AIS Lecture 1

Accounting Information
Systems

“Inaccurate accounting records
often contribute to business
failures. Failure to understand
accounting information can
result to poor business
decision.” -
G.V.Lising Jr.

Information
 Non-quantitative Information
 Quantitative Information
 Non-accounting Information
 Accounting Information
 Operating Information
 Financial Accounting
 Management Accounting
 Tax Accounting

The need for information

 quantitative – is information
that is expressed in numbers
 non quantitative – samples
are visual impressions,
conversations, television
progs etc
 accounting is primarily
concerned with
QUANTITATIVE INFO

Accounting is one of the several types of
quantitative information

Four categories of information
 operating information
 financial accounting information
 management accounting information
 tax accounting information

INFORMATION

Non-quantitative information Quantitative information

Accounting Non accounting
information information

Operating Financial accounting Management Tax accounting
information accounting

 OPERATING INFORMATION constitutes by far
the largest quantity of accounting information.

 FINANCIAL ACCOUNTING INFORMATION is
intended for both managers and also for the use
of parties external to the organization, including
shareholders (and trustees) in profit
organizations), banks, and other creditors,
government agencies, investment advisers, and
the general public.

MANAGEMENT ACCOUNTING INFORMATION
– accounting information specifically
prepared to aid managers. This information is
used in three management functions
 planning
 implementation
 control

PLANNING actions should be taken care in the future.
is the process of deciding what

 An important form of planning is BUDGETING – the process of planning overall
activities of the organization for a specified period of time, usually a year. A
primary objective of budgeting is to coordinate the separate plans made for
various segments of the organization so as to ensure that these plans harmonize
with each other

Planning involves making DECISIONS
 recognizing the problem
 specifying and ranking the criteria to be used to determine the best solutions
 identifying alternative ways of addressing the problem or opportunity
 analyzing the consequences of each alternative
 comparing these cosequences

 IMPLEMENTATION – making plans does not
itself ensure that managers will implement
the plans. Each manager also must make
more detailed implementation plans to
encompassed in the budget

 CONTROL – manage / perform properly

Accounting information is used in the control
process

 as means of communication
 motivation
 attention getting
 appraisal

System

 Set of detailed methods, procedures, and
routines established or formulated to carry
out a specific activity, perform a duty, or solve
a problem. –BusinessDictionary.com

Elements of System

 Inputs and outputs
 Processor
 Control
 Environment
 Feedback
 Boundaries/interface

Planning Implementation Control

Appropriate action

Feedback

Plan revision

Objectives

 To appreciate the complex, dynamic environment in which
accounting is practiced.
 To know the AIS, its relationship to the organizations business
processes
 To know the attributes of information
 To recognize how information is used for different types of
decisions and at various levels in the organization
 To recognize how the information system supports the
management function
 To recognize the accountant’s role in relation to the current
environment for AIS

Key Terms

 System
 Subsystem
 Information system (IS)
 Management information system (MIS)
 Accounting information system (AIS)
 Operations Process
 Management process

Key Terms

 Information
 Data
 Understandability
 Relevance
 Timeliness
 Predictive value
 Feedback value

Key Terms

 Verifiability
 Neutrality
 Freedom from bias
 Comparability
 Consistent
 Validity
 Accuracy
 Completeness

Key Terms

 Decision making
 Structured decisions
 Unstructured decisions
 Enterprise database
 Effectiveness
 Efficiency

Key Terms

 Confidentiality
 Integrity
 Availability
 Compliance
 Reliability of information

Elements in the Study of AIS

Dull, Gelinas and Wheeler, Accounting Information System 2nd Edition, Page 31

Sarbanes-Oxley Act of 2002
Section 404 –
 Management must identify, document, and evaluate
significant internal controls
 Auditors must report on management’s assertions
regarding internal controls
Section 409 –
 Requires disclosure to the public on a
“rapid and current” basis of material changes in an
organization’s financial condition.

Implications for both public and private accountants

23

Accounting Systems and
Subsystems
 A system is a set of interdependent elements
that together accomplish specific objectives.
 A subsystem is the interrelated parts that
have come together, or integrated, as a single
system.

24

Information System Model

 An information system (IS) (or management
information system [MIS]) is a manmade system
that generally consists of an integrated set of
computer-based and manual components
established to collect, store, and manage data and
to provide output information to users.

25

Information System Model

26

Purpose of AIS

 Collect, process and report information
related to the financial aspects of business
events
 Often integrated and indistinguishable from
overall information system
 Like the IS, the AIS may be divided into
components based on the operational
functions supported.

27

Management Decision Making

1. Intelligence: Searching the environment for
conditions calling for a decision.
2. Design: Inventing, developing, and analyzing
possible courses of action.
3. Choice: Selecting a course of action.

28

Management Decision Making

29

Strategic
Management
Tactical
Management

Operations
Management

Operations and
Transaction Processing

Horizontal information flows

30

Accountant’s Role

 Designer—application of accounting
principles, auditing, information systems, and
systems development
 User—participate in design
 Auditor—provide audit and assurance
services

31

2012 Top Technology Priorities

 http://www.aicpa.org/INTERESTAREAS/INFOR
MATIONTECHNOLOGY/RESOURCES/TOPTEC
HNOLOGYINITIATIVES/Pages/2012TTI.aspx

2012 Top Technology Priorities
1. Securing the IT environment
2. Managing and retaining data
3. Managing risk and compliance
4. Ensuring privacy
5. Leveraging emerging technologies
6. Managing system implementation
7. Enabling decision support and managing
performance
8. Governing and managing IT investment/spending
9. Preventing and responding to fraud
10. Managing vendors and service providers

YOU

 Catalyst of change and improvement
 Enabler
 Decision maker

Acknowledgement and Sources:
 Fundamentals of Accounting by Agamata & Berbano
 Accounting: Text and Cases by Robert N. Anthony
 Accounting Principles by Kieso and Weygant
 Basic Accounting by G.V.Lising Jr
 BDO International
 Deloitte (www.iasplus.com)
 Wikipedia (http://en.wikipedia.org)
 BusinessDictionary.com

Thank you!

AIS Lecture 1

More Related Content

What's hot (19)

Viewers also liked (20)

Similar to AIS Lecture 1 (20)

More from Cheng Olayvar (10)

Recently uploaded (20)

AIS Lecture 1

Editor's Notes