CHAPTER 1: ACCOUNTING INFORMATION SYSTEMS: AN OVERVIEW

Action of a subsystem
inconsistent with other
subsystems / whole
system

Subsystem achieves
its goals while
contributing to org.
goal

Encourages
integration eliminates duplicate
recording, storage,
reporting etc.

Changes in subsystem
cannot be made without
considering the effect on
other subsystems & the
whole system

Activities

Resources
People
Facts on

Goal conflict

Goal
congruence
Systems
concept

is a set of 2 or more interrelated

components/subsystems that
interact to achieve common goal

Subsystem should
maximize
organizational
goals first

'Facts' that are

collected, recorded,
stored & processed by
IS

Definition
SYSTEM
DATA

Definition:
A set of related, coordinated and
structured activities and tasks that are
performed by a person/computer/machine
to accomplish organisational goal

Data that have been

processed & organised to
provide meaning to user

AIS:
OVERVIEW

Benefits:
reduction of
uncertainty,
improved decision,
better planning

Definition

Business
Processes

5 major groups:
revenue cycle; expenditure cycle;
production/conversion cycle; human
resources/payroll cycle & financing cycle

Valuable information
= Benefits > Costs
INFORMATION

R-Reliable (free
from erroe or bias)

V - Verifiable (2
independent parties would
produce same information)
C - Complete (Not omit
important aspects of
underlying events)

Costs:
Time and resources
spent to collect,
process, store,
distribute info.

Information
overload

Amount of information is beyond

the limit of what human mind
can absorb and process

R - Relevant (Reduce
uncertainty, improve
decision making)
Characteristics of
useful information
(RATU VCR)
U - Understandable
(presented in useful
and intelligent format)

A - Accessible (Available
when needed in a format
that they can use)
T - Timely (Provided
in time for decision
making)

Costly and reduce

quality of decision
making

1(1)

Zafiruddin

CHAPTER 1: ACCOUNTING INFORMATION SYSTEMS: AN OVERVIEW

Who operate the

systems and perform
various functions

All devices used to collect,

store, process and transmit data
e.g computers, network devices

IT infrastructure

Both manual and automated

that collect, process and store
data about org.

Sesurity measures that

safeguard the data

Procedure
Software used to
process org. data

Internal control
people
a system that collects, records,
stores & processes data to
produce info for DM

Components
of AIS
(PIPI SD)

Data about the

organization and its
business process

Software

Data

Definition
of AIS

AIS

Collect and store data about

organizational activities, resources
& personnel

These 6
components enable
AIS to fulfill 3
business function

Transform data into info.

useful for decision
making

Decision Making

Provide adequate control to

safeguard assets / ensure data
always available, reliable, accurate
AIS can assist in decision
making. Eg reports, decision
models & analytical tools, query
languages

How AIS improve

decision making?

Able to analyse
sales data
Provide accurate
and timely info

Identify situation that

requires mgmt attention
E.g: Report on cost variance

Reduce uncertainty provides basis for

choosing alternatives

Provides info. about

results of previous
decisions
1(2)

Zafiruddin

CHAPTER 1: ACCOUNTING INFORMATION SYSTEMS: AN OVERVIEW

Role of AIS in Value Chain

AIS
1. Firm Infrastructure - Accounting, Finance, Legal, General Administration that allow org. to function

2. Human Resource - Recruiting, hiring, training

SUPPORT
ACTIVITIES
3. Technology - Activities to iimprove product or service e.g. R&D, Product design

4. Purchasing - raw material. machinery, building etc.

PRIMARY
ACTIVITIES

Inbound Logistic
(Receiving & storing
material)

Outbound
Logistic
(Distribution,
shipping)

Operations
(manufacturing,
repackaging)

Marketing &
sales
(Advertising,
Selling)

Service
(Repair,
maintenance)

How AIS add value to Organization?

Easier to share
knowledge and
expertise, thus
improving
operations and
provides
competitive
advantage

Provide timely
information

S - Sharing
knowledge

Provide accurate & timely

information so the 5
primary value chain
activities can be
performed effectively and
efficiently

E - Efficiency of
operation

Reduce costs while

improve quality of
products/services

C - Cost &
Quality

S - Supply chain

D - Decision
making

I -Internal control

improve efficiency and

effectiveness of supply
chain

AIS with proper IC will protect

system from problems such as
fraud, errors, failures and
disasters

1(3)

Zafiruddin