The Internet makes strategy more

important than ever y Enterprise resource planning (ERP) systems integrate all aspects of a company s operations with its traditional AIS. y The key feature of ERP systems is the integration of financial data and other nonfinancial operating data.
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A Model of an Accounting Information System

Environment
Information
Management

Data

Data processing software

Database
Accounting Information System

Input physical resources

Transform

Output physical resources

Environment

y Performs necessary tasks y Standard procedures y Detailed data y Historical focus y Provides minimal problem-solving information

y Users
y Manufacturers y Wholesalers y Retailers

y Note data flows, data stores, and processes

Customers

Sales orders

A Context Diagram of the Distribution System

Commitments Purchases orders

Rejected sales order notices

Shipments Supplier invoices

Invoices

Suppliers

Statements Payments by customers

Distribution system

Supplier statements

Payments to suppliers Income statement

Balance sheet Budget reports

Stock

Materials stockroom

Management
Other reports

Sales Orders

Customers
Rejected sales order notices

Invoices Statements Payments by customers Receivables ledger data Inventory ledger data Received items

A Figure 0 Diagram of the Distribution System

1. Fill Orders

Purchasing data

Commitments

3. Maintain general ledger

Income statement

Payables ledger data Other reports Budget reports

2. Order replenishment stock

Purchase Orders Shipments Supplier invoices

Suppliers

Balance sheet

Supplier statements Payments to suppliers

Management
Stock

Materials stockroom

Sales orders

Customers

Rejected sales order notices

A Figure 1 Diagram of the Systems That Fill Customer Orders

Accepted orders

Payments by customers

1.1 Order Entry

Filled items Completed orders Invoices

1.2 Inventory

Billed orders

1.3 Billing
Purchasing data Inventory ledger data
3 3 2

1.4 Accounts receivable

Receivables ledger data

Received items

A Figure 2 Diagram of the Systems That Order Replenishment Stock

Purchasing data 1 2.1 Purchasing Commitments Purchase orders

Filled purchase orders

Issued purchase order data

Shipments

Suppliers

Received items 2.2 Receiving 1 Stock Materials stockroom

Supplier invoices

Received purchases Incurred obligations Payable ledger data 2.3 Accounts payable

Supplier statements Payments to suppliers

A Figure 3 Diagram of the Systems That Perform General Ledger Processes

1 1 2
Receivables ledger data Inventory ledger data Payables ledger data

3.1 Update general ledger

General ledger records Updated general ledger records

Management report data

General ledger

3.2 Prepare management reports

Other reports Budget reports

Balance sheet Income statement

Management

y Order entry
y Sales order form

y Inventory
y Process sales y Process receipts y Feed general ledger

A Figure 1.1 Diagram of the Order Entry System

Customers
Sales orders Edit rejects

Rejected sales order notices

1.1.1 Edit order data

Edited orders

Sales order edit ejects Customer credit file

Edited and checked orders

1.1.2 Computer credit check

Credit data

Accepted orders 1.2

Credit Rejects 1.1.3 Log in orders Order data

Sales order credit rejects

1.3

Completed orders

1.1.4 Mark filled orders

Date filed Order log

A Figure 1.2 Diagram of the Inventory System

1.1
Accepted orders

1.2.1 Check the balance on hand

Item records

Inventory file additions

1.2.3 Add received items

Received items

Backorder records

Backorder file

Items available

Inventory file

Updated item records

Inventory records

Inventory ledger data

Filled items

1.2.2 Check the reorder point

Purchasing data

1.2.4 Provide general ledger data

1.3

y Invoice
y Note: y 1. Customer data y 2. Item data

1.2

Filled items

A Figure 1.3 Diagram of the Billing System

1.3.1 Obtain customer data

Customer data

Customer file

Invoice data 1.3.2 Prepare invoices

Invoices Customers

Billed orders
1.4

Completed orders
1.1

y Four separate triggers

y Today's sales y Today's payments y Time to send statements y Need to provide general ledger data

Billed orders 1.3

A Figure 1.4 Diagram of the Accounts Receivable System

New receivables Receivables records

1.4.1 Add new receivables

Accounts Statement records receivable file

Receivables records to delete 1.4.2 Delete paid receivables

1.4.4 Provide general ledger data Receivables ledger data

1.4.3 Prepare statements

Statements

Payments by Customers customers

Paid receivables records

Paid receivables file

y Purchasing
y Emerging technologies y EDI y ISDN y Purchase order

A Figure 2.1 Diagram of the Purchasing System

Purchasing data
1 2.1.1 Select suppliers

Past performance data

Supplier file

Inventory and supplier data 2.1.2 Obtain verbal commitments

Purchase order data Issued purchase order data 2.1.3 Prepare purchase orders

Commitments

2.2 2.3

Purchase Orders

Suppliers

Incurred Obligations

Purchase order records Outstanding purchase order files

Purchase Order history file Removed purchase order records

Purchase records to close out Filled purchase Orders 2.2

2.1.4 Close out purchase orders

A Figure 2.2 Diagram of the Receiving System

2.1
Issued purchase order data

Suppliers

Purchased item data

Purchased items file

Shipments Stocks

2.2.1 process receipts

Receipt information

Received items Materials stockroom 1 2.2.1 Notify Filled purchase orders other 2.1 systems Received purchases 2.3

y The firm pays suppliers when: y 1.

Stock was ordered (P.O. file copy) y 2. Stock was received (Received purchases file) y 3. Invoice

A Figure 2.3 Diagram of the Accounts Payable System

2.1 Incurred Obligations 2.3.1 Set up supplier payables records Received Purchases New Payables data Payables Records Payables Ledger Data 2.3.4 Provide general ledger data 3

Accounts payable file

Payables Records to delete Paid Payables Records

2.2

Received purchases file

Receipt Data
Payment data

2.3.3 Delete paid payables

Supplier Invoices

Paid payables file

2.3.2 Make supplier payments

Paid Supplier Data Invoice Data

Invoice and statement file

Supplier statements

Suppliers
Payments to Suppliers

y MIS y DSS y ES

Depends on a good AIS Depends on a good AIS Depends on a good AIS

THANKS ANYWAY