Introduction to Accounting System

Unit overview Accounting Information System Concept

2

Lecture 1Introduction to accounting systems

1

Accounting System Design and Development

Data (Singular form datum) are the

raw

materials of which Information Systems

are built.

Information is processed or value-

added

data.

Knowledge is understanding the meaning

of

information – knowledge is personal and

subjective.

What is information? What is a system?

What is information system?

What is an accounting information system?

Why do business need IS?

Why do accountant need to know about IS?

‘A collection of parts that work together

to

achieve some purpose.’ Systems can be man-made or natural

Identify some systems that you know about –what do they have in common?

Can you give an example which links

all

three? Data

Information

Knowledge

System – data conversion

Inputs Data

Processing

Outputs Information

Processes are the sets of activities that

are

performed on the inputs into the system

Examples:o Format checks on data

o Validity checks on data

Manual keying

Scanning through barcode technology

Scanning through image scanners

Magnetic ink character recognition [MICR]

Voice recognition

Optical mark readers

A system whose purpose is the

efficient

storage, manipulation, processing and

retrieval of information.

A set of interrelated components that

collect

(or retrieve), process, store, and distribute

information to support decision marking and

control in an organization.

Outputs refer to what is obtained from

a

system, or the result of what the system

does

Examples:

o Receipts

o Invoices

Outputs are normally the starting

point

when designing a system

Source: Laudon and Laudon 2006

The components of an information

system

are:◦ People

◦ Data/information

◦ Procedures

◦ Software

◦ Hardware

◦ Communication

We can use technology to create barriers

to

competition.

We can use technology to lower the costs

of

market entry.

We can shorten timelines, speed cashflow,

cut

out intermediaries,

We can be better informed than

our

competitors.

Internet growth and technology convergence. Transformation of business enterprise.

Growth of a globally connected economy.

Growth of knowledge and information-

based

economies. Emergence of the digital firm.

Business process

Source: Laudon and Laudon 2006

Source: Laudon and Laudon 2006

Transaction Processing Systems (TPS)◦ serves the operational level of an organization.

◦ are designed to process routine

transactions

efficiently

◦ E.g. Systems to calculate the weekly and

monthly

payroll and tax payments Knowledge management systems (KMS)

◦ helps businesses create and share information.

◦ uses group collaboration systems such as

an

intranet.

1. When describing systems, a component

may

belong to more than one system.

2. Information Systems is purely and simply

about

technology

3. Successful Information Systems are centered

on

technology

◦ improves the productivity of employees who need to

◦ provides individuals effective ways to process personal and

documents. e.g. word processing, spreadsheets, file

◦ serves the management level of the organization.

usually take data from the TPS and summarise it into a

◦ MIS reports tend to be used by middle management and

Decision-support systems (DSS)

◦ helps management make decisions in situations where

there is uncertainty about the possible outcomes of those

decisions.

◦ DSS comprise tools and techniques to help gather

relevant

information and analyse the options and alternatives.

◦ DSS often involves use of complex spreadsheet

and

databases to create "what-if" models. Executive support systems (ESS)

◦ serves the strategic level of an organization.

◦ It gathers, analyses and summarises the key internal

and

external information used in the business.

Office automation systems (OAS)

process data and information.

organisational data, perform calculations, and

create managers, personal calendars, presentation

packages Management information systems (MIS)

◦ mainly concerned with internal sources of

information. MIS

series of management

reports.

operational supervisors.

A collection of data and information

processing procedures aimed at converting

economic data into the accounting

information needed by users for decision

about the allocation of scare resource.

AIS = Accounting + Information System

Source: Laudon and Laudon 2006

Accounting and IS – a changing relationship

Evolution of AIS

Pre 15th century: recording economic activities

15th century: Pacioli’s development of double-entry accounting

19th century: adding machines and cash registers >> batch totals

20th century: punch cards >> fully integrated computerised systems

21st century: accounting information systems

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