FINANCIAL

INFORMATION SYSTEM
SHAIRA KARISSA J. CIPRIANO
CATHERINE JOY NAYAL
LEARNING OBJECTIVES

• What is FIS?
• What are the qualitative characteristics of FIS?
• What does the Ideal FIS do?
• What are the building blocks of FIS?
• Application of Financial Information System
• What are the advantages and disadvantages of having FIS?
SLIDE OUTLINE

PART 1

• What is FIS?
6
• What are the qualitative characteristics of FIS
7
• What does the Ideal FIS do?
8-9
• What are the building blocks and major components of FIS?
10
SLIDE OUTLINE

PART 1I

• Application of FIS
14
• What are the advantages and disadvantages of having FIS?
16
19
• Summary
20
• references
PART I.
INTRODUCTION

SHAIRA KARISSA CIPRIANO

INTRODUCTION
What is Financial Information
• System?
Definition

• Is a form of real-time operating system that works to enhance financial information exchanges

• Purpose
• FIS is essential to business since decision makers need the resulting information to make decisions about
how to run the organization
• How?
• FIS provides an overview of the company’s revenue, expenses, profitability and debt.
• Financial Statement provide a snapshot of a corporation’s financial health, giving insight into its
performance, operations, and cash flow.
• Accumulates financial data and then analyze that data in order to allow the decision makers in the
business to make better decisions.
 INTRODUCTION
What are the qualitative characteristics of FIS?

Qualitative Characteristics of
Financial Information
Complete
Confirmatory Value (Past)
FAITHFUL Neutral
RELEVANCE Fundamental
Predictive Value (Future) REPRESENTATION
Free from Error

Enhancing

Verifiability Timeliness Comparability Understandability

Source: Corporate Finance
Institute
INTRODUCTION
What does the Ideal FIS do?

• Collect Information
• In a manner that is accurate, timely, complete, reliable and consistent that will ultimately to results
that can be trusted
• Reports
• To provide management reporting to accurate levels that can help decision makers
• Support Policy Decisions
• When policies are made, they should be backed up with accurate and reliable data
• Preparation and Execution of Budgets
• Real-time data should inform the management about their execution of the budget so they know
whether they are within limits or exceeding them
INTRODUCTION
What does the Ideal FIS do?

• Financial Statements
• Should facilitate the preparation of FS, both internal and external
• Information for Budgeting, Analysis and Reporting
• These are three important high-level functions within any business and can only be effectively carried
out if the data produced is accurate and reliable
• Audit Trail
• Maintaining records of every single transaction that occurs
 Administrative Management System What are the
building blocks
SAP of an FMIS?

Logistics FIS HRIS • General Ledger

• Accounts Payable
• Accounts Receivable
Payroll
Sales & Financial • Budgetary Accounting
Controlling Funds Mgt
Distribution Acctg Module
Time Mgt
Materials Mgt • Payroll System
General Ledger Personnel • Procurement Module
Adminisration
Purchasing • Project Ledger Module
• Asset Module
Accounts Accounts
Payable Receivable
Three
Components of FIS
Financial
Information Financial
System Controlling
Acctg Funds Mgt

General Ledger
Major Categories
of Finanacial
What is the
Management
Which Accounts Accounts
department/ Payable Receivable source of
project funding? • Cash Management
incurred the How much
What revenue or expense • Investing
activity? funding is
activity occurred? Management
available?
• Capital Budgeting
• Financial Planning
PART II.
APPLICATION OF FIS

CATHERINE JOY E. NAYAL

FUNCTION OF FIS
Application of FIS?

Example Scenario: Household budget management using the FIS Model

Consider a household which maintains two bank accounts; the first to handle all regular
household expenditures and the second to save for a dream vacation.
• The account balances of each account is $1,500 and $1,000, respectively and neither one
allows for overspending.
• Household spending plan contains the details for how you intend to spend the money and
would also be updated to record the actual spending.
• Cheque book will record the amount and the type of each expense incurred.
 FUNCTION OF FIS
Application of FIS?

Beginning of the Month:

Cheque Book (FI) Bank Accounts (FM) Household Budget/Plan (CO)
Plan Actual Variance
Household
No transactions recorded General Household Food 600
Funds Available 1,500 Clothing 200
Utilities 400
Car Expenses 300
Vacation Fund 1,500
Funds Available 1,000 Vacation
This Year 200
Next Year 2,000
2,200
 FUNCTION OF FIS
Application of FIS?

End of the Month:

Cheque Book (FI) Bank Accounts (FM) Household Budget/Plan (CO)
Plan Actual Variance
Household Household
Food 600 General Household Food 600 600 0
Clothing Funds Available 1,500 Clothing 200 0 200
Utilities 500 Household (1,500) Utilities 400 500 (100)
Car Expenses 400 Funds Available 0 Car Expenses 300 400 (100)
1,500 1,500 1500 0
Vacation Vacation Fund Vacation
This Year 180 Funds Available 1,000 This Year 200 180 20
Vacation (180) Next Year 2,000 0 2,000
Funds Available 820 2,200 180 2,020
FUNCTION OF FIS
What are the advantages and disadvantages of having FIS?

Accounting
• The center of a financial information system will be found in accounting. This area looks
at the overall financial picture of a project, business or individual, incorporating both
accounts payable and accounts receivable.

Funds
• The FIS examines where funds are coming in and where funds are going out. Unlike
accounting, however, FIS can make use of rigid budget controls. This enables a user to
quickly identify whether or not a financial situation is developing.
FUNCTION OF FIS
What are the advantages and disadvantages of having FIS?

Reporting
• By allowing users to examine reports on any aspect of the financial data, it assists in
keeping track of past expenses, as well as projecting future expenses.

Faster decision making

• The information provided by the MFIS/FIS is timely, reliable, accurate, and verifiable.
 FUNCTION OF FIS
What are the advantages and disadvantages of having FIS?

Business more efficient

• The system gives you all the information and control you need to prevent the misuse of the
business’s financial resources while giving you the ability to mitigate potential risks that you
cannot foresee.

Costly and requires training

SUMMARY

• FIS is essential to business since decision makers need the resulting information to make decisions
about how to run the organization
• The primary qualitative characteristics of financial information is relevance and faithful
representation. Its secondary qualitative characteristics are comparability, understandability,
timeliness and verifiability.
• An ideal financial information system must be able to collect information, provide reports,
financial statements, supports policy and creates audit trail, and helps in preparation and execution
of budgets.
• The three major components of FIS are controlling, financial accounting and fund management.
REFERENCES

• Welcome to the Financial Information System: An Intorduction; Univeristy of Toronto

• https://www.technopedia.com/definition/26394/financial-information-system-fis

• https://smallbusiness.chron.com/benefits-financial-management-information-system-71943.html

• Financial Information System; Corporate Finance Institute

• https://bizfluent.com/list-6588708-benefits-accounting-information-systems.html