Chapter 1 – The Information System: An Accountant’s Perspective

The Information Environment

 Accounting information systems (AIS) are
specialized subset of information systems that
processes financial transactions.
 Information flows are the flows of information into
and out of an organization.
 Trading partners is a category of external user,
including customer sales and billing information,
purchase information for suppliers, and inventory
receipts information.
 Stakeholders are entities either inside or outside an
organization that have a direct or indirect interest in
the firm.

Internal and External Flows of Information

Information Objectives
Three fundamental objectives that are common to all organizations:
 To support the firm’s day-to-day operations.
 To support management decision making.
 To support the stewardship function of management.

An Information Systems Framework

 The information system is the set of formal procedures by which data are collected, processed into information,
and distributed to users.
  A management information system (MIS) is a system that processes nonfinancial transactions not normally
processed by traditional accounting information systems.
 A transaction is an event that affects or is of interest to the organization and is processed by its information system
as a unit of work.
 A financial transaction is an economic event that affects the assets and equities of the organization, is measured in
financial terms, and is reflected in the accounts of the firm.
 Nonfinancial transactions are events that do not meet the narrow definition of a financial transaction.

A Framework for Information Systems

Transactions Processed by the Information Systems

 The Accounting Information System

 The transaction processing system (TPS) is an activity composed of three major subsystems—the revenue cycle,
the expenditure cycle, and the conversion cycle.
 The general ledger/financial reporting system (GL/FRS) is a system that produces traditional financial statements,
such as income statements, balance sheets, statements of cash flows, tax returns, and other reports required by law.
 The management reporting system (MRS) is a system that provides the internal financial information needed to
manage a business.
 The Management Information System
 The Need to Distinguish between AIS and MIS