General Models of AIS

1. End User
a. External user
b. Internal User
c. Data vs information
2. Data source
3. Data Collection
4. Data Processing
5. Database Management
d. Data attribute
e. Record
f. File
g. Database management task.
6. Information Generation
h. Relevance
i. Timeliness
j. Accuracy
k. Completeness
l. summarization
7. Feedback

General Models of AIS (Accounting Information Systems) encompass various components and processes
that help organizations manage their financial information effectively. Here, I'll explain each of these
components with examples:

1. **End User**: End users interact with AIS to access and utilize financial information. There are two
main types:

a. **External User**: These are individuals or entities outside the organization who require financial
information. Examples include investors, creditors, and government regulators who use financial
statements for decision-making.

b. **Internal User**: Internal users are individuals within the organization who need financial data for
various purposes. This group includes managers, employees, and executives who use AIS for budgeting,
forecasting, and performance analysis.

2. **Data Source**: Data sources are the origins of financial information. Examples include sales
transactions, purchase orders, bank statements, and employee payroll records.
3. **Data Collection**: This is the process of gathering data from various sources and inputting it into
the AIS. For instance, when a cashier records a sales transaction at a retail store, it's a part of data
collection.

4. **Data Processing**: Data processing involves manipulating and organizing the collected data to
generate meaningful information. This can include tasks like calculating totals, generating financial
statements, and identifying trends in sales data.

5. **Database Management**: Database management involves organizing and maintaining data

efficiently. Key terms in this context include:

c. **Data Attribute**: A specific characteristic or property of a data item. For example, in a customer
database, attributes can include name, address, and phone number.

d. **Record**: A collection of related data attributes for a single entity. In a sales database, a record
could represent a single sales transaction containing details like date, customer name, and product sold.

e. **File**: A collection of records. In a payroll system, an employee file might contain records for all
employees' salary information.

f. **Database Management Task**: Tasks like adding, updating, deleting, and retrieving records in a
database fall under database management. For example, updating an employee's address in the HR
database is a management task.

6. **Information Generation**: This is the result of data processing. AIS converts data into meaningful
information that can be used for decision-making. Attributes of generated information include:

g. **Relevance**: Information should be pertinent to the decision at hand. For instance, sales figures
are relevant when assessing the performance of a sales team.

h. **Timeliness**: Information should be available when needed. Outdated information can lead to
poor decision-making. For example, timely financial statements are crucial for shareholders.
 i. **Accuracy**: Information must be free from errors and mistakes. In financial reporting, inaccurate
data can lead to financial misstatements and legal issues.

j. **Completeness**: Information should include all necessary details. Incomplete information can
hinder decision-making. For instance, a budget report should include all expected expenses.

k. **Summarization**: Summarizing data helps in presenting complex information in a more

understandable form. Financial reports often include summaries like income statements and balance
sheets.

8. **Feedback**: Feedback is essential in AIS for control and improvement. It involves evaluating
the system's performance, identifying issues, and making necessary adjustments. For example, if
a company's AIS detects a significant increase in inventory costs, it can trigger a feedback
process to investigate the issue and make necessary adjustments to inventory management
practices.

General Models of AIS

1. End User

a. External user: These are individuals or organizations outside the company who use the financial
information generated by the AIS. Examples include investors, creditors, and regulatory agencies.

b. Internal User: These are individuals or departments within the company who use the financial
information generated by the AIS. Examples include managers, employees, and other stakeholders.

2. Data Source: This refers to the origin of data in the AIS. It can be internal or external to the
organization and can include transactional data, financial statements, and other relevant data.

3. Data Collection: This is the process of gathering data from various sources and inputting it into the AIS.
The objective of data collection is to collect data that are efficient and relevant.
4. Data Processing: This involves the conversion of raw data into meaningful information. This process
includes data validation, sorting, summarizing, and calculating.

5. Database Management:

c. Data Attribute: This refers to the characteristics of the data stored in the AIS, such as name, address,
and account number.

d. Record: This is a collection of related data elements that are stored in the AIS.

e. File: This is a collection of related records that are stored in the AIS.

f. Database Management Task: This refers to the activities involved in managing the database, such as
data backup, security, and recovery.

6. Information Generation:

g. Relevance: The information generated should be relevant to the needs of the end-users.

h. Timeliness: The information generated should be timely and up-to-date.

i. Accuracy: The information generated should be accurate and free from errors.

j. Completeness: The information generated should be complete and include all relevant data.

k. Summarization: The information generated should be summarized to provide a clear and concise
picture of the financial data.

7. Feedback: This is the process of evaluating the performance of the AIS and making necessary
adjustments to improve its efficiency and effectiveness.

Example: A company uses an AIS to manage its financial data. The AIS has both external and internal
users, including investors, creditors, managers, and employees. The data sources include transactional
data, financial statements, and other relevant data. The data collection process involves gathering data
from various sources and inputting it into the AIS. The data processing involves sorting, summarizing,
and calculating the data. The database management includes data attributes, records, files, and database
management tasks. The information generated is relevant, timely, accurate, complete, and summarized.
Finally, feedback is provided to evaluate the performance of the AIS and make necessary adjustments to
improve its efficiency and effectiveness.

Citations:
[1] https://eopcw.com/find/downloadLectureNote/378

[2] https://quizlet.com/436952768/questions-ais-flash-cards/

[3] https://quizlet.com/432306433/ais-chapter-1-obanks-flash-cards/

[4] https://www.scribd.com/document/519579807/AIS-compilation

[5] http://site.iugaza.edu.ps/hmadi/files/2014/11/JAMES-AIS_unprotected.pdf

[6] https://www.investopedia.com/articles/professionaleducation/11/accounting-information-
systems.asp

General Models of AIS

An Accounting Information System (AIS) is a system that businesses use to collect, store, manage,
process, retrieve, and report their financial data. The general model of AIS consists of seven
components, including end-users, data sources, data collection, data processing, database management,
information generation, and feedback.

1. End User

a. External user: These are individuals or organizations outside the company who use the financial
information generated by the AIS. Examples include investors, creditors, and regulatory agencies.

b. Internal User: These are individuals or departments within the company who use the financial
information generated by the AIS. Examples include managers, employees, and other stakeholders.

2. Data Source: This refers to the origin of data in the AIS. It can be internal or external to the
organization and can include transactional data, financial statements, and other relevant data.

3. Data Collection: This is the process of gathering data from various sources and inputting it into the AIS.
The objective of data collection is to collect data that are efficient and relevant.

4. Data Processing: This involves the conversion of raw data into meaningful information. This process
includes data validation, sorting, summarizing, and calculating.

5. Database Management:
c. Data Attribute: This refers to the characteristics of the data stored in the AIS, such as name, address,
and account number.

d. Record: This is a collection of related data elements that are stored in the AIS.

e. File: This is a collection of related records that are stored in the AIS.

f. Database Management Task: This refers to the activities involved in managing the database, such as
data backup, security, and recovery.

6. Information Generation:

g. Relevance: The information generated should be relevant to the needs of the end-users.

h. Timeliness: The information generated should be timely and up-to-date.

i. Accuracy: The information generated should be accurate and free from errors.

j. Completeness: The information generated should be complete and include all relevant data.

k. Summarization: The information generated should be summarized to provide a clear and concise
picture of the financial data.

7. Feedback: This is the process of evaluating the performance of the AIS and making necessary
adjustments to improve its efficiency and effectiveness.

In conclusion, the general model of AIS is a comprehensive system that businesses use to manage their
financial data. It involves various components, including end-users, data sources, data collection, data
processing, database management, information generation, and feedback. By implementing a well-
designed AIS, businesses can improve their financial reporting, enhance efficiency, and gain a
competitive edge.

Citations:

[1] https://www.scribd.com/document/519579807/AIS-compilation

[2] https://openstax.org/books/principles-financial-accounting/pages/7-1-define-and-describe-the-
components-of-an-accounting-information-system

[3] https://www.investopedia.com/articles/professionaleducation/11/accounting-information-
systems.asp

[4] https://www.investopedia.com/terms/a/accounting-information-system-ais.asp

[5] https://eopcw.com/find/downloadLectureNote/378
[6] https://quizlet.com/436952768/questions-ais-flash-cards/

PPT
Script for Reporting

Accounting Information Systems (AIS) are integral components of modern business operations,
playing a crucial role in capturing, processing, and reporting financial data. Accounting
Information Systems are critical for handling financial data, assisting decision-making, and
guaranteeing regulatory compliance.
General Model

The figure presented on the screen represents a general model for Accounting Information Systems
(AIS). General because this model is applicable to all AIS, irrespective of the specific technologies or
software solutions they utilize. The model illustrates the connections/relationship among the key
components that together form an AIS application, encompassing end users, data sources, data
collection, data processing, database management, information generation, and feedback.

END USER

End users in the context of Accounting Information Systems (AIS) are individuals or entities who interact
with the system to access, utilize, or contribute financial information. These users can be broadly
categorized into two groups: external and internal.

1. External End Users: These are individuals or entities outside the organization/company who
require/use the financial information generated by the AIS.

Creditors: Creditors, such as banks or lending institutions, use financial information from AIS to assess an
organization's creditworthiness when considering loans or credit extensions.

Stockholders and Potential Investors: Investors and shareholders rely on AIS-generated financial reports
to make investment decisions and gauge a company's financial health.

Regulatory Agencies and Tax Authorities: Government agencies, like the Securities and Exchange
Commission (SEC) or the Internal Revenue Service (IRS), depend on AIS data for regulatory compliance
and tax assessment purposes.

Suppliers and Customers: Suppliers may analyze a company's financial stability through AIS data to
determine credit terms, while customers might assess the financial viability of their business partners.

2. Internal End Users: These are individuals or departments within the company who use the financial
information generated by the AIS to facilitate various aspects of their work and decision-making
processes. These users play a crucial role in the organization's day-to-day operations, management, and
strategic planning. Examples include managers, employees, and other stakeholders.

Management: Management at all levels within an organization utilizes AIS for various purposes. Top-level
executives use AIS data for strategic planning, while middle and lower-level managers rely on it for day-
to-day decision-making.

Operations Personnel: Individuals involved in day-to-day operational activities, such as inventory

managers or production supervisors, use AIS to track performance, manage resources, and ensure
smooth operations.

Before Data Sources, differentiate muna natin kung ano ang pinagkaiba ng Data at Information.
1. Data:

Data refers to raw facts and figures. These facts can be collected, recorded, and stored, but on their own,
they lack context and do not inherently lead to actions or decisions.

Data can take various forms, including numbers, text, symbols, or other representations of observations
or measurements.

Data may or may not be processed. When data is processed, it undergoes editing, summarization, or
refinement to make it more understandable or meaningful.

2. Information:

Information is derived from data but is more than just processed data. It is data that has been
transformed into a meaningful context and has the power to influence or trigger actions, decisions, or
responses from users.

Information is determined by the effect it has on the user. If it causes a user to take an action that they
otherwise wouldn't have taken, it is considered information.

Information goes beyond the physical form of data; it is about the impact and relevance of the data to a
specific user or situation.

DATA SOURCE

Data sources are fundamental components of Accounting Information Systems (AIS) as they represent
the origins of financial data that enter the system for processing and reporting. In the context of AIS,
data sources can be categorized into two main types: external and internal.

1. External Data Sources:

External data sources refer to financial transactions that involve interactions between the organization
and entities or individuals outside of the firm. These transactions typically involve economic exchanges.
Examples of external data sources include:

Sale of Goods and Services: When a company sells its products or services to customers, it generates
revenue. This is an external transaction as it involves a financial exchange between the organization and
external customers.

Purchase of Inventory: When a business purchases raw materials or inventory items from suppliers, it
incurs expenses. These transactions involve external suppliers.

Receipt of Cash: When the company receives payments from customers, it involves external financial
transactions as cash is coming in from external sources.

Disbursement of Cash (including Payroll): Paying suppliers, employees' salaries, or other expenses
involves external financial transactions because funds are leaving the organization and going to external
parties.

2. Internal Data Sources:

Internal data sources, on the other hand, pertain to financial transactions that occur within the
organization, involving the exchange or movement of resources or financial elements. Examples of
internal data sources include:

Movement of Raw Materials into Work-in-Process (WIP): In a manufacturing setting, raw materials are
converted into work-in-process inventory as they are used in the production process.

Application of Labor and Overhead to WIP: The costs associated with labor and overhead expenses are
applied to work-in-process inventory as products are being manufactured.

Transfer of WIP into Finished Goods Inventory: Once products are completed, they are moved from
work-in-process inventory to finished goods inventory within the organization.

Depreciation of Plant and Equipment: The depreciation of assets like machinery, buildings, and
equipment is an internal transaction that reflects the allocation of asset costs over time.

DATA COLLECTION

Data collection is a critical initial phase in the operation of an information system. Its primary objective is
to ensure that the data entering the system are accurate, complete, and free from significant errors. This
stage is of utmost importance because it lays the foundation for the entire information processing cycle.
Errors at this stage can propagate through the system and result in erroneous and unreliable outputs,
potentially leading to incorrect actions and poor decision-making by system users.

Here are key points to understand about data collection in information systems:

1. Validity, Completeness, and Error-Free Data:

Validity: Data must be valid, meaning that it accurately represents real-world events or transactions.
Invalid data can mislead and compromise the integrity of subsequent processing.

Completeness: Data collection processes should ensure that all relevant data elements are captured.
Incomplete data can lead to incomplete or inaccurate outputs.

Error-Free: Data should be free from material errors. Errors in data can distort the information derived
from them and affect decision-making.

2. Importance of Data Collection:

Data collection is a critical control point within the information system. Detecting and correcting errors at
this stage is more efficient and cost-effective than identifying and rectifying errors later in the
information processing cycle.

3. Relevance and Efficiency:

Relevance: Data collection procedures should be designed to capture only relevant data. Determining
what is relevant is a fundamental task for system designers, and it is often based on an analysis of user
needs. Relevant data are those that contribute to meaningful information (as defined previously).
Irrelevant facts should be filtered out during data collection.
Efficiency: Efficient data collection procedures aim to collect data only once. This reduces duplication and
ensures that the same data can be made available to multiple users. Collecting the same data multiple
times can overload system resources, lead to data redundancy, cause inconsistencies, and reduce overall
system effectiveness.

DATA PROCESSING

Data processing is a fundamental stage in the operation of information systems, where collected data are
transformed, organized, and analyzed to generate meaningful information. Data processing tasks can
vary in complexity, depending on the specific objectives and requirements of the system. Here are key
points to understand about data processing in information systems:

1. Transformation of Data into Information:

The primary goal of data processing is to convert raw data into meaningful information. Data, in their
raw form, are often difficult to interpret or act upon. Processing adds context, structure, and relevance
to data, making them useful for decision-making.

2. Range of Data Processing Tasks:

Data processing tasks can vary widely in complexity and application. Examples include:

Mathematical Algorithms: Complex mathematical models and algorithms, such as linear programming,
are used for solving optimization problems. For instance, in production scheduling applications,
algorithms can help determine the most efficient use of resources to meet production goals.

Statistical Techniques: Statistical methods are employed for tasks like sales forecasting. These techniques
analyze historical data to predict future trends and demand patterns.

Posting and Summarizing Procedures: In accounting applications, data processing involves tasks like
posting financial transactions to appropriate accounts and summarizing them in financial statements.

3. Importance of Data Processing:

Data processing is the heart of an information system. It adds value to raw data by transforming it into
actionable information.

Effective data processing is essential for generating accurate and reliable information, which forms the
basis for informed decision-making.

DATABASE MANAGEMENT

Database management is a crucial component of information systems and serves as the physical
repository for financial and nonfinancial data within an organization. It involves the organization, storage,
retrieval, and maintenance of data in a systematic and structured manner. Let's break down the key
concepts related to database management:

1. Database Hierarchy:
Data Attribute: The data attribute is the smallest unit of data in the database. It represents a logical and
relevant characteristic of an entity about which the organization collects data. In the context of Figure 1-
5, attributes relate to a common entity, such as "accounts receivable (AR)." Each attribute is considered
logical and relevant because it contributes to the overall information content. Removing any relevant
attribute diminishes the information's value, and adding irrelevant or illogical attributes does not
enhance it.

Record: A record is a complete set of attributes for a single occurrence within an entity class. For
instance, within the "AR" class, a record could represent a specific customer's name, address, and
account balance. To uniquely identify a record within the database, there is a need for a unique identifier
attribute called the "primary key." Often, artificial keys are assigned to ensure uniqueness, as natural
attributes like customer names cannot guarantee it.

File: A file, also known as a table in database terminology, comprises a complete set of records of an
identical class. For example, all "AR" records within the organization constitute the "AR file." Similar files
are created for various record classes such as inventory, accounts payable, and payroll. The entire
collection of such files makes up the organization's database.

2. Database Management Tasks:

Storage: The storage task in database management involves assigning keys to new records and storing
them in their appropriate locations within the database. When new data is collected or generated, it is
organized and inserted into the database, ensuring that it can be efficiently retrieved and processed.

Retrieval: Retrieval is the process of locating and extracting existing records from the database for
various purposes, such as data analysis, reporting, and decision-making. Data is retrieved based on
specific criteria or queries to meet user needs.

Deletion: Deletion involves permanently removing obsolete or redundant records from the database.
Over time, data can become outdated or irrelevant, and deleting such records helps maintain the
database's efficiency and accuracy.

Example: In a customer database:

Data Attribute: Attributes could include "Customer Name," "Address," "Phone Number," and "Purchase
History."

Record: A record would represent a specific customer's information, like "John Smith" with his
corresponding details.

File: The collection of all customer records within the database forms the "Customer File."

Database Management Significance:

Effective database management is crucial for maintaining data accuracy, consistency, and integrity.

It ensures that data is organized in a structured manner, making it accessible and useful for various
organizational functions.

Efficient storage, retrieval, and deletion processes support data-driven decision-making and enhance
overall system effectiveness.
In summary, database management is a fundamental component of information systems, responsible for
organizing and maintaining data in a structured and efficient manner. It ensures that data is available
when needed, accurate, and aligned with the organization's information needs. Proper database
management supports data integrity and contributes to informed decision-making within the
organization.

INFORMATION GENERATION

Information generation is a vital stage in the operation of information systems, where data is processed,
organized, and presented to users in a meaningful and useful form. This stage involves compiling,
arranging, formatting, and presenting information to support various organizational functions. Let's delve
into the key aspects of information generation:

1. Characteristics of Useful Information:

Relevance: Information must serve a purpose and be directly related to the user's needs or tasks.
Relevant information supports decision-making and actions effectively. Presenting irrelevant data in
reports or documents can be counterproductive and lead to confusion.

Timeliness: The age of information is critical. It should be no older than the timeframe of the action it
supports. Timely information ensures that decisions and actions are based on up-to-date data. For
example, inventory decisions based on inventory status should reflect the most current data.

Accuracy: Information must be free from significant errors. The level of accuracy required depends on
the specific context and the impact of inaccuracies on decisions. Material errors are those that can lead
to poor decisions or the failure to make necessary decisions. A balance between accuracy and timeliness
is often sought.

Completeness: Information should not omit any essential details or calculations required for a decision
or task. Reports and documents should provide all necessary information clearly and unambiguously.

Summarization: Information should be presented in a way that aligns with the user's needs. Lower-level
managers may require detailed, granular data, while top-level managers may prefer summarized, high-
level insights. Summarization ensures that information is tailored to the user's level and role within the
organization.

2. Importance of Information Relevance:

The relevance of information is particularly critical. Users rely on information to make decisions and take
actions. Irrelevant data in reports can distract from the core message and potentially lead to incorrect
decisions or actions.
FEEDBACK:

Feedback is a critical concept in information systems and represents a form of output that is sent back
into the system as a source of data. This data can be used to initiate or alter processes within the
organization. Feedback can be both internal and external and plays a crucial role in maintaining effective
operations and decision-making. Let's explore the key aspects of feedback in information systems:

1. Internal and External Feedback:

Internal Feedback: Internal feedback is generated from within the organization itself. It often serves to
alert employees or processes about specific conditions or events. For example, an inventory status
report generated by the system may signal to the inventory control clerk that certain inventory items
have fallen to or below their minimum allowable levels. This internal feedback triggers the inventory
ordering process to replenish the inventory.

Example Internal Feedback: The store's information system generates an inventory status report
regularly. When this report indicates that the stock of a particular product has fallen below the minimum
allowable level (internal feedback), it triggers the inventory replenishment process. Orders are placed
with suppliers to restock the product, ensuring it remains available to customers.

External Feedback: External feedback, on the other hand, comes from sources outside the organization.
It provides insights or data about external conditions or factors that can impact the organization's
operations. For instance, external feedback may include information about the level of uncollected
customer accounts. This data can be used to adjust the organization's credit-granting policies or take
actions to recover outstanding payments.

Example External Feedback: External feedback may come from customer feedback surveys. If these
surveys indicate that customers are dissatisfied with the availability of a particular product or the speed
of service, this external feedback can prompt the store to adjust its product stocking or operational
processes to improve customer satisfaction.

2. Role of Feedback in Decision-Making:

Feedback is an essential component of the decision-making process within an organization. It provides

real-time or periodic information that decision-makers can use to assess the current state of affairs,
identify issues or opportunities, and make informed decisions.