LECTURE OUTLINES
Accounting Information System
Definitions Objective of Accounting Information System General
view of AIS application
Role of accountant in AIS Comparison between manual and
computer-based system (Accounting records and processing)
INFORMATION IS A BUSINESS SOURCE. Stakeholders Top Mgmt
Middle MgmtBudget info.& Instruction Operations
ManagementDay to day operations information
Performance Info.
Operations personnel
Customer
Supplier
Cont
Vast quantities of information flows to the respective users,
depending on their needs. Based on the diagram, the information
flows horizontally and vertically. Horizontal
flows support the operation level task and contain detail
information (eg. Shipment of goods, sales, units produced
&etc..) Vertical flows distribute summary of detail information
to the various level of managers. Info. to support planning &
ctrl functions. Downward info. (eg senior to junior) in the form of
instructions, quotas and budget.
Information also organization and environment.
flows users
between the in the external
ACCOUNTING INFORMATION SYSTEMAccounting .a process of recording,
classifying, summarizing economic data into useful information in
making decision by the interested users. Information is derived
from the processing of data.
Input Economic Data
Process
Output Financial Information
SystemSystem is a unified group of interacting parts that
function together to achieve its purposes. Characteristics of
system:
System has a boundary that separates it from its environment.
Systems are open where they accept inputs from environments and
provide outputs to the environments. Systems are also tangible
where they employ physical resources such as materials and
personnel. System contains interdependent parts that have system
characteristics and are called subsystems.
ACCOUNTING INFORMATION SYSTEM
Definition of AISAIS is a unified structure within an entity,
such as a business firm, that employs physical resources and other
components to transform economic data into accounting information,
with the purpose of satisfying the information needs of a variety
of users.
INFORMATION SYSTEM
A set of formal procedures by which data are collected,
processed into information, and distribute to users.2 types of
information system,
MIS and AIS both systems should integrate to achieve operational
efficiency
AIS consists of major subsystems:
Transaction Processing System (TPS) General ledger/financial
reporting system (GL/FRS) Management Reporting System (MRS)
INFORMATION SYSTEM
AIS
MIS
GL/FRS
TPS
MRS
FMS
MS
PS
HRS
Distinction between AIS and MISAIS process financial and
non-financial information which directly affect the processing of
financial system. MIS process non-financial transactions which are
not being processed by AIS.
Objectives of AIS1.
2.
3.
To support the stewardship function of mgmt. Providing mandatory
info to users who are external to the firm eg shareholders ( fin
statement ) , government/regulators (tax withholding report ),
lenders etc To support management decision making Decisions
pertaining to planning and controlling a firms operations. To grant
or increase credit facility to a particular customer. Provide info
for make of buy decision. To support firms day to day operations
Billing customers for goods sold/services performed. Ordering goods
from suppliers and making payments. Processing paychecks for
employees.
AIS APPLICATION (General Model)EXTERNAL ENVIRONMENTTHE
INFORMATION SYSTEM Database Mgmt
External Sources data
Data collection
Data Processing
Information generation
External End Users
Internal Sources data
Internal End Users THE BUSINESS ORG Feedback
Data Sources a financial transaction which enter into the system
External Sources Eg. Sales of goods & services Internal Sources
Eg. Movement of RM into WIP
Data Collection important stage, only valid, complete and free
from material errors are accepted. Apply
2 rules : Relevance to avoid data redundancy, improve
efficiencies (reduce data overloaded). Efficiencies
Data Processing Involve
posting, summarizing procedures used in accounting application.
Various techniques that can be used by firm Batch processing
sequential file approach Batch processing direct access approach
Batch processing using real time data collection Real time
processing Batch processing - Transactions are accumulated to a
certain batch size and processed in one go. Real time processing -
Transaction is processed immediately after it is keyed in
Distinguishing CharacteristicsInformation time
frameResources
Data Processing Methods BatchLag exist between time when the
economic event occurs and when it is recorded.Generally, fewer
resources (hardware, programming, training) are required. Certain
records are processed after the event to avoid operational delays1.
2. 3.
Real- timeProcessing takes place when the economic event
occursMore resources are required than for batch processing All
records pertaining to the event are processed immediately1.
Operational efficiency Advantages
Better control Fewer resources required. Better operational
efficiency Times lag exist, data is not up to date.
No time lag, data is updated immediately
Disadvantages
1.
1. 2.
More resources are required. Can create operational
inefficiency
Data
management
Management
of repository of financial and non-financial data. Content :
according to hierarchy attribute records file Tasks : storage
retrieval deletion
Functional areas of a firm
Material mgmt Production Marketing Distribution Personnel
Finance ACCOUNTING COMPUTER SERVICE
Accounting Functions Captures
and records firms transactions Distributes transaction
information to operations personnel to coordinate their tasks eg.
Inventory control, cost accounting + etc.
Computer Service FunctionsCentralized approach Computer
resources are placed at the central location, and shared by other
functional areas. (refer figure 1-9, 1-10)
Value info. reliability Maintain
its independence concept within the organization.
Distributed approach Places resources of the firm under the
direct control of end users. Involve extensive use of networks to
permit comm among users. (refer figure 1-11)
CENTRALISED DATA PROCESSING APPROACH (figure 1-9)Data
Information Marketing
Finance COMPUTER SERVICES RESOURCES
Production
Distribution
Accounting
ORGANIZATION OF COMPUTER SERVICES FUNCTION Biz Org
Marketing
Computer Services
Finance
System Development
Database Administration
Data Processing
New System Development
System Maintenance
Data Control
Data Preparation
Computer Operation
Data Library
ORGANIZATION OF COMPUTER SERVICES FUNCTION (DDP) Biz Org
Marketing
Finance
Administration
Treasurer
Controller
IPU
IPU
IPU
IPU
ROLES OF ACCOUNTANT IN AIS1.
2.
3.
Users of AIS As end users, accountants must provide a clear
picture of their needs to the professionals who design their
systems. For eg the accountant must specify accounting rules and
techniques to be used, internal control requirements, and special
algorithms such as depreciation models. Designers of AIS
Responsible for the conceptual system which involves specifying
criteria for identifying delinquent customers and the information
that needs to be reported. Accountants should determine the nature
of information required, its sources, its destination, and the
accounting rules to be applied. Auditors of AIS Accountants must
check that the system is working as it should be, according to what
it is design for. This includes testing the internal control of the
system.
Accounting record in manual and computer based systems
Manual System Documents
Computer Based systems Master
Source documents Product Documents Turnaround Documents
Journal Ledgers
file Transaction file Reference file Archive file
* Provide audit trail for tracing transactions.
* Audit trail is embedded in the system
Manual System
Documents1. Source document Used to capture and formalized
transaction data needed for processing by the transaction cycle. 2.
Product document Are results of transaction processing rather than
the triggering mechanism. 3. Turnaround document Are product
documents of one system that become source documents for another
system
Manual System-continued
Journal transactions are recorded in chronological order.1.
Special journals Sales journals Purchases journals Cash receipts
journals Cash disbursement journals Payroll journals
Manual System-continued2. General Journals Used to record
non-recurring, infrequent and dissimilar transactions e.g
depreciation. 3. Registers This term denotes certain types of
special journals e.g payroll register. The register can also be a
log e.g receiving register is a log of all receipts of raw
materials or merchandize ordered from supplier.
Manual System-continued
Ledgers
Are books of financial accounts, which reflect the financial
effects of the firms transactions after they are posted from the
various journals. Show activity by account type. Two types of
ledgers:
General ledgers Subsidiary ledgers
e.g of subsidiary ledgers are Debtors ledger, Creditors ledger,
Payroll ledger and inventory ledger.
Computerized system
Master file Contains account data. Examples are general ledgers
and subsidiary ledgers. Transaction file. A temporary file holding
transaction records that will be used to change or update data in a
master file. E.g Sales orders, inventory receipts and cash
receipts.
Computerized system - continued
Reference file Stores data that are used as standards for
processing transactions. E.g Price lists, list of authorized
suppliers, tax table, employee rosters and customer credit files.
Archive file. Contains records of past transactions that are
retained for future reference.
Benefits of computerized AIS
Information can be prepared on time. Produce more accurate and
presentable accounting information. Information can be accessed or
retrieved quickly and timely. In the long run, save time and cost
in the preparation and safe keeping of the information.