1-1 Chapter 1

Accounting Information Systems: An Overview

 What Is a System?
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 System
 A set of two or more
interrelated components
interacting to achieve a goal
 Goal Conflict
 Occurs when components act
in their own interest without
regard for overall goal
 Goal Congruence
 Occurs when components
acting in their own interest
contribute toward overall
goal

Copyright © 2020 Pearson Education, modified by Lamiaa Mostafa

 Data vs. Information
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 Data are facts that are

recorded and stored.
 Insufficient for decision
making.
 Information is processed
data used in decision making.
 Too much information
however, will make it
more, not less, difficult to
make decisions. This is
known as Information
Overload.
 Levels
4
4

 Management
 Data
 Information System
 Value of Information
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Benefits Costs

 Reduce Uncertainty  Time & Resources

 Improve Decisions spent to
 Improve Planning
 Produce Information
 Improve Scheduling  Distribute Information
Benefit $’s > Cost $’s
 What Makes Information Useful?
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 Necessary characteristics:
 Relevant
 “The capacity of information to make a difference in a decision
by helping users to form predictions about the outcomes of past,
present, and future events or to confirm or correct prior
expectations.”
 Reliable
 “The quality of information that assures that information is
reasonably free from error and bias and faithfully represents what
it purports to represent.”
 Complete
 “The inclusion in reported information of everything material
that is necessary for faithful representation of the relevant
phenomena.”
 What Makes Information Useful?
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 Timely
 “Having information available to a decision maker before it loses its
capacity to influence decisions.”-available when needed
 Understandable
 “The quality of information that enables users to perceive its
significance.”-useful format
 Verifiable
 “The ability through compromise among measurers to ensure that
information represents what it aims to represent or that the chosen
method of measurement has been used without error or bias.”
 Accessible
 Available when needed (see Timely) and in a useful format (see
Understandable).
 Business Process
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 Systems working
toward organizational
goals
 Business Process Cycles
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 Revenue
 Expenditure
 Production
 Human Resources
 Financing
 Business Transactions
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 Give–Get exchanges
 Between two entities
 Measured in economic terms
1-11

Business
Cycle
Give–Get
 Accounting Information Systems
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 Collect, process, store, and report data and

information
 If Accounting = language of business
 AIS = information providing vehicle
 Accounting = AIS
 Components of an AIS
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 People using the system

 Procedures and Instructions
 For collecting, processing, and storing data
 Data
 Software
 Information Technology (IT) Infrastructure
 Computers, peripherals, networks, and so on
 Internal Control and Security
 Safeguard the system and its data
 AIS and Business Functions
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 Collect and store data about organizational:

 Activities, resources, and personnel
 Transform data into information enabling
 Management to:
 Plan, execute, control, and evaluate
 Activities, resources, and personnel
 Provide adequate control to safeguard
 Assets and data
 AIS Value Add
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 Improve Quality and Reduce Costs

 Improve Efficiency
 Improve Sharing Knowledge
 Improve Supply Chain
 Improve Internal Control
 Improve Decision Making
 Improve Decision Making
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 Identify situations that require action.

 Provide alternative choices.
 Reduce uncertainty.
 Provide feedback on previous decisions.
 Provide accurate and timely information.
 Value Chain
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 The set of activities a product or service moves

along before as output it is sold to a customer
 At each activity the product or service gains value
 Value Chain—Primary Activities
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 Value Chain—Support Activities
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 Value Chain
1-20
 AIS and Corporate Strategy
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Organizations
have limited
resources, thus
investments to
AIS should have
greatest impact on
ROI.

Organizations
need to
understand:
IT developments
Business
strategy
Organizational
culture

Will effect and be

effected by new
AIS