it is a system that collects, records, stores and processes data to produce information for decision makers. It includes people, procedures and instructions data, software, information technology infrastructure, and internal controls and security measures

Components of Accounting Information System

The ______ who use the system.

The ______ used to collect, process and store data.

The _____ about the organization and its business activities.

The _____ used to process data.

The _____, including the computers, peripheral devices, and network communications devices used in the AIS.

The _____ that safeguard AIS data.

How can AIS add value to an Organization?

Major Subsystems of AIS

It supports daily business operations with numerous reports, documents, and messages for users throughout the organization.

Produces the financial statements such as income statement, balance sheet, statement of cash flows, etc.

Provides internal management with special purpose financial reports and information needed for decision-making such as budgets, variance reports, and responsibility reports.

Processes non-financial transactions that are not normally processed by traditional AIS.

Elements of General Model for AIS

fall into two general groups: external and internal

include creditors, stockholders, potential investors, regulatory agencies, tax authorities, suppliers, and customers.

Include management at every level of the organization, as well as operations personnel. In contrast to the external reporting, the organization has a great deal of latitude in the way it meets the needs of ______.

Are facts, which may or may not be processed (edited, summarized, or refined) and have no direct effect on the user.

Is a processed data.

These are financial transactions that enter the information system from both internal and external sources. These are economic exchanges with other business entities and individuals outside the firm.

Are the most common source of data for most organizations.

These are exchange or movement of resources within the organization.

_____ is the first operational stage in the information system. The objective is to ensure that event data entering the system are ______, ______, and _____. The Information system should capture only relevant data and there must be efficient data collection procedures.

Once collected, data usually require processing to produce information. Tasks in _____ stage range from simple to complex. Examples: Statistical techniques for sales forecasting, production scheduling applications, posting and summarizing procedures used for accounting applications.

The organization's database is its physical repository for financial and nonfinancial data. Its content can be represented in logical hierarchy.

Levels in the DATA HIERARCHY

It is the most elemental piece of potentially useful data in the database. An attribute is a logical and relevant characteristic of an emtity about which the firm captures data.

It is the comple set of attributes for a single occurrence within an emtity class. To find a _____ within a database, we must be able to identify it uniquely.

It is a complete set of records of an identical class. For example, all the AR records of the organization constitute the AR file. Similarly, _____ are constructed for other class records such as inventory, accounts payable, and payroll. The organization's database is entire collection of such _____.

DATABASE MANAGEMENT three fundamental tasks includes:

Assigns keys to new records and stores them in proper location in database.

The tasks of locating and extracting an existing record from the databse for processing.

Tasks of permanently removing obsolete or redundant record from the database.

It is the process of compiling, arranging, formatting, and presenting information to users.

It is a form of output that is sent back to the system as a source of data. It could be internal or external to initiate or alter a process. Example: An inventory status report signals the inventory control clerk that items of inventory have fallen to, or below, their minimum allowable levels.

Information system objectives

_____ manages the financial information resource of the firm. In this regard, it plays to important roles in transaction processing: 1. Accounting captures and records the financial effects of the firm’s transactions. 2. The accounting function distributes transaction information to operations personnel to coordinate many of their tasks.

The _____ to a user is determined by its reliability. Information must possess attributes like relevance, accuracy, completeness, summarization and timeliness. Unreliable information has no value – it can waste resources or can lead to dysfunctional decisions. Effective decisions require information that has a high degree of reliability.

THE ROLE OF ACCOUNTANTS 1. Accountant as _____. 2. Accountant as _____. 3. Accountant as _____.

An economic event that affects the assets and equities of the firm, is reflected in its accounts and is measured in monetary terms. Ex: Sale of goods and services, purchase of inventory, discharge of financial obligations, receipt of cash on account from customers.

These TRANSACTION CYCLES process most of the firm’s economic activity:

In this cycle, the business activities begin with the acquisition of materials, property and labor in exchange for cash. Most business to business transactions are based from credit relationship between the trading parties. The actual disbursement of cash takes place at some point after the receipt of goods and services. The system used includes: Purchase/accounts payable system, Cash disbursement system, payroll system and fixed asset system.

This system recognizes the need to acquire physical inventory (such as raw materials) and places an order with the vendor. When the goods are received, the purchases system records the event by increasing inventory an establishing an account payable to be paid at a later date.

When the obligation created in the purchases system becomes due, the _____ authorizes the payment, disburses the funds to the vendor, and records the transaction by reducing the cash and accounts payable accounts.

The _____ collects labor usage data for each employee, computes the payroll, and disburses paychecks to the employees. Conceptually, payroll is a special case purchases and cash disbursement system. Because of accounting complexities associated with payroll, most firms have a seperate system for payroll processing.

This system maintains details about each piece of equipment and other fixed assets. It provide a system for tracking for organizations' physical assets.

This cycle compromises two major subsystem: the production system and the costing system.

It involves planning, scheduling, and control of the physical product through the manufacturing proces. This includes determining raw materials requirements, authorizing the works to be performed, released of raw materials into production and directing the movement of the work in process through its various stage in manufacturing.

It monitors the flow of cost information including labor, overhead and raw materials related to production. The information that this system produces is used for inventory valuation, budgeting cost control, performance reporting, and management decisions, such as make-or-buy decisions.

Firms sell their goods and services to customers through the _____. This cycle includes processing cash sales, credit sales, and the receipt of cash following a credit sale. _____ transactions also have a physical and financial components, which are processed seperately. The primary subsystems of the _____.

The majority of business sales are made on credit and involve tasks such as preparing sales order, granting credit, shipping products (rendering of a service) to the customer, billing customers, and recording the transaction in the accounts (accounts receivable, inventory, expenses and sales).

For credit sales, some period of time (days or weeks) passes between the point of sales and the receipt of cash. _____ includes collecting cash, depositing cash in bank, and recording theses events in the accounts (accounts receivable and cash).

convert the organization's cash into physical materials and human resources it needs to conduct the business.