MANAGEMENT INFORMATION

SYSTEM

Prince I P
[COMPANY NAME] [Company address]
 MODULE 1

INTRODUCTION TO MIS
 Introduction

Today the need for updated information, has become inevitable to arrive at an effective
decision in all walks of life. Whether it is industry, commerce, defence, banking, education,
economics or politics, information is needed everywhere.

Information is live as it is required to be updated all the time and is renewable,

The exponential growth of information makes it necessary that information is collected,

stored and retrieved in various fields when needed.

For example

(a) In setting of a new industry, information regarding the choice of technology, skill,
money and material becomes an important requirement for its growth and smooth
functioning.

(b) In a competitive market, before deciding about the price of an item, the producer
needs information about the pricing police of the competitors, specially of competitive
products, sales techniques etc

Management information system Meaning

Management information system is a system, which is designed to provide

information to various organizational levels, to assist them in decision-making

This is certainly not a new system. Many firms have customer information system,
accounting information system; marketing information System.

As the business organizations grow in complexity, managers depend more heavily

upon various external and internal sources of information. The growing complexity of
the business organizations also increases the quantum of points at which decision
must be made, ranging from individual decision-maker at the lowest operating levels
to strategic decision-maker at the top.
 MANAGEMENT

Management has been viewed as be function, a process, a profession and a

class of people. It refers to the kind of task and activities that are perform by
managers. The specific nature of the activities is determined by such managerial
functions as planning, organising, directing, leadership and controlling.

Planning:

It is the process of deciding in advance the courses of action to be followed and when
and how to undertake these. Its objectives in the best possible manner and for
anticipating future opportunities and problems.

Organising:

It is formal grouping of people and activities to facilitate achievement of the farm's

objectives. It is need for assigning responsibilities, jobs and hierarchy among
personnel.

Controlling:

It is the checking the progress of plans and correcting any deviations that may occur
along the way.

Directing:

It is the process of activating the plans, structure and group efforts desired direction. It
is needed for implementation of plans by providing desired leadership motivation and
proper communication.

The management can be group into 3 hierarchical levels

❖ Top or Strategic management
❖ Middle or Tactical management
❖ Junior or Operational management

Top Management:

It is establishes the policies, plans, objectives and budget framework under which
various departments will operate of the organisation.
 Middle Management:

It has the responsibility of implementing the policies and overall plans of the top
management.

Junior Management:

It has the responsibility of implementing day to day operations and decisions of the
middle

A Management Information System is

➢ An integrated user-machine system
➢ For providing information
➢ To support the operations, management, analysis, and decision-making
functions in an organization

MIS - Definitions
Management information system is a system of people, equipment, procedures,
documents and communications, that collects, validates, operates, transformers,
stores, retrieves, and presents data for use in planning, budgeting, accounting,
controlling and other management process". SCHWARTZ

Management information system is a comprehensive and coordinated set of

information sub-systems which are rationally integrated and which transform data
into information in a variety of ways to enhance productivity in conformance with
managers' styles and characteristics on the basis of established criteria".
GEORGE M. SCOTT
Evolution- Management information system
A management information system (MIS) is a computer system that gathers data from
multiple business systems, analyses the information, and provides reports that help guide
management in decision-making.

1950 - 1960: Electronic Data Processing, Transaction Processing System

During this period, the role of Information system was mostly to perform activities
like transaction processing, recordkeeping and accounting. Information system was mainly
used for electronic data processing (EDP).

Transaction Processing System (TPS) was the first computerized system developed to
process business data. TPS was mainly aimed at clerical staff of an organisation. The early T
PS used batch processing data which was accumulated over a period and all transactions were
processed afterward.

1960 to 1970: Management Information Systems

During this era, the role of IS evolved from TPS to Management Information Systems
(MIS). MIS process data into useful informative reports and provide managers with the tools
to organize evaluate and efficiently manage departments within an organization MIS delivers
information in the form of displays and pre-specified reports to support business decision-
making. Examples of output from MIS are cost trend, sales analysis and production
performance reporting systems.

MIS generates three basic types of information which are:

➢ Detailed information reports typically confirm transaction-processing activities. A

detailed Order Report is an example of a detailed report.
➢ Summary information establishes data into a format that an individual can review
quickly and easily.
➢ Exception information report information by filtering data that is an exception
inventory report. Exception reports help managers save time because they do not have
to search through a detailed report for exceptions.
1970 to 1980: Decision Support Systems

In this era, a major advancement was an introduction of the personal computers-(PC).

With the-introduction of PCs, distribution of computing or processing power across the
organization. Information system function associated strongly with management rather than a
technical approach in an organisation. The role focused on "interactive computer-based
system" to aid decision-makers in solving problems.

DSS uses data from both internal and/or external sources. Internal sources of data might
include inventory, sales, manufacturing or financial data from an organization's database.
External sources could include pricing, interest rates, population or trends. Managers use DSS
to manipulate the data to help with decisions. Examples of DSS are projected revenue figures
based on new product sales assumptions, product pricing and risk analysis systems.

1980 to 1990: Executive Information Systems

This period gave rise to departmental computing due to many organisations purchasing
their own hardware and software to suit their departmental needs. Instead of waiting for indirect
support of centralized corporate service department, employees could use their own resources
to support their job requirements.

This trend led to new challenges of data incompatibility, integrity and connectivity
across different departments. Further, top executives were neither using DSS nor MIS hence
executive information systems (EIS) or executive support systems (ESS) were developed

1990 to 2000: Knowledge Management Systems

During this era, the rapid growth of the intranets, extranets intranet and other
interconnected global networks dramatically changed the capabilities of IS in business. It
became possible to circulate knowledge to different parts of the world irrespective of time and
space.

This period also saw an emergence of enterprise resource planning (ERP) systems. ERP
is an organization-specific form of a strategic information system that incorporates all
components of an organisation including manufacturing, sales, resource management, human
resource planning and marketing.
 Moreover, there was a breakthrough in the development and application of artificial
intelligence (Al) techniques to business information systems. Expert systems (ES) and
knowledge management systems (KMS) interconnected to each other

Expert systems (ES) are a computer system that simulate the decision-making ability
of human experts. For example, systems making financial forecasts, diagnosing human
illnesses and scheduling routes for delivery vehicles. Knowledge management system (KMS)
is an IT system that stores and retrieves knowledge to support creation, organization and
dissemination of business knowledge within the enterprise. Examples of KMS are feedback
database and helpdesk systems.

2000 - Present: E-Business

The Internet and related technologies and applications changed the way businesses
operate and people work. Information systems functions in this period are still the same just
like 50 years ago doing records keeping, reporting management, transactions processing,
support management and managing processes of the organization. It is used to support business
process, decision making and competitive advantage.

Many businesses use Internet technologies and web-enable business processes to create
innovative e-business applications. E-business is simply conducting business process using the
internet.

Significance and need of MIS

❖ To provide information for planning, organizing and controlling purposes,

❖ To assist in identifying the managerial problems and their solution.
❖ To provide information regarding work force planning.
❖ To provide the information regarding the financial health of the business organization.
❖ To provide information regarding production and inventory
❖ To provide information regarding sales and other marketing aspects i.e. product, price,
promotion, market, physical distribution, payment collection, market segmentation etc.
❖ To speed up the execution of the results with the reliable data available.
❖ To smooth up the flow of data through various levels of the organization.
❖ To provide information regarding work force planning.
❖ To provide the information regarding the financial health of the business organization
❖ To speed up the execution of the results with the reliable data available.
 ❖ To smooth up the flow of data through various level of the organization.

Objectives MIS
Data Capturing: MIS capture data from various internal and external sources of organization.
Data capturing may be manual or through computer terminals.

Processing of Data: The captured data is processed to convert into required information.
Processing of data is done by such activities as calculating, sorting, classifying, and
summarizing.

Storage of Information: MIS stores the processed or unprocessed data for future use. If any
information is not immediately required, it is saved as an organization record, for later use.

Retrieval of Information: MIS retrieves information from its stores as and when required by
various users.

Dissemination of Information Information, which is a finished product of MIS, is

disseminated to the users in the organization. It is periodic or online through computer terminal.

Management Reporting System

1. MRSs are usually developed by information system professionals, rather than by end
users.
2. MRSs are oriented towards reporting on the past and the present, rather than projecting
the future.
3. MRSs largely report on internal company operations.
4. MRSs generally have limited analytical capabilities.
5. MRSs do not directly support the decision-making process
6. MRSs provide Scheduled or Periodic Reports, Exception Reports, and Demand or Ad-
hoc Report

Decision Support System

Decision Support Systems are a class of computerized information systems that support
decision-making activities. DSS are interactive computer-based systems and subsystems
intended to help decision makers. A DSS may present information graphically and may include
an expert system or artificial intelligence. DSS tend to be designed primarily to serve
management control level and strategic planning level managers.
 • DSSs support for decision-makers in semi-structured and unstructured problems.
• DSSs are more focused on specific decision rather than routine flows of information.
• DSS present information graphically and ma include an expert system or artificial
intelligence.
• DSSs are adaptive over time

Office Information System

Office Information System is an information system that uses hardware, software, and
networks to enhance work flow and better communication between employees. Office
automation refers to the application of computer and communication technology to office
functions.

Office automation systems are meant to improve the productivity of managers at

various level of management by providing secretarial assistance and better communication
facilities. Office automation systems are the combination of hardware, software and people in
information systems, that process office transactions and support office activities at all levels
of the organisation. These systems include a wide range of support facilities, which include
word processing, electronic filing, electronic mail, message switching, data storage, data and
voice communication etc.

Business Expert System

Business expert system is a knowledge-based information system that uses its

knowledge about a specific, complex application area to act as an expert. This system is one of
the knowledge-based information system. Expert system provides decision support to
managers in the form of advice from an expert in a specific problem area. Expert systems find
application in diverse areas, ranging from medical, engineering and business.
 MIS and other Academic disciplines

✓ The management information system draws a lot of support from other

academic disciplines too. The foundation of MIS is the management theory.
✓ It uses the principles and practices of management while designing the system,
and gives due regard to the theory of organizational behaviour. It considers the
human mind as a processor of information.
✓ While designing the report format and forming business communication
channels, MIS takes into account the behaviour of the manager as an individual
and in a group
✓ Another area of academics is operational research. The operational research is
used for developing the models of management and they are then incorporated
in the
✓ MIS as decision support systems. The inventory control, queuing theory, and
resource programming are used in the MIS as decision support systems
✓ The network theory is used for planning and controlling large projects. The
application of PER / CPM to a project planning is now easily possible through
the MIS support.
✓ In the area of accounting application, it uses the accounting principles to ensure
that the data is correct and valid. It uses the principles of double entry
bookkeeping for balancing the accounts. It uses the accounting methodology for
generating a trial balance sheet and other books of accounts.
✓ The MIS further relies heavily on the decision methodology. It uses different
mathematical techniques to handle the situation of decision making uses the
method of decision- making under certainty for decision- making and action
✓ The is possible when it builds decision making systems in MIS which in turn is
possible if it draws tools, techniques, methods, rules and principles from pure
and application science, and use them as an integral part of the system.
✓ The MIS draws data from its own source and uses it in the application of a
variety of tools and techniques to solve the management, mathematics, and
accounting. Psychology, communication theory, operations
 Operating elements of MIS

A management information system is made up of five major c ponents namely people,

business processes, data, hardware, and software, All of these components must work together
to achieve business objects.

People

These are the users who use the information system to record the day to day business
transactions. The users are usually qualified professionals such as accountants, human resource
managers, etc. The ICT department usually has the support staff who ensure that the system is
running properly.

Business Procedures

These are agreed upon best practices that guide the users and all other components on how to
work efficiently. Business procedures are developed by the people i.e. users, consultants, etc.

Data

He recorded day to day business transactions. For a bank, data is collected from activities such
as deposits, withdrawals, etc.

Hardware

Hardware is made up of the computers, printers, networking devices, etc. The hardware
provides the computing power for processing data. It also provides networking and printing
capabilities. The hardware speeds up the processing of data into information.

Software

These are programs that run on the hardware. The software is broken down into two major
categories namely system software and applications software. System software refers to the
operating system i.e. Windows, Mac OS and Ubuntu, etc. Applications software refers to
specialized software for accomplishing business tasks such as a_Payroll program, banking
system, point of sale system, etc.
Customers

Every information system has end users or customers. An information system can have internal
as well as external. Customers are beneficiaries of products and services provided by an
information system. Here external customers could be people visiting a website for shopping
or e-commerce transaction, people searching for cooking recipe, searching for tax saving tools,
etc.

Internal customer of an information system could be employee receiving salary from

payroll system, employee checking inventory and stock, etc. Sometimes these employees could
be the customer for the product and services, for example, employee working with a computer
manufacturer could be customer of manufactured product.

For a manufacturing organization, production department would be customer for supply

department. Therefore, information system requirements of each department would be
different. Information systems are design to service what is best for external customers.
However, information systems should be flexible enough to support internal requirements also.

Products and Services

The result of data transformation is products and services. An information system can
generate products as well as service depending upon industry it is developed for. In clothing
industry designer clothes are produced based customer's requirement. Here completed
garments are product and custom design is a service. In internet banking, customer can
accomplish the entire banking task, without visiting the bank. Internet banking, therefore, is a
service.

An information system can generate various types of services and products based on its
design. An effective information system needs to satisfy customer expectation. An information
system should provide product and service based on customer's needs and requirements,

Business Processes

Business activity consists of various processes. These processes include talking to

customer, understanding her requirements, manufacturing product as per requirement, provide
post sales service, etc. A business process may not be structured all the time and may not be
formal. An improvement in the business process directly impacts business performance. An
information system can improve a business process, by providing relevant information,
increasing a step in business process or eliminating a step in a business process.

Communication Technology

Communication technology and computers are the central pieces of an information

system model. Their presence is required to deliver efficient business process and customer
products and services. Infusion of technology within business creates win-win situations.
Technology improves internal communication via email chat, etc. and improve external
communication through website, webinar etc. Access to valuable information is quicker
through information system, and this can provide a competitive edge in digital age.

MIS based on Management Activity

MIS provides useful information to the different levels of management for discharging
their function more effectively and efficiently. In order to understand design of suitable
management information system.

This means that the structure of management information can be expressed in terms of
different levels of management activity. There are three important levels of management
namely strategic management, management control or tactical management and operational
management. These levels of management activity are discussed below

Strategic Management

The first area of management is strategic planning level or top level management. Top
level management consists of board of directors and other chief executives. They are ranking
officers of the organization. Top level management develops over all organizational goals,
strategies, policies and objectives through long range strategic planning. They integrate the
functions of entire organization.

Strategic managers make decisions that affect the entire organization. Their decisions
may also leave a long term impact in the organization. Here the decision maker develops
objectives and allocates resources to attain these objectives. Decisions of this type are made
over a long period of time and usually involve huge investments. Developing and introducing
a new product in the market, the opening of branches abroad, mergers or acquisition etc. is
some of the examples for strategic decisions.
Management Control or Tactical Management

Management control level or middle level management decisions involve financial or

[personal consideration. They make wide ranging decisions for their subordinates on the basis
of general guide lines received from the top level management. They develop medium range
plans and defining objectives of their departments. These managers are responsible for finding
the best operational measures to accomplish the strategic decisions set by the top level
management.

They make plans and compare the actual performance with standards. Then they
determine variances if any and take remedial measures to avoid them in future. For example if
the top level managers to make decisions regarding the acquisition of hardware, software and
imparting training to staff under him.

Operational Management

Operational management or lower level management deals with routine activities. They
make short term plans to carry out day to day activities more effectively and efficiently. They
are in charge of small group or subordinates.

These managers' implements policies handed over to them by their superiors. With in
these policies, they make decisions that affect their small units for a short period preparation
of pay roll and inventory management are examples of operational control level decisions.

MIS based on organizational functions

The structure of MIS can also be described in terms of organizational functions which
make use of information.

The term organizational function information systems is used to describe a variety of

information system that support an organizational function such as accounting, finance,
production, marketing, human resource management etc. Each of these functions has its own
information needs.

MIS is a typically an integrated combination of functional information systems that is

designed to meet the info requirements of the functional subdivisions of an organization. Each
of these functions is considered as a subsystem.
Production Subsystem

Production info system support the production function which includes all activities
concerned with the planning & control of the processes that produce goods or service. In the
production subsystem there are transaction processing, operation control, managerial control
& strategic planning. The typical info required at the transaction processing level is production
orders. The production order is generally based on the sales orders required by the company.

At the same time operational control level requires detailed reports comparing actual
performance with the production schedule & identifies the weak areas. However management
control requires a summary report which compares the overall performance to actual
performance. Strategic planning is concerned with simplifying, automating ,integrating many
of the activities needed to produce goods.

Marketing Subsystem

Marketing is another important function of an organization. The success of an

organization depends on the efficiency of marketing. The marketing function of an organization
is concerned with the planning, promotion & sale of existing products in existing markets &
the development of new products & new markets to satisfy existing & potential customers.
Thus marketing performs a vital function in the operation of the business enterprise.

MIS help analyse dd for different products in different regions. It’s mainly concerned
with the marketing right product to target customers. Marketing info system provides info for
planning, control & transaction processing in the market function. Strategic & operational info
system assists marketing managers in product planning, pricing decisions & advertising & sales
promotion strategies. MIS provides info that helps management to decide the number of sales
executives to assign specific products in specific geographical areas.

Human Resource Subsystem

The HRM function is concerned with the recruitment, placement, compensation &
development of employees in an organization. It mainly helps in record keeping & employee
evaluation. Every organization must maintain correct record of its employees.
 Produce pay cheques & pay reports, maintain personal records & analyse the use of
personnel in business operation are the important activities done at the transaction processing
level. Management control level conducts budget analysis, turnover analysis etc & showing the
variances resulting from planned & actual performance. Strategic planning of personnel
involved with the planning of alternative strategies for recruiting, training & compensating
employees. In this regard they have to collect different type of info from external sources.

Finance & Accounting Subsystem

Financial subsystem undertakes the function of arranging adequate finance to the

business at min cost. This function includes granting credit to customers, cash management &
financial arrangement. Accounting info system record & report the flow of funds through the
organization on a historical basis & prepares important financial statements like profit & loss
account & balance sheet.

Transaction processing system engaged in the legal & historical record keeping &
produces financial statements. They undertake activities like order processing, inventory
control, payroll & general ledger systems. Management control level focuses on planning &
control of business operations & they compare the actual cost of financial resources with the
targeted cost. The strategic planning level for accounting & finance involves in the long term
strategies connected with financial & accounting matters.

Logistics Subsystem

The logistic subsystem includes activities like purchasing, receiving, inventory control
& distribution. The transactions to be processed are purchase requisitions, manufacturing
orders, receiving reports & shipping orders. The operational control function make use of info
contained in reports like out of stock items, over stocked items, inventory turn over reports etc
managerial control level compares the planned & actual inventory levels, cost of purchased
items, stock outs etc analysis of new distribution strategies, adoption of new policy towards
the sellers are some of the common tasks dealt at the strategic planning level.
Information Processing Subsystems

It's the responsibility of the info processing subsystem to provide the necessary info
processing services & resources. Typical transactions for info processing are requests for
processing, changes in data & program. Managerial control over 'IMO processing requires data
on planned & actual performance. Acquisition of hardware & software & automation of info
processing etc are some of the strategic decision to b taken at the top level management.
 MODULE 2

INFORMATION IN
DECISION MAKING
 CONCEPT OF INFORMATION

The word ‘information’ is used commonly in our day to day working. In MIS,
information has a precise meaning and it is different from data. The information has a value
in decision making while data does not have. Information brings clarity and creates an
intelligent human response in the mind.

Information is the most significant resources of the specific economic system. It is the
right input for right decisions in any sphere of economic activity. Management uses
information system which is highly technical cantered and is well designed and implemented
according to the requirement of the Organisation.

CHARACTERISTICS OF INFORMATION

➢ Improves representation of an entity

➢ Updates the level of knowledge
➢ Has a surprise value
➢ Reduces uncertainty
➢ Aids In decision making

The quality of information could be called good or bad depending on the mix of these
characteristics.

INFORMATION PRESENTATION

Presentation of the information is an art. The data may be collected in the best
possible manner and processed analytically, bringing lot of value in the information;
however, if it not presented properly, it may fail to communicate anything of value to the
receiver.

The degree of communication is affected by the methods of transmission, the manner

of information handling and the limitation and constraints of a receiver as the information
user.
 The methods used for improving communication are summarization and message
routing. The concept of summarization is user to provide information which is needed in the
form and content.

The principle behind summarization is that too much information causes noises and
distortions, i.e., confusion, misunderstanding and missing and purpose. The message routing
suppresses the noise and the distortions by directing the specific path and avoid unnecessary
length of the message pathway.

QUALITY OF INFORMATION

Information is a vital resource for the success of any organization. Future of an

organization lies in using and disseminating information wisely. Good quality information
placed in right context in right time tells us about opportunities and problems well in
advance.

Data quality is crucial — it assesses whether information can serve its purpose in a
particular context (such as data analysis, for example). So, how do you determine the quality
of a given set of information. There are data quality characteristics of which you should be
aware

DIMENSIONS OR ELEMENTS OF INFORMATION QUALITY

Intrinsic — Accuracy, Objectivity, Believability, Reputation

Contextual Relevancy, Value-Added, Timeliness, Completeness, Amount of information

Representational --Interpretability, Format, Coherence, Compatibility

Accessibility — Accessibility, Access security

 MOST ESSENTIAL CHARACTERISTIC FEATURES FOR
INFORMATION QUALITY

Reliability — It should be verifiable and dependable.

Timely —i It must be current and it must reach the users well in time, so that important
decisions can be made in time.

Relevant — It should be current and valid information and it should reduce uncertainties

Accurate - It should be free of errors and mistakes, true, and not misleading.

Sufficient — It should be adequate in quantity so that decisions can be made on its basis.

Unambiguous — It should be expressed in clear terms. In other words, in should be

comprehensive.

Complete It should meet all the needs in the current context.

Unbiased It should be impartial, free from any bias. In other words, it should have integrity.

Explicit It should not need any further explanation.

Comparable - It should be of uniform collection, analysis, content, and format.

Reproducible It could be used by documented methods on the same data set to achieve a
consistent result

FIVE TRAITS THAT YOU'LL FINDWITHIN DATA QUALITY

1. Accuracy
2. Completeness
3. Reliability
4. Relevence
5. Timeliness
 HISTORICAL DEVELOPMENT
▪ Interest in the concept of information grew directly from the creation of the telegraph
and telephone.
▪ In 1844 the American inventor Samuel F.B. Morse built a telegraph line between
Washington, D.C., and Baltimore, Maryland
▪ The invention of the telephone in 1875 by Alexander Graham Bell and its subsequent
proliferation attracted further scientific solicitors
▪ The formal study of information theory did not begin until 1924, when Harry Nyquist
a researcher at Bell Laboratories, published a paper entitled "Certain Factors
Affecting Telegraph Speed."
▪ Nyquist realized that communication channels had maximum data transmission rates,
and he derived a formula for calculating these rates in finite bandwidth noiseless
channels
▪ Hartley, whose paper 'Transmission of Information" (1928) established the first
mathematical foundations for information theory
▪ The real birth of modern information theory can be traced to the publication in 1948
of Claude Shannon's Mathematical Theory of Communication"
▪ Shannon also realized that the amount of knowledge conveyed by a signal is not
directly related to the size of the message
▪ Hugo sent his publisher a card with just the symbol In return he received a card with
just the symbol “!”
▪ Shannon thus wisely realized that a useful theory of information would first have to
concentrate on the problems associated with sending and receiving messages

MATHEMATICAL THEORY OF INFORMATION

Communication is used to reduce uncertainties between strangers engaging in

conversation. The foundation of the uncertainty reduction theory stems from the information
theory, originated by Claude E. Shannon and Warren Weaver.

Shannon and Weaver suggest, when people interact initially, uncertainties exist
especially when the probability for alternatives in a situation is high and the probability of
them occurring is equally high.
 They assume that uncertainty is reduced when the amount of alternatives is limited
and/or the alternatives chosen tend to be repetitive

If you have options but are not certain which one to go with, then there is uncertainty,
or more precisely there is an unacceptable level of uncertainty. If it were acceptable, that is
the expected results are not that different, then there is no decision making as well.

DATA REDUNTANCY

Data Redundancy can be defined as the uncontrolled duplication of data. It means the
same piece of data is stored in two or more different places within the same database or data
storage technology.

In other words, when two or more different fields are present within a single database,
or different spots in several software environments or platforms it is called data redundancy.

Whenever data is repeated, this basically constitutes data redundancy. This can take
place by accident, but is also done deliberately for backup and recovery purposes.

CLASSICAL INFORMATION THEORY

Shannon developed a very simple abstract model of communication. Because his

model is abstract, it applies in many situations, which contributes to its broad scope and
power. Shannon’s communication model Consider a simple telephone conversation:

A person (message source) speaks into a telephone receiver (encoder), which

converts the sound of the spoken word into an electrical signal. This electrical signal is
then transmitted over telephone lines (channel) subject to interference noise). When the
signal reaches the telephone receiver decoder) at the other end of the line it is converted
back into vocal sounds. Finally, the recipient (message receiver) hears the original
message.

FOUR TYPES OF COMMUNICATION

• There are two fundamentally different ways to transmit messages: via discrete signals
and via continuous signals.

• Discrete signals can represent only a finite number of different, recognizable states.
For example, the letters of the English alphabet are commonly thought of as discrete signals.
Continuous signals, also known as analog signals, are commonly used to transmit quantities
that can vary over an infinite set of values—sound is a typical example

• Communication can also take place in the presence or absence of noise. These
conditions are referred to as noisy or noiseless communication, respectively.

• Discrete noiseless communication; discrete noisy communication; continuous

noiseless communication; and continuous noisy communication.

• The English alphabet is a discrete communication system. It consists of a finite set of

characters, such as uppercase and lowercase letters, digits, and various punctuation marks.
Messages are composed by stringing these individual characters together appropriately

VALUE OF INFORMATION

The value of information is a very slippery concept as information per does not have
any universal value. Its value is related to the person who uses it, when he uses it and for
what he uses it. Any assessment of the value of information is therefore related of decision—
ma king supported by such information.

Hence, it will be fair to say that value of information is relative. There is no absolute
value of information.

The normal mathematical and economical explanation of value of information

suggests that if an event occurs whose expectation was low and information of its occurrence
is known then such information is valuable.

NORMATIVE VALUE OF INFORMATION

This information or knowledge is represented by an a priori assignment of probability

of occurrence to the event and hence a calculated payoff. 'The a priori probability might be
objective or subjective as the case may be and with the knowledge of additional information
the probabilities are modified resulting in a change in the expected payoffs. This approach is
however, only good for theoretical discussions as its practical applicability is poor.
 SUBJECTIVE VALUE OF INFORMATION

It is the subject view of the information available. It is the subjective perception or

impression of the information. This subjective value approach varies widely with individuals.
In the subjective valuation of information, no probabilities are calculated. Subjective value of
information is the person's (receiver's) comprehensive impression about the information
content.

VALUE OF INFORMATION AND DECISION MAKING

The decision theory suggests the methods of solving the problems of decision making
under certainty, risk and uncertainty. A decision-making situation is of certainty when the
decision maker has full knowledge about the alternatives and its outcomes. This is possible
when perfect information is available.

Therefore, the information has a perceived value in terms of decision making. The
decision maker feels more secured when additional information is received in case of
decision making under an uncertainty or a risk. The information is called perfect information,
if it wipes out uncertainty or risk completely. However, perfect information is a myth.

VALUE OTHER THAN IN A DECISION

▪ Timeliness : Information is only valuable to management when it can result in some

timely intervention/decision. The time aspect of decision is very vital for any value to
be attributed to it 'in management. Information of an event will only be valuable to
managers if they have time to react to it. If the reaction time is not there then the
information loses its managerial value.

▪ Presentation : Managerial information is valuable when presented in a way that

facilitates decision-making. Information should not only be given but presented in
such a way that the decision-making aspect becomes obvious.

▪ Accuracy: Any information to management is valueless unless accurate.

▪ Context : Information for management is highly contextual. Information is valuable to

a manger only if it has a decision-making connotation to it. For example, for a finance
manager any information about the competitor's product is valueless.
 ▪ Expectation : Information is generally more valuable to management when the
information breaks an expected view or an expected result or an expected' reaction.
Any information that is unexpected carries a higher value. For example, if a manager
has made a marketing strategy expecting his competitor to launch a product A and
before the launch he gets information that the product to be launched by his
competitor is not product A but product S, then this information has got greater value
for him as it is contrary to his expectation.

AGE OF INFORMATION

❖ The concept of Age of Information (AOI) was introduced in 201 1 in to quantify the
freshness of the knowledge we have about the status of a remote system.
❖ More specifically, AOI is the time elapsed since the generation of the last successfully
received message containing update information about its source system.
❖ The attention AOI has been receiving is due to two factors. The first is the sheer
novelty brought by AOI in characterizing the freshness of information versus for
example that of the metrics of delay or latency.
❖ Second, the need and importance of characterizing the freshness of such information
is paramount in a wide range of information, communication, and control systems.

DECISION MAKING

Decision making is the process of making choices by identifying a decision, gathering

information, and assessing alternative resolutions. Thus, it is the process of taking the best
from among alternative course of action.

Using a step-by-step decision-making process can help you can reach more deliberate,
better decisions by organizing relevant information through defining and redefining
alternatives.

PROCESS OF DECISION MAKING

• Identify the decision and decision situation

• Gather relevant information
• Identify the alternatives
• Analysis of alternatives
 • Choose the best alternative
• Take action
• Review your decision and its consequences

DECISION MAKING PHASES

One of the key researchers in the field of management and decision making was a Herbert
Simon.

He was among the pioneers of artificial intelligence, information processing, decision-

making, organization theory and other very important scientific domains.

Simon's model defines four phases of decision-making process:

SIMON'S MODEL OF DECISION-MAKING

▪ Intelligence Phase

Searching for conditions in the environment that calls for decisions

▪ Design Phase

Inventing, developing, and analysing possible courses of action

▪ Choice Phase

Selecting a course of action from those avail able

▪ Implementation Phase

Implementing the selected course of action

▪ Monitoring Phase

Checking the consequences of the decision made after implementation

DECISION MAKING MODELS

A manager has to make decisions under different conditions and situations. While taking a
decision how a manager perceives the things, how does he react and how does he try to
resolve, all this is human behaviour.

Two models or approaches explain the behaviour of the decision maker.

 ECONOMIC MAN MODEL

The classical approach to decision making in economics has used the 'economic man' model
under conditions of certainty.

The economic man is completely rational. It states how a manager should behave in the
process of decision making. This approach, besides rational is also idealistic because it
cannot be fully applied to a practical situation. This approach is supported by scientific and
logical methods.

FEATURES OF ECONOMIC MAN MODEL

➢ The approach is logical and full of reasoning,

➢ Economic man always identifies clearly the ends to which he wants to reach and
the means which are available for the purpose/
➢ The manager knows of various alternatives available and will be in a position to
evaluate them rationally,
➢ The manager is supposed to be objective, not allow any bias, preference, liking or
disliking in decision making process,
➢ Manager should try to reach goals with positive attitude.
➢ A manager must have a clear understanding of the existing environment

METHODS FOR DECIDING AMONG ALTERNATIVES

Experience. experimentation, and research and analysis are the three common tools or
approaches for choosing the best alternative in decision making.

• Experience

Experience is a great guide. Reliance on pas} experience. therefore. plays a comparatively

big role In decision-making.

• Experimentation

Trying one of the alternatives and see how it goes is the usual way of choosing an alternative,
This kind of experimentation is often used in scientific inquiry.
• Research and Analysis

One of the best techniques for selecting from among alternatives when major decisions are
involved in research and analysis. This approach means solving problem by understanding it
at first.

BEHAVIOUR MODEL

Rationality approach may not a ways be applicable in practical situations. Management

experts have developed 'behavioural approach' which is realistic as per the demand of the
situation. This approach is pragmatic and holds the view that manager is a human being and
cannot be fully rational because he is confronted with many constraints, problems,
limitations and inadequacies.

Taking into consideration various factors of real-life decision-making. Herbert Simon has
proposed a theory of Bounded Rationality". This theory states that the real-life decision
maker must cope With inadequate information about the nature of problem and its solution
The norm of rationality is bounded by many limitations and. therefore, the concept is known
as •bounded rationality'

DECISION MAKING UNDER PSYCHOLOGICAL STRESS

Studies of human decision making have demonstrated that stress exacerbates risk
taking. Since all decisions involve some element of risk, stress has critical impact on decision
quality.

Cognitive science has recognized that "psychological stress exceeding o certain

Intensity affects the quality of decision making

Proposed aids to decision making under stress (DMUS) have varied with significant
emphasis being placed on use of decision support systems (DSS)

Cognitive resource theory (Vecchio, 990) confirms that stress can negatively impact
intelligence and decision quality. Harassed decision-makers often make riskier decisions .
Bara dell and Klein (1993 reported that stress, perceived as time pressure, low self-esteem,
and threats a punishment for poor performance, resulted in more errors of intellectual tasks,
Use of stereotypes when making judgments, and a greater tendency to ignore Situational
norms in reaching decisions.

The use of DSS can potentially mitigate the negative psychological experiences associated
with stress and thereby Improve decision quality.

ECONOMIC MAN MODEL

The economic man model is applicable to routine and repetitive decisions which are
programmed. The predetermined rules and procedures are applied for taking routine
decisions. Economic man is always in search of an optional solution or best way of doing
things for maximising his benefits. He is governed by economic considerations and uses
mathematical and statistical tools for solving problems.

BEHAVIOUR MODEL

In real life situation decision-making is sub-rational, fragmented and pragmatic

activity. According to Herberton Simol, the norm of' satisfying t represents and describes
actual decision-making behaviour of the manager and involves choosing a course of action
that is satisfactory or good enough under the circumstances.
 MODULE 3

SYSTEM CONCEPTS
 INTRODUCTION

The word system is used in day to day life very frequently in describing the subjects,
as the traffic system, education system, business system, etc. The system provides a meaningful
framework for describing and understanding the features and problems of the subject.

System is defined as a set of elements arranged in an orderly manner to accomplish an

objective. It is arranged with some logic governed by rules, regulations, principles and policies.
Such an arrangement is also influenced by the objective the system desires to achieve.

Hence, a clear statement of objectives brings a precision and an order into the selection of
elements and their arrangements in the system.

SYSTEM

A set of detailed methods, procedures and routines created to carry out a specific
activity, perform a task or solve a problem. It can be defined as an organized, purposeful
structure that consists of interrelated and interdependent components working for a definite
purpose. These elements continually influence one another to maintain their activity and the
existence of the system, in order to achieve the goal of the system. All systems consist of inputs,
outputs, process and feedback mechanisms.

CHARACTERISTICS OF SYSTEM

❖ Systems are concepts of reality.

❖ Systems have arrangement which is described by its parts as well as their composition.
❖ Systems have performance involving inputs, processing and outputs of material, energy
or data
❖ Systems have some feedback mechanism
❖ Systems work for achieving a definite objective.
❖ The different parts of a system have functional as well as structural relationships
between each other.
TYPES OF SYSTEM

1. Abstract and physical systems

An abstract or conceptual system is an orderly arrangement of interdependent

ideas or constructs, which may or may not have any Counterpart in the real world.

On the other hand, Physical systems are generally concrete operational system s made up of
people, materials, machines, energy and other physical things. Physical systems are more than
conceptual constructs.

2. Deterministic and Probabilistic Systems

A deterministic system is one in which the occurrence of all events is known with
certainly. A probabilistic system is one in which the occurrence of events cannot be perfectly
predicted. Though the behaviour of such a system can be described in terms of probability, a
certain degree of error is always attached to the prediction of the behaviour of the system.

3. Open and Closed Systems

An open system is one that interacts with its environment and thus exchanges
information, material, or energy with the environment, including random and undefined inputs.
Open systems are adoptive in nature, as they tend to react with the environment in such a way,
so as to favour their continued existence. Such systems are self organizing in the sense that
they change their organisation in response to changing conditions.

A closed system is one, which does not interact with its environment. Such systems in
business world are rare, but relatively closed systems are common. Thus, the systems that are
relatively isolated from the environment but not completely locked are called closed system.

4. Human-machine Systems

Information systems are generally human-machine systems or user machine systems because
both perform some of the activities in the accomplishments of a goal (e.g., making a decision).
The machine elements (computer hardware and software) are relatively closed and
deterministic, whereas the human elements of the system are open and probabilistic. Various
combinations of human and machine are possible. For example, the computer can be
emphasised and the human can simply monitor the machine operation. At the other extreme,
the machine performs a supporting role by doing computation or searching for a data while the
user performs the significant work.

5. Super system and sub system

A super system is viewed as a large system that is made up of number of subsystems.

A system is usually composed of self-contained but interrelated systems that are called
subsystems. It is important to be able to recognize these subsystems, because understanding
this interdependence is vital to developing a complete system. Group of interconnected and
interactive parts that performs an important job or task performs as a component of a larger
system. Thus, a sub system may be any system that is part of a larger system. An example of a
subsystem is the way a department works in a larger company.

SUBSYSTEM

Information system is a special type of system that allows storage, retrieval and processing of
data in a secure environment. Logically the major sub systems of Information systems are:

Data Repository

• This is a subsystem which is at the core of any information system. Mostly this is a
relational database management system that has pre-formatted and structured tables for
storage of data. These structures are arranged in a way that helps in faster storage and
retrieval of such data with adequate security.

User Interface

• This subsystem handles the interaction of the system with the User (human) and hence
it has to take care of issues related to the dispt.gy of data on an Output medium. This
can be either graphical or character-based depending on the level of ease offered to the
user.

Network

• This subsystem ensures communication between the different entities of an information

system. It is crucial for functioning of an information system

Computer Hardware

• One needs IT infrastructure to use information systems in an effective manner. Almost

all the components of an information system are housed in some kind of computer
 hardware enabling it to perform the tasks better. For example, an algorithm to find the
lowest of three numbers it can will be also much be calculated faster and efficient.
Manually but under a computerized system, it will be much faster and efficient.

System Software

• Some basic software is required just like computer hardware for efficient functioning
of information systems. The system software does not directly aid in the functionality
of information systems buf work as enablers. Examples would include operating
systems,

Input/Output

• Sometimes this is clubbed with the user interface to suggest that I/O functions are
handled by IJI alone. However, in some systems I/O may be User independent like
when an alert is activated, the input for the alert comes from some other system input
rather than a user.

Business Rule (Process)

• This is a set of rules that governs how a system should function to mimic the real
business process.

Algorithm/Program/ Application Software

• This is the actual invisible component that integrates all the components. The logic
(business rule), is defined in the program (embedded in il) which enables the
functioning of the information system for some specific purpose.
• All the above components work in concert to make a functional information system.

ENTROPY

Entropy is a measure of the degree of disorder in a system. It is c familiar term in

thermodynamics, when considering chemical systems, and is also relevant to information
systems. The concept of entropy says that any system will tend towards disorder.

Knowing such disorder we can put checks in place to monitor the correctness of the output of
a system. The measure of the level of disorder in a closed but changing system, a system in
which energy can only be transferred in one direction from an ordered state to a disordered
state. Higher the entropy, higher the disorder and lower the availability of the system's energy
to do useful work

ELEMENTS OF THE SYSTEM

These are the elements by which all systems are described. They are set in a fixed position
which helps the system analyst to design & work with system more easily.

l. Input: It is defined as energizing or start up component on which system operates. It may be

raw material/ data, physical source, knowledge or any energy to decide the nature of output.

2.Processor : It is defined as the activity that makes possible the transformation of input to
output. When data is processed through computer it is processed through logical steps.
However these steps are required to be instructed in series to the computer.

3.Output : It is end result of the operation. In other words it is the purpose or the main objective
for which the system is designed. Though output is largely dependent on input, its nature or
format may vary vastly from the input. For example: If data keyed is in numerical form it may
display output which is in form of graph or pictorial form.

INFORMATION SYSTEM ENVIRONMENT

In order to build any system only the knowledge of its elements does not serve the purpose,
there should be fundamental clarity of some important concepts which are essential to build
the efficient system and to keep it in equilibrium

The major concepts are

I. Boundary & environment

II. Subsystem
III. Interface
IV. Feedback control
V. Black box

SYSTEM ENVIRONMENT

• Boundary and environment: Every system has its limits that determine the sphere of
influence & control is called as Boundary of the system. Everything within the circumscribed
space is called system & everything outside it is environment. Flow from environment to the
system is its input while c flow from system to Its environment is the output. Boundary of the
system may exist physically or conceptually.

•Subsystem: A complex system is difficult to implement when consider as a whole. However

if we divide it into smaller functional units which are of manageable sizes ten every small
function unit becomes a subsystem. In the formation of subsystem the components performing
same or similar functions are grouped.

Interface: The interconnections & interactions among the subsystems are termed as interfaces.
In fact each interface implies a communication path. Number of interfaces increase with
number of subsystem

Feedback control: In order To improve the performance of any system feedback control
mechanism can be used as a tool or device to control or modify the input of the system after
analysing the output properly.

Black box: Black box is the subsystems at lowest level where the inputs are defined, outputs
are determined but the processor of the system is not defined means it difficult to understand
how the transformation of input to output takes place

DECOUPLING

Decoupled, or decoupling, is a state of an IT environment in which two or more

systems somehow work or are connected without being directly connected.
It is a type of IT operational environment where systems„ elements or components have
none or very little knowledge about the other components.
Typically, a decoupled system consists of one or more standalone computing
components/elements, such as a computer, server, business application and storage
application. Each component is connected via a shared interface but can operate
independently. Their performance and operation usually does not affect other systems.

For example, in c10Ud computing infrastructure services, the cloud provider is

responsible for delivering the cloud or backend infrastructure but does not have any control
over the client's applications installed and used on top of it by the client.
 SYSTEM STRESS
Stress in system Is often happen due to the conjunction with the more general process
of performance -By conducting a stress test, an adverse environment is deliberately created
and maintained to find out the some.
Reason for the stress
• Running several resource-intensive applications in a single computer at the same lime
• Attempting to hack into a computer and use it as a zombie to spread spam
• Flooding a server with useless e-mail messages
• Making numerous, concurrent attempts to access a single Web site
• Attempting to infect a system with viruses, Trojans, spyware or other malware.
• The adverse condition is progressively and methodically worsened, until the
performance level falls below a certain
PROCESS OF ADAPTATION
Implementation of such IT solutions as an ERP system entails a process for managing the
transformation from one organizational setting to another.
A generic ERP implementation consists of assessment of business requirements, design of
system and roll out implementation. IT implementation is not as clear cut where many risks
are involved in every stage. Ensuring success requires change management to properly
coordinate with all related parties, plan then execute transition
CONSEQUENCE REDUCTION
Marchewka (2015) defined a four-step change management plan.
First step is to assess willingness, readiness and ability to change where implementers
evaluate current conditions of the organization to determine sponsors, change agents,
objectives.
Second is development of a change strategy in accordance to existing conditions.
Third step is implementation of plans and monitoring throughout the process.
Fourth step Is to reflect and evaluate the lessons learned from the implemented change.
ORGANISATION AS OPEN SYSTEMS
An open system is a system that regularly exchanges feedback with its external
environment. Open systems are systems, of course, so inputs, processes, Outputs, goals,
assessment and evaluation, and learning are all important. Aspects that are critically
important to open systems include the boundaries, boundaries, external environment and
equifinality.
 Healthy open systems continuously exchange feedback with their environments,
analyze that feedback, adjust internal systems as needed to achieve the system's goals, and
then transmit necessary information back out to the environment.
ORGANISATION AS OPEN SYSTEMS
Any organization can be described as a "system."
o A system is a group of components (or parts) that interact with each other and
are dependent on each other to serve a common goal.
o Organizations and other social systems can be "closed" or "open" systems,
o Closed systems have boundaries that cannot be penetrated by new
information or ideas.
o Open systems have permeable boundaries (or boundaries which allow things
to pass through them)
o Open systems interact with their environments and constantly let in new
information and ideas so that they can continue to grow.

DECISION SUPPORT SYSTEMS

• Decision support systems are interactive, well integrated systems that provide
managers with data, tools and models to facilitate semi structured decisions or tactical
decisions. It automates the routine and repetitive elements in a problem while
simultaneously supporting the use of intuition and judgement. DSS are ideally suited for
problem like location selection, identifying new products to be marketed, scheduling
personnel, and analysing the effect that price increases for resources have on profits.
• DSS are man/machine systems and are suitable of semi structured problems. The
problem must be important to the manager and the decision required must be an important
one.
 SOME CRITERIA OF DSS

• There Should be a large data base,

• Large amount of computation or data manipulation,

• Complex interrelationships,

• Analysis by stages,

• Judgment required and

• Communication

TRANSACTION PROCESSING SYSTEM (TPS)

The main purpose of Transaction processing system is to records, process validates & store.
Transition loss takes place in various function area of a business for future retrieval of use.

• Transaction can be internal or external. When a department order office supplies from
the purchasing department an internal transaction occurs. • When a customer places an order
for a product an external transition occurs.

• This processing system is various used in this organisation such as finance accounting,
manufacturing, production human resources, marketing, Engineer quality control and resource
and development.

STEPS IN PROCESSING A TRANSACTION

Data must be processed to become use full information. There are following 6 steps in
processing a transaction.

1. Data entry

2. Data validation

3. Processing and revalidation

4. Storage

5. Output generation

6. Query support
 EXPERT SYSTEM

EIS are forms of data retrieval systems that provide selected and summarised information for
senior executive engaged in long range planning. Crisis management and other strategic
decisions. It is a user friendly Interactive system. It has excellent menus graphic capabilities.
A typical way that an EIS works is by exception reporting and drilling down to investigate the
causes.

• For example a director of an organisation may be altered that a particular department IS well
over budget. The manager would then drill down the data by pursuing lower and lower levels
of detail.

CONTROL IN SYSTEMS

Information Systems controls are a set of procedures and technological measures to ensure
secure and efficient operation of information within an organization. Both general and
application controls are used for safeguarding information systems.

General Controls

These controls apply to information activities throughout an organization. The most important
general controls are the measures that control access to computer systems and the information
stored or transmitted over telecommunication networks. General controls include
administrative measures that restrict employee access to only those processes directly
relevant to their duties, thereby limiting the damage an employee can do. Some general controls
are as follows.

Software Controls — Monitor the use of system software and prevent unauthorized access of
software programs, system failure and computer programs.

Hardware Controls --Ensure the computer hardware is physically secure and check for
equipment malfunctions. Computer equipment should be specially protected against extreme
temperatures and humidity. Organizations should make provisions for backup or continued
operation to maintain constant service.

Computer Operations Controls This include controls over setup of computer processing jobs
and computer operations and backup and recovery procedures for processing that ends
abnormally.
Data Security Controls — Ensures critical business data on disk and tapes are not subject to
unauthorized access, change or destruction while they are in use or in storage.

Implementation Controls Audit the system development process at various points to ensure
that the process is properly controlled and managed.

Administrative Controls — Formalize standards, rules, procedures and control discipline to

ensure that the organization's general and application controls are properly executed and
enforced

APPLICATION CONTROLS

Application controls are specific to a given application and include measures as validating input
data, regular archiving copies of various and ensuring that information is disseminated only
to authorized users. This can be classified as input, processing and output controls.

Input Controls — Input controls check data for accuracy and completeness when they enter
the system. There are specific & input controls for input authorization data conversion, data
editing and error handling.

Processing Controls — Processing controls establish that data are complete and accurate
during updating. Run control totals, computer matching, and programmed edit checks are used
as processing controls.

Output Controls —Output controls ensure that the results of computer processing are
accurate, complete and properly distributed

NEGATIVE FEEDBACK CONTROL

Negative feedback is also known as degenerative feedback. Feedback that reduces the output
of a system.

Negative feedback tends to make a system self-regulating; it can produce stability and reduce
the effect of fluctuations.

Negative feedback control is system means keeping the system operating within certain limit
of performance,
 LAW OF REQUISITE VARIETY

The law of requisite variety originates in the field of cybernetics, control and system theory.
Cybernetics was defined as "the science of control and communication, in the animal and the
machines". The law has special significance in the development of engineering control and
communication systems but it's a general principle that applies to any system, whether
economic social, mechanical or biological.

• The law states that in order to regulate a system, the regulator must be able to
generate at least as much variety as that exhibited by the system under control.

According to this law, in order to control a system, the system controller must be provided with
the following elements:

• Enough control responses to make the controller capable of handling any situation.
• Decision rules for generating all possible control responses.
• The authority to become self-organizing system in order to generate control responses.

The law of requisite variety states that in order to control each possible states of the system
elements, there must be a corresponding control state.

Suppose if there are 50 items to control, there should be at least 50 control states. To put it in
another way complete control of a system can be achieved only when the control system has
as much variety in response as the number of ways the system can go wrong. This means that
the controller of a system must be able to determine the variations of the control variables and
required to sent system changes instructions for each change.

THE NATURE OF CONTROL IN ORGANISATION

Controlling is one of the important functions of a manager. In order to seek planned results
from the subordinates, a manager needs to exercise effective control over the activities of the
subordinates. In other words, the meaning of controlling function can be defined as ensuring
that activities in an organization are performed as per the plans. Controlling also ensures that
an organization's resources are being used effectively & efficiently for the achievement of
predetermined goals.

• Controlling is a goal-oriented function.

• It is a primary function of every manager.

 MODULE 4
SYSTEM ANALYSIS AND
DESIGN
 SYSTEM

• The word system is derived form Greek word Systema, which means an organized
relationship between any set of components to achieve some common objective.
• A system is “an orderly grouping of interdependent components linked together
according to a plan to achieve a specific goal”.

SYSTEM ANALYSIS
➢ Systems analysis is a process of collecting factual data, under the process involved,
identifying problems and recommending feasible suggestions for improving the system
functioning.
➢ In other words, it is a process of studying the system functioning, gathering operational
data, understand the information flow, finding out bottlenecks and evolving solutions
for overcoming the weaknesses of the system so as to achieve the organizational goals.
➢ It also includes decomposition and integration analysis.

WHY SYSTEM ANALYSIS?

• It is necessary to establish the System boundaries.

• It helps to identify the inputs and outputs of the various sub-systems, covering the entire
system.
• It helps the system designer to conclude the nature and type of the system
• It helps to understand and analyse system constraints and bottle necks
• It helps to understand and examine system environments.
• This helps in breaking the resistance of work force to the new development and it also
ensures the commitment to the new system.
• It helps to establish the technical, economic and operational feasibility of the system
• It helps in defining the resource requirement in terms of hardware and software
• It is necessary to understand the role and significance of the system in the organization
• It helps to make required modifications in the new system
 SYSTEM FLOW CHART

• A System flow chart is a diagram or pictorial representation of the logic operations and
information in an organisation.
• It depicts the relationship between input processing and output considering the system
• A standard set of symbols is generally used for construction of system flow charts.

DECISION TREE

• Some decisions involve a series of steps

• The outcome of first decision guides the second; the third decision depends on the
outcome of the second, and so on
• Decision tree is the most powerful and popular tool for classification and prediction.
• A Decision tree is a flowchart like tree structure, where each internal node denotes a
test on an attribute, each branch represents an outcome of the test

SYSTEM DESIGN

• It is a process of planning and developing a new system for replacing an existing system
by defining its components or elements to satisfy the specific requirements.
• Before planning, one needs to understand the existing system thoroughly and determine
how the resources can best be used in order to operate efficiently.
• It is the process of defining, developing and designing systems which satisfies the
specific needs and requirements of an organization.

System Design mainly focuses on:

• Systems
• Processes and
• Technology
 Design Methods

1. Architectural design
Design is based on the views, models, behaviour, and structure of the system.
2. Logical Design
Design is based on the data flow, inputs and outputs of the system.
3. Physical Design Based on:
a) How users add information to the system and how the system provides information
back to the user
b) How the data is modelled and stored within the system.
c) How data moves through the system, how data is validated, secured and
transformed through and out of the system.

Prototyping Approach

• A prototype is a model that demonstrates how an idea works and what it will look like.
• Prototyping is an experimental process where design teams implement ideas into
tangible forms from paper from paper to digital
• A prototyping methodology stands with identifying the basics system requirements
especially the input and output from system.
• These requirements are then used to crate a simulation model that users can interact
with and provide feedback
• Prototyping makes it easy for users to specify their requirements and developers
understanding the requirements of the users because of the prototypes.

Conceptual and Detailed MIS design

• During the system analysis, the analysis of data and its flow is very important.
• Analysis of data is made up of more than one level.
• At first level, analyst develops a conceptual system design
• The conceptual design outlines the structure of the MIS and indicates the
performance requirements for those who develop the detailed design.
• The detailed design of the MIS begins after the conceptual frame work has been
completed.
• The detailed design starts with the performance specifications provided by the
conceptual design and ends with a set of specifications for the construction of the MIS.
 STEPS IN DEVELOPING CONCEPTUAL DESIGN

1. Define the Problem

The first step in the conceptual design is to clearly understand and define the problem
to be solved.
Here the designer identifies the information needs of the organisation based on the
mission, objectives and operating plans for the organisation.
2. Set System objectives
System objectives should be stated in quantitative terms.
3. Identify system constraints
System constraints may be classified into two categories:
a) External Constraints
• These are external to the organization. For example constraints imposed by the
customers, the government and the suppliers.
b) Internal constraints
These are imposed from within the organization. For example non coorperation
and lack of support from top management, resource constraints like manpower,
time and money etc.
4. Determine information needs
For determination of information needs, users should specify:
a. What they want out of an information system and
b. Items of information that are needed to achieve the objectives of MIS
5. Determine information sources
Sources of information may be classified as given below:
a. Internal and external records
The internal records may be written form like files, inputs and outputs,
correspondence, reports etc. whereas external records may include trade
publications, government statistics, etc.
b. Managers and operating personnel
User mangers and operating staff may be an important source. However, gathering
data from the source involves interviewing the managers and operating personnel,
which requires proper planning and skill.
6. Develop various designs:
More than one alternative conceptual designs are to be developed which are then
compared to select the optimum one it is done:
1) Which meets the requirements of the users/organizations and
2) Which is cost effective
Various criteria can be adopted as a basis for evaluating the designs such as
economic, performance, operational etc.
7. Documentation of the conceptual design
The documentation involves:
a) Overall system slow
b) System inputs
c) System outputs, and
d) Other documentations like activity sheet and system description, etc
8. Report preparation:
• The report prepared should mention the problem, objectives and an overall view
of the system.
• Justification for selecting the alternatives and many more.

SYSTEM DEVELOPMENT LIFE CYCLE

▪ The system development life cycle is the set of activities that analysts, designers and
users carry out to develop and implement an information system.

▪ It is an organizational process of developing and maintain systems.

▪ It helps in establishing a system project plan, as it gives overall list of processes and
sub-processes required for developing system.

PHASES OF SYSTEM DEVELOPMENT LIFE CYCLE

• Preliminary Study

• Feasibility Study

• Detailed system study

• System analysis

• System Design
• System Coding

• System Testing

• System Implementation and

• System Maintenance

IMPLEMENTAION OF MIS

• Implementation as an activity has to be carefully managed.

• It requires client interaction at every stage.
• The implementers need the full support and cooperation of the client and the IS
department functionaries to successfully execute the implementation of information
system
• Implementation as an activity has to be carefully managed.
• It requires client interaction at every stage.
• The implementers need the full support and cooperation of the client and the IS
department functionaries to successfully execute the implementation of information
system.

STEPS IN IMPLEMENTATION

1. Setting Implementation Plan

It is the planning of series of action-oriented steps for making the smooth

implementation of MIS.

It normally involves the following:

• Creating a master schedule of the implementation activities

• Setting timelines for critical and non-critical activities
• Identifying major bottlenecks and their solutions
2. Communication of the plan.
Communication plays a vital role in the process of implementation
It will help the users of the system to understand the time frame for installation of the
new system.
3. Organizing the MIS Department
The MIS department will be the custodian of the new system. Hence, they have
to be gear up to support the new system. Organisation of the department is therefore
necessary before the new system becomes operational. The roles of each member of the
MIS department have to be clearly laid out before the new system becomes operational.
4. Selection and Procurement of Hardware
This is an important step as it involves investments. Proper care is taken to
ensure that the organization gets the best deal from such selection and procurement of
the hardware. The process of selection and procurement of hardware also varies greatly
from firm to firm depending on the size and nature of the firm.
5. Procurement of Software
Procurement of system software is done on similar lines as the procurement of
hardware. The only difference in the case of procurement of software is that the choice
of what software to purchase is already made at the design stage of the system
development.
6. Creating the Database
• The database has to be created and structures inside the database have to be
made in order to enable it to store data.
• The implementation team created the database, its structures and rules so that
the application system being implemented can be plugged into the database
and start working.
7. Training of Users
• A training needs assessment is done to understand the training of the users
• A training programme is planned and the required training should be given to
users.

The training helps the users to understand the features of the new system and helps
to build trust and appreciation for the new system.

8. Creating Physical Infrastructure

• The new system being implemented may require a physical infrastructure
• The implementation team must ensure that the system performance must not
suffer due to infrastructure bottlenecks.
9. Transition to the New System
• This is the last step in the implementation process
• Parallel system development or cut over by segment may be followed.
 MODULE 5

DATA PROCESSING
AND
DATA MANAGEMENT
 DATA PROCESSING

The word 'data' is the plural of the word 'datum' which means 'fact'. Thus, data means
facts. These may be numeric, textual, pictorial or even vocal. Facts are represented by symbols.
For example, numeric data can be represented by digits, textual data can be expressed by using
alphabets, digits and punctuation symbols. Processing of data useful in decision making
process

The data may be transformed into tables or reports. The transformation of data into any
desired form is known as data processing. When data processing is done by electronic machine,
it is known as electronic data processing. Computers are very popular for electronic data
processing.

ELECTRONIC DATA PROCESSING

1. Collection of data

Collection is the first stage of the data processing cycle, and is very crucial, since the
quality of data collected will impact heavily on the quality of output. The collection process
needs to ensure that the data gathered are both defined and accurate, so that subsequent
decisions based on the findings are valid. There are different methods of data collection which
include census (data collection about everything in a group or statistical population), sample
survey (collection method that includes only representative part of the total population), and
administrative by- product (data collection is by-product of an organisation’s day to day
operations).

2. Editing and classification of data

Editing is the verification of data into a form suitable form for further analysis and
processing. Raw data must be checked for accuracy, completeness, consistency etc. Preparing
data for analysis is the construction of data set from one or more data sources through a through
scrutiny and verification. It includes editing and classification of data. Editing is the process of
examining data to ensure that they are complete, accurate, consistent etc. Classification is the
process of grouping data in to different classes or groups according to common characteristics.
 3. Inputting data

Input is the task where verified data is coded or converted into machine readable form
so that it can be processed through a computer. Data 99try is done through the use of a
keyboard, digitizer, scanner, or data entry from an existing source. This is a time-consuming
process which requires speed and accuracy. Most data need to follow a formal and strict
structure since a great deal of processing power is required to breakdown the complex data at
this stage.

4. Processing data

Processing is done when the data is subjected to various means and methods of
manipulation, the point where a computer program is being executed, and it contains the
program code and its current activity. The process may be made up of multiple threads of
execution that simultaneously execute instructions, depending on the operating system. While
a computer program is a passive collection of instructions, a process is the actual execution of
those instructions. Many software programs are available for processing large volumes of data
within very short periods.

5. Generating output

Output and interpretation is the stage where processed information is transmitted 'to the
user. Output is presented to users in various report for9ats like printed report, audio, video, or
on monitor. Output need to be interpreted so that it can provide meaningful information that
will guide future decisions of the management.

6. Storing information

Storage is the last stage in the data processing cycle, where data, instruction and
information are held for future use. The importance [of this cycle is that it allows quick access
and retrieval of the processed information, allowing it to be passed on to the next stage directly,
when needed. Every computer uses storage to hold system and application software.
 Data Hierarchy

Data hierarchy refers to the systematic organization of data, often in a hierarchical form.
Data organization involves characters, fields, records, files and so on. This concept is a starting
point when trying to see what makes up data and whether data has a structure.

Data are the principal resources of an organization. Data stored in computer systems
form a hierarchy extending from a single bit to a database, the major record-keeping entity of
a firm. Each higher rung of this hierarchy is organized from the components below it.

Data Logics

• Bit (Character) - a bit is the smallest unit of data representation (value of a bit may be
a 0 or 1). Eight bits make a byte which can represent a character or a special symbol in
a character code.
• Field - a 'field consists of a grouping of characters. A data field represents an attribute
(a characteristic or quality) of some entity (object, person place, or event).
• Record - a record represents a collection of attributes that describe a real-world entity.
A record consists of fields, with each field describing an attribute of the entity.
• File - a group of related records. files are frequently classified by the application for
which they are primarily used (employee file). A primary key in a file is the field (or
fields) whose value identifies a record among others in a data file.

DATABASE

It is an integrated collection of logically related records or files. A database consolidates

records previously stored in separate files into a common pool of data records that provides
data for many applications.

The data is managed by systems software called database management systems (DBMS). The
data stored in a database is independent of the application programs using it and of the types
of secondary storage devices on which it is stored.
 File Organization

Data files arc organized so as to facilitate access to records and to ensure their efficient storage.
A trade-off between these two requirements generally exists: if rapid access is required, more
storage is required to make it possible.

Access to a Record

1. Sequential access is performed when records are accessed in the order they are stored.
Sequential access is the main access mode only in batch systems, where files are used and
updated at regular intervals.

2. Direct access on-line processing requit-es direct access, whereby a record can be
without accessing the records between it and the beginning of the file. the primary key serves
to identify the needed record.

Methods of file organization

Sequential Organization

• In sequential organisation records arc physically stored in a specified order according

to a key held in each record.
• It is fast and efficient when dealing with large volumes of data that need to be processed
periodically (batch system).
• Requires that all new transactions be sorted into the proper sequence for sequential
Access processing
• Locating, storing, modifying, deleting, or adding records in the file requires rearranging
the file.
• This method is too slow to handle applications requiring immediate updating or
responses.

Indexed-Sequential Organization

In the indexed-sequential files method, records physically stored in sequential order on

a magnetic disk or other direct access storage device based on the key field of each record.
Each file contains an index that references one or more key fields of each data record to its
storage location address.
 Direct Organization

• Direct file organization provides the fastest direct access to records, when using direct
access methods, records do not have to be arranged in any particular sequence on
storage media.
• Computers must keep track of the storage location of each record using a variety of
direct organization methods so that data can be retrieved when needed.
• New transactions data do not have to be sorted,
• Processing that requires immediate responses Updating is easily performed

DATA BASE MANAGEMENT SYSTEM

A database is an organized collection of interrelated data that serves a number of applications

in an enterprise. The database stores not only the values of the attributes of various entities but
also the relationship between these entities. A database is managed by a database management
system (lDBMS), a systems Software that provides assistance in managing databases shared
by many Users.

• Helps organize data for effective access by a variety of users with different access needs
and for efficient storage.
• It makes it possible to create, access, maintain, and control databases.
• Through a DBMS, data can be integrated and presented on demand

OBJECTIVES DATA BASE MANAGEMENT SYSTEM

• Shareability
An ability to share data resources is a fundamental objective of database management
• Availability
Availability means bringing the data of an organization to the user of that data. The
system which manages data resources should be easily accessible to the people within
organization — making the data available when and where it is needed and, in the
manner, and from in which it is needed.
 • Evolvability
Evolvability refers to the ability of the database management system to change in
response to growing user needs and advancing technology Evolvability is the system
characteristics system that enhances the future availability of the data resources.
• Adaptability
Adaptability is a more advanced form of evolvability in which enables system to
change itself, rather than having a change made to it.
• Integrity
• Protecting the existence of the database.
• Preserving the quality of the database.
• Ensuring the privacy of the database.

Functions of Database Management System

• Define, acquire and store data according to the user needs.

• Provide tools to access and update the data and produce reports.
• Inform and assist users in planning and using data resources and database management
tools.
• Maintain database integrity protecting its existence; maintain its quality and controlling
access to private data.

Functions of Database Management System

• Monitor operations for efficient performance and integrity threats.

• Provides a building block in constructing data processing system for application
requiting database access such as MIS or system for the accounting, production and
inventory control or customer support.
• Helps the data base administrator to perform certain managerial duties

DATA MODELS OR HOW TO REPRESENT RELAIONSHIPS

BETWEEN DATA

A data model is a method for organizing databases on the logical level, the level of the
schema and subschemas. The main concern in such a model is how to represent relationships
among database records. The relationships among the many individual records in databases
arc based on one of several logical darn structures or models. DBNIS are designed to provide
end users with quick, easy access to information stored in databases. three principal models
include:

DATA BASE MODELS

Hierarchical Model

The hierarchical data model organizes data in a tree structure base. There is a hierarchy of
parent and child data segments. This structure implies that a record can have repeating
information, generally in the child data segments. Data are in a series of records, which have a
set of field values attached to it. It collects all the instances of a specific record together as a
record type. These record types are the of tables in the relational model, and with the individual
records being the equivalent of rows. In order to create links between these record types, the
hierarchical model uses Parent Child Relationships
Network Model

The popularity of the network Clara model coincided with the popularity of the hierarchical
data model. Some data were more naturally modelled with more than one parent per child. So,
the network model permitted the modelling of many-to-many relationships ill data. The basic
data modelling constructs the network model is the set construct, A set consists of an owner
record type, a set name, and a member record type- A member record type can have that role
in more than one set; hence the multi parent concept is supported. owner record type can also
be a member or owner in another set. The data model is a simple. network, and link and
intersection record types (called junction records) may exist, well as sets between them.

Properties of relational tables:

• Values are atomic

• Each row is unique
• Column values ace of the same kind
• The sequence of columns is insignificant
• The sequence of rows is Insignificant
• Each column has a unique name
Relational Model

A database based on the relational model developed by F.F. Codd- A relational

database allows the definition of data structures, storage and retrieval operations and integrity
constraints. In such a database the data and relations between them arc organised in tables. A
table is collection of records and each record in a table contains the same fields.

Certain fields be designated as keys, which mean that searches for specific values of
that field will use indexing to speed them up. Where fields in two different tables take values
from the same set, a joint operation can be performed to select related records in the two table
by matching values in those fields.

DATA BASE APPROACH

The database approach is a wav in which data is stored within a computer. It is

organized into various charts that are accessed by a variety of computer applications from
different locations. Databases are composed of a variety of information that is pertinent and
relevant to the organization that is using the database

DATA BASE APPROACH-TYPES

Traditional approach

Under the traditional approach, separate data files are created and stored for each
application program. It ultimately results 111 data redundancy i.e. duplication of data separate
files. Data redundancy conflicts with data integrity (the degree to which the data in any one file
is accurate). This is called the conventional file management system,

Database approach

Database technology eliminates many of the problems of traditional file organization

by organizing data, centralizing data and controlling redundant data. It can serve many
applications and different groups at the same time effecting synchronisation of data files.

DATA DICTIONARY

A data dictionary is defined In the IBM Dictionary of Computing, as a "centralized

repository of information Clara such as meaning, relationships to other darn, origin, usage,
and format." The term can have one of several closely related meanings pertaining to
databases and database management systems (T)B.MS):
 o A document describing a database or collection of databases.
o An integral component of a DBMS that is required to determine its structure.
o A piece of middleware that extends or supplants the native data dictionary of a
DBMS.

TYPES OF DATA DICTIONARY

Active data dictionary

Any changes to the database object structure will have to be reflected in the data dictionary
But updating the data dictionary tables for the changes are responsibility of database in which
the data dictionary exists. If the data dictionary is created in same database, then the DBMS
software will automatically update the data dictionary. Hence there will not be any mismatch
between the actual structure and the data dictionary details. Such data dictionary is called
active data dictionary.

Passive data dictionary

In some of the databases, data dictionary is created separately from the current database as
entirely new database to store only data dictionary information. Sometimes it is stored as xml,
excels or Ln any other file format. Tn such case, an effort is required to keep data dictionary
line with the database objects. This kind of data dictionary is called passive darn dictionary.
In this case, there is a chance of mismatch with the database objects and the data dictionary.
This kind of data dictionary- has to be handled with utmost care.

LEVELS OF DATA DEFINITION IN DATABASE

The user view of a DBMS becomes the basis for the date modelling steps where the
relationships between data elements are identified. These data models define the logical
relationships among the data elements needed to support a basic business process. A DBMS
serves as a logical framework (schema, subschema, and physical) on which to base the
physical design of databases and the development of application programs to support the
business processes of the organization.
 A DBMS enables us to define a database on three levels:

1. Schema - is an overall logical of the relationships between Clara in a database.

2. Subschema - is a logical view of data relationships needed to support specific end
user application programs that will access the database.
3. Physical - looks at how data is physically arranged, stored, and accessed on the
magnetic disks and other secondary storage devices of computer system.

Developmental Trends in Database Management

Distributed Databases

Distributed databases are that are spread across several physical locations. Tn distributed
databases, the data are placed where they are used most often, but the ensure database is
available to each authorized user. These ace databases of local work groups (LAN), and
departments at regional offices (WAN), branch offices, manufacturing plants, and other work
sites. These databases can Include segments of both common operational and common
databases, as well as data generated and used only at a user's own site.

Data Warehousing

A data warehouse is a collection of databases that work together. A data warehouse makes it
possible to integrate data from multiple databases, which can give new insights into the data.
The ultimate goal of a database is not just to store data, but to help businesses make decisions
based on that data. A data warehouse supports this goal by providing architecture and tools to
systematically organize and understand data from multiple databases.

FEATURES OF DATA WAREHOUSE

Subject Oriented - A data warehouse is subject oriented because if provides information

around a subject rather than the organization's ongoing operations. These subjects can be
product, customers, suppliers, sales, revenue, etc. A data warehouse doc not focus on the
ongoing operations; rather it focuses on modelling and analysis of data for decision making.

Integrated - A data warehouse is constructed by integrating data from heterogeneous

sources such as relational databases, files, etc. This integration enhances the effective
analysis of data.
Time Variant - The data collected In a data warehouse is identified with particular time
period. 'l 'he data in a clam warehouse provides information from the historical point of view

Non-volatile - Non-volatile means the is nor erased when new data are added to lt. A data
warehouse is kept separate from (he operational and therefore frequent changes in operational
database is not reflected in the data warehouse.

Data warehouse and Operational databases

• An operational database is constructed for well-known tasks and workloads such as

searching particular records, indexing, etc. In contract, data warehouse queries are
often complex and they present a general form of data.
• Operational databases support concurrent processing of multiple transactions,
Concurrency control and recovery mechanisms are required for operational databases
to ensure robustness and consistency of the database.
• An operational database maintains current data. On the other hand, a data warehouse
maintains historical data

Rich Databases
With the vastly expanded capabilities of information technology, the content of the
databases is becoming richer. Traditional databases have been oriented toward largely
numerical Clara or short fragments of text, organized into well-structured records. As
the processing and storage capabilities of computer systems expand and as the
telecommunications capacities grow; it is possible to support knowledge work more
fully with rich data. These include:
1. Geographic information systems
2. Object-oriented databases
3. Hypertext and hypermedia databases
4. Image databases and text databases.

DATA MINING

Generally, data mining, sometimes called data or knowledge discovery, is the process of
analysing data from different perspectives and summarising it into useful information such as
information that can be used to increase revenue, cuts costs, or both. Data mining software IS
one of a number of analytical tools for analysing data. It allows users to analyse data from
many different dimensions or angles, categorize it, and summarize the relationships identified
Technically, data mining is the process of finding correlations or patterns among a number of
fields in large relational database.

HOW DOES DATA MINING WORK?

While large-scale information technology has been evolving separate transaction and
analytical systems, data mining provides the link between the two. Data mining software
analyse relationships and patterns in stored transaction data based on open-ended user
queries. Several types of analytical software are available. Statistical, machine learning, and
neural networks.

Types of Relationships used in Mining

Classes: Stored data arc used to locate data in predetermined groups. For example, a
restaurant chain could mine. customer purchase data to determine when customers visit and
what they typically order. This information could be used to increase traffic by having daily
specials.

Clusters: Items are grouped accordin g to logical relationships or consumer preferences. For
example, data can be mined to .identify marker segments or consumer affinities.

Associations: Data can be mined to identify associations. The bread and butter example IS an
example of associative mining.

Sequential patterns: Data are mined to anticipate behaviour patterns and trends. For
example, an outdoor equipment retailer could predict the likelihood of a backpack being
purchased based on a consumer's purchase of sleeping bags and hiking shoes.

DECISION MAKING

In the day to day life everybody makes different types of decisions. It's a usual part of
life, and most of the time we don't even think about the process. Decision-making means
making a choice among the given choices by a manager or a decision maker. In an
organization, decisions are made at every level. The level at which the decision IS made can
also determine the complexity of the decision in relation to the input of data and output of
information.
 DECISION MAKING AND MIS

A decision-making process involves the entire process of establishing goals, defining

activities, searching for alternatives and finally the development of plans. In addition, the
decision-making process Includes all the activities of problem-solving, co-ordinating,
information processing and evaluating of alternatives that usually precede a decision. A
decision is an end or the final product of the decision-making process that represents
behaviour selected from a number of possible alternatives.

LEVELS OF DECISION MAKING

Knowledge-Level Decision Making. These decisions determine new ideas ot-

improvements to current products ot- services. A decision made at this level could be 'IDO
we need to find a new chocolate recipe those results in a radically different taste for our Andy
bar?"

Operational control. These decisions determine specific tasks that support decisions
made at the strategic of managerial levels. An example is " How many candy bars do we
produce today?"

LEVELS OF DECISION MAKING

Strategic Decision Making. These decisions are usually concerned with the major
objectives of the organisation, such as "Do we need to change the core business we are in?'
They also concern policies of the organization, such as "Do we want to support affirmative
action?"

Management Control. These decisions affect the use of resources, such as "Do we
need to find a different supplier of packaging materials?" Management level decisions also
determine the performance of the operational units, such as "How much is the bottleneck in
Production affecting the overall profit and loss of the organization, and what can we do about
it?"

ACCOUNTING INFORMATION SYSTEM

An accounting information system (ATS) is the collection, storage and processing of

financial and accounting data used by internal users to report informant to investors, creditors
and tax authorities. An accounting information system is generally a computer-based method
for tracking accounting activity in conjunction with information technology resources. An
accounting information system combines traditional accounting practices, such as the
Generally Accepted Accounting Principles (GAAP) with modern information technology
resources.

FUNCTIONS OF AN ACCOUNTING INFORMATION SYSTEM

The first function of an AIS is the efficient and effective collection and storage
of data concern-mg an organization's financial activities, including getting the transaction
data from source documents, recording the transactions in journals, and posting data from
journals to ledgers

The second function of ATS is to supply information useful for making decisions,
including producing managerial reports and financial statements.

The third function of AIS is to make sure controls are in place to accurately record
and process data.

COMPONENTS OF ACCOUNTING INFORMATION SYSTEM

• People: Those who use the system, including accountants, managers, and business
analysis
• Procedure and instructions: These arc the ways that data arc collected, stored,
retrieved, and processed
• Data: Data includes all the information that goes into an AIS
• Software: It consists of computer programs used for processing data
• Information technology infrastructure; It includes all the hardware used to operate
the AIS
• Internal controls: These arc the security measures used to protect data

Five Basic Principles of AIS Reliability

Security- Access to the system and its data is controlled and limited only to those
authorized.

Confidentiality - The protection of sensitive information from unauthorized disclosure.

Privacy - The collection, use, and disclosure of personal information about customers is
clone in an appropriate manner.

Processing integrity- The accurate, complete, and timely processing of data done with
proper authorization.

Availability – The system is available to meet operational and contractual obligations.

AIS AND MANAGERIAL DECISIONS

Information System plays an influential role in determining the success of an

organisation. The function of the information system is to collect, store and process data into
information, through the assistance of a set of interrelated components, The processed
information is later distributed to support decision making in an organisation. Information
system can be decomposed to two main elemental subsystems namely as Accounting
Information System (AIS) and Management Information System (MIS).

AIS AND MARKETING MANAGEMENT

Marketing is the “process of planning and executing the conception, pricing,

promotion, and distribution of ideas, goods, services, organizations, and events to create and
maintain relationships that satisfy individual and organizational objectives" (Boone and
Kurtz, 1998, 9). Marketing managers need to know how much a product costs order to help
establish a reasonable selling price.

AIS AND PRODUCTION MANAGEMENT

The operations and production function generates the products or services that an
organization provides to its customers. Production and operations managers are concerned
with providing quality products and services that can compete in a global marketplace. They
need accounting information to make planning decisions affecting how and when products
and services are produced. They need to understand the costs of producing and storing
products in order to decide how much inventory should be kept on hand.
 AIS AND FINANCE MANAGEMENT

The finance function is responsible for managing the financial resources of the
organization. Finance managers make decisions about how to raise capital as well as where
and how it is profitably invested.

Finance managers need accounting information to answer such questions as whether

money should be raised through borrowing (issuing bonds) or selling stock.

Finance managers make decisions concerning whether a new piece of manufacturing

equipment should be purchased or leased and whether plant expansion should be paid for in
cash or by borrowing money from the bank

AIS AND HUMAN RESOURCE MANAGEMENT

Human resource function is concerned with the utilization of human resources to help
an organization to achieve its goals. More specifically, human resource managers support
other functions and managers by recruiting and staffing, designing compensation and
benefit packages, ensuring the safety and overall health of personnel, and providing training
and development opportunities for employees. These decisions requite input from all other
functional areas.