lOMoARcPSD|29353944

AIS101 CHAP5 - This might help you.

Accounting Information System (Don Honorio Ventura Technological State University)

Studocu is not sponsored or endorsed by any college or university

Downloaded by John Emmanuel Soriano ([email protected])
 lOMoARcPSD|29353944

Chapter 5
Functional and Enterprise
Systems

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

5.1 MANAGEMENT INFORMATION SYSTEM (MIS)

An overview of Management Information System

MIS is defined as the integrated machine system that provides relevant information
in order to support business operations, management, and decision-making.

This MIS utilizes the following in order to meet its purpose:

 A computer hardware and software
 Certain clear procedures (manual procedures)
 Appropriate models for certain operations like analysis, decision-making, and
more
 A database

MIS has subsystems that are approached according to the following:

 Organizational functions. The approach to organizational functions refers to the
support given by an MIS to a business organization.
 Managerial activities. The approach to managerial activities refers to activities
that could be used by a business organization.

The following are some examples of functional subsystems of MIS and its uses:
 Management or top management. MIS is used by the top management mainly for
strategic planning.
 Logistics. MIS is used for planning, control, and distribution.
 Marketing. MIS is used for planning, sales forecast, or sales or customer analysis.
 Human Resources. MIS is used to plan relevant employee requirements, analyze
employee performance, or administer salaries.
 Finance and Accounting. MIS is used in financial analyses, cost analyses, and so
on.

Users of Management Information System in Relation to Its Activities

1. Clerical staff. It refers to the users that handle direct transactions, process the
inputs, and answer various inquiries.
2. Managers (first level). It refers to users that obtain data related to operations and
assist in scheduling, planning, or making decisions.
3. Information specialists. They refer to users that would analyze information and
assist in planning and reporting.
4. Top management. It refers to users that would check and analyze reports regularly,
retrieve requests, and assist in the identification of problems and opportunities and
decision-making.

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

Management Information System for Decision-Making

There are multiple decisions that can be made with respect to the MIS structure
and the type of decision provided to them There are two types of decisions as follows:
1. Structured or programmable decisions
A decision can be considered structured or programmable if and only if the
rules of instantly recognizable decisions rules have been specified in advance.
2. Unstructured or nonprogrammable decisions
A decision can be considered unstructured or nonprogrammable if there
was no pre-established decision procedure or rule.

Advantages of Management Information System

 MIS communicates effectively with stakeholders of business organizations.
 MIS produces reports that are used to evaluate the performance of employees,
machines, and investments for the management to make decisions for the future.
 MIS compares plans and budgets to the actual performance of a business. This will
allow the management to take appropriate actions based on the current situation
of a business.
 MIS produces reports that would identify the strengths of business organizations
which could lead to the availment of opportunities.
 MIS allows for the smooth flow and transition of data in various levels of business
organizations.
 When it comes to accounting, MIS is the main source of information about the
financial health and situation of business organizations.

Characteristics of Management Information System Professionals

The following are skills MIS professionals possess:
3. Excellent problem-solving skills
4. Strategic thinking about technology
5. Ability to bridge business and technology
6. Detail-oriented and ability to see the big picture
7. Excellent communication skills
8. Excellent time and resource management skills
9. Versatility and ability to work with different people
10. Willingness to implement and develop ideas

Sales and Inventory Management System

Produce many useful reports that can be generated directly from the system
which include the following.
 Status Report. This type of report includes the status of inventory in terms of time,
location, and duration, as well as the current inventory status that could help in
fulfilling orders and placing new inventory.

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

 Analysis and Margin Report. This type of report focuses on profitability. It includes
the reviews of the turnover, demand, and profitability.
 Forecasting Report. This type of report shows the anticipated demand depending
on the results of an analysis to be done using a data analytics tool. This report can
help optimize reordering processes and monitor inventory to avoid overstocking
and spending.
 Inventory Ageing Report. This type of report saves a business organization from any
form of delay in shipment as it measures the period of on-hand inventory.
 Sales Summary Report. This type of report gives a business organization an
overview for sales within a specified period of time. It contains information related
to the cost of goods sold, profit, tax or margins.
 Sales Report per Product Type. The sales report and Product Type. The sales report
per product identifies the best and worst products in business organizations. This
report will help in deciding which product needs to be let go and which one needs
to be kept. On the other hand, the sales report per product type helps business
organizations handle their revenues from a category level.
 Sales Report per Customer or Customer Group. This type of report describes the
sales per customer or customer group. With this report, it is easier to identify
important customers, as well as those who engage with a company's brand for
the improvement of marketing strategies and communication with customers.
 Stock Inventory Report. This type of report is one of the main inventory statements
that regularly update the stock record in real time. It summarizes the stock-in-hand
for a particular date.

5.2 TRANSACTION PROCESSING INFORMATION SYSTEM (TPIS)

A transaction processing system (TPS) is an IS that captures and processes a
company’s business transactions necessary to update data and support its basic
operations. It plays a significant role in recording, collecting, storing, modifying,
validating, manipulating, processing, and retrieving diverse data transactions. A TPS
should be accurate, reliable, and user-friendly and should have good performance.

Functions of Transaction Processing System

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

Four Functions of a TPS

1. Input function. This function involves the capturing of data coming from the users
or other systems based on a certain source document. Then, it enters data into
the TPS and checks data entry.
2. Process function. This part manipulates the data entered into the system.
3. Output function. This produces valuable results form of a report (i.e., summary
report).
4. Storage function. This stores data files into the database, as well as accesses, sorts,
updates and deletes stored data.

Data Processing Activities of Transaction Processing System

 Basic data entry. This refers to data entered by users into the system.
 Data validation. A TPS uses a set of programs that would allow for the computation
and validation of data entered by users.
 Data verification. A TPS verifies data coming from specific users.
 Data process. A TPS validates data from users, checks their accuracy and
authenticity, and processes the data based on the instructions given by the users
 Data storage. After processing the data, a TPS stores data in a memory device
either for a short or long period of time, depending on the instruction the users.
 Report of information. When the processed data turn into pieces of information, a
TPS displays the information according to the template of certain reports

Features of a Transaction Processing System

1. Rapid processing
2. Reliability
3. Standardization
4. Controlled access

Transaction Processing System Qualifiers

1. Atomicity. A transaction could only be processed completely either in full or not
at all.
2. Consistency. A TPS observes integrity constraints or rules that ensure the
consistency of the processed information.
3. Isolation. Transactions should appear isolated in a TPS.
4. Durability. Transactions performed by a TPS are irreversible.

Types of Transaction Processing System

1. Batch Processing. A business organization collects data from transactions, which
accumulate over a period of time, puts them together in a group or batch, and
allows the system to process the entire batch all at once.

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

2. Online and Real-time Processing. This involves data being processed immediately
upon entry or if a transaction occurs. It is more expensive than batch processing,
and its database is always up to date. It requires a fast secondary storage such as
magnetic disks. Online analytical processing is commonly used by many business
organizations today.
3. Hybrid Processing. This is a combination of two methods, batch and online and
real time processing. It collects data upon entry but processes them in a specific
period of time or in intervals.

Business organizations expect TPSs to do try following

 Maintain a high degree of data integrity and accuracy.
 Perform transactions in an organized manner.
 Produce timely relevant reports and documents.
 Improve business organizations in terms labor efficiency and fast transactions.
 Help provide quality service to clients and customers.
 Help build harmonious relationships and maintain customer loyalty.
 Help attain competitive advantage.

5.3 CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

Customer relationship management or CRM refers to the strategies and
technologies used by business organizations to manage and analyze data from their
stakeholders, current customers, and potential customers. Businesses need to employ
CRM in order to improve business-customer relationships, which could result in customer
retention, increase in sales, and attraction of new customers.
A CRM system helps business organizations reach out to and stay connected with
their customers, improve profitability, and streamline processes. It is the best way to allow
different areas of business organizations to interact and build strong with external
stakeholders.

A CRM system allows a business organization to perform the following tasks:

Record and store the contact information of current and prospective customers
 Identify and analyze sales opportunities
 Collect, store, and solve customer service issues
 Manage and monitor marketing campaigns

A CRM system records the interactions and conversations taking place between
customers and business organizations daily. With a CRM system, everyone in a business
organization can see the communication between the customer and the company, their
purchase, their preferences, the time of purchase, the method of payment, and so on.

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

Benefits of Customer Relationship Management

CRM systems can provide an overview of data regarding current and prospective
customers. These customer data include their histories, orders statuses, service issues, and
dashboard uses. A business organization can collect its customers' profiles, information,
preferences, reviews, and views regarding competitors and include them in social media
accounts and activities.
Forecasting is much easier and more accurate with the use of CRM systems. Thus,
they can be considered as a tool for sales and marketing to better understand customers
and company sales. For example, customers of this generation like publicizing their
opinions on social media platforms about a certain product or company. A CRM system
can design a platform where inquiries and issues across various channels can easily be
managed and, at same time, give customers a single view about company sales,
services, and marketing strategies.

Components of A Customer Relationship Management

1. Marketing automation. To ease marketing efforts, CRM systems automate routine
work such as sending marketing materials to prospective customers through or
messages.
2. Salesforce automation. CRM systems ease customer information tracking and
automated business functions, which help the sales divisions of business
organizations acquire new customers.
3. Contact center automation. A CRM software provides pre-recorded audio for
customer troubleshooting and inquiries to alleviate the workload of a company's
contact center agents, as well as to diminish call time. Tools can also be installed
on an agent's computer to streamline customer service procedures.
4. Geolocation technology or location-based services. Some CRM software also
provide geolocation technologies which can help identify a customer's location,
build networks, and find prospective customers using their location.
5. Workflow automation. CRM systems help simplify a company's operations by
managing workloads to improve employee creativity and performance.
6. Lead management. Sales teams can scan for leads by inputting and analyzing
data using certain CRM software.
7. Human resource management. The human resources department can also
benefit from using CRM systems when they check employee information, contact
details, and performance reviews.
8. Analytics. CRM systems help companies analyze customer data to provide better
products and services to customers, as well as produce appropriate product
marketing materials.
9. Artificial intelligence. CRM technologies have built-in artificial intelligence to
perform routine tasks and identify patterns in customer behavior, purchases, and
so on.

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

Types of Customer Relationship Management Technology

 On-premises CRM. This type of CRM system allows a company to use the software
for the management, organization, security, and maintenance of its operations.
 Cloud-based CRM. This type of system works by having company data stored in a
remote, external network that is accessed by employees using the Internet. A third-
party service provider can be hired to install the CRM system for a company. This
CRM system is appealing to companies that are short on techno logical resources.
The system is paid for through monthly or annual subscriptions.
 Open-source CRM
This CRM system makes a source code available to the public, allowing
changes with zero cost. This system is beneficial for companies that dwell on social
media for customer interaction.

Customer Relationship Management Examples in Practice

1. Contact center. A company's sales and marketing teams widely use CRM systems,
with the help of contact center agents, in tracking leads and customer. Contact
center agents collect and update customer data through calls and technical
support platforms, which are used by the sales team for devising marketing plans
and strategies.
2. Social CRM. Some businesses use social media platforms to interact with
customers. Social media serves as a means for customers to discuss a company's
products and services, whether for complaints or promotions.
3. Mobile CRM. CRM applications available for smartphones and tablets allow
employees to access customer data and perform tasks off-site. Sales teams
benefit from these applications because of their tendency to travel to find
prospective customers.
4. Business-to-Business (B2B) Practices. CRM systems can monitor sales, resulting in a
faster addressing of issues that may arise. The organized system makes sales
processes efficient.

Customer Relationship Management Challenges

With proper use and management, CRM systems become useful for storing
customer information. The data should be connected and distributed in an organized
manner to provide easy access to needed information. Difficulties may result from
unorganized data and complications with the user interface. Duplicated or outdated
customer information also poses problems that could lead to longer and inappropriate
technical support or service. Therefore, companies should invest in thorough
maintenance essential to keep CRM systems working

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

5.4 DECISION SUPPORT SYSTEM (DSS)

Decision-making becomes easier with the help of a DSS which uses data,
knowledge, communication technologies, and models to assist the decision-makers of a
company. A DSS may use Al to present detailed information to senior employees or
executives. Data such as assets, legacy and relational data sources, comparative data
figures, projected figures, consequences of alternative decisions, and so on are the ones
usually retrieved and presented by a DSS. There are different types of DSSs and are
categorized as such:

1. Communication-driven DSS
Focusing on the internal aspect of a company, a communication-driven DSS
provides a platform for people to meet and/or collaborate. This type of system
makes use of the Internet or client/server links such as messaging software and
online meeting systems.
2. Data-driven DSS
This type of DSS is used for seeking answers from a given database. Managers,
staff, and suppliers use the Internet, a main frame system, or a client/server link to
access databases.
3. Document-driven DSS
This type of DSS is the most common. It is used to search through websites and
pages to find documents using keywords. This system uses the Internet and a
client/server system.
4. Knowledge-driven DSS
This type of DSS has a broad range of users, from employees of a company and
its customers to third-party entities. It is used to spread management instructions or
to choose products and/or services. This system uses servers, the Internet, or a PC
software.
5. Model-driven DSS
This is a complex system used by staff and managers to analyze and make
decisions regarding a business. Different models are used depending on their
intended purpose. This DSS uses a PC software and hardware, the Internet, and
client/server systems.

Characteristics of a Decision Support System

1. Facilitation.
2. Interaction.
3. Ancillary.
4. Repeated use.
5. Identifiable.
6. Task-oriented.
7. Decision impact

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

8. Supports individual and group decision-making

9. Comprehensive data access
10. Easy to develop and deploy
11. Integrated software
12. Flexibility

Objectives for Using a Decision Support System

The following are the objectives for using a DSS:
 Make decision-making processes easier and more effective
 Assist a decision-maker, but not replace him/her
 Improve decisions made for a company

Components of a Decision Support System

DSS components may be classified as follows:
 Inputs - These are data to be analyzed such as numbers, factors, and
characteristics.
 Outputs - processed data that general, decisions.
 Decisions - These are the results produced by the system according to the user or
employee.

Advantages and Disadvantages of Using a Decision Support System

The following are the advantages of using a DSS:
 Time-saving
 Enhanced effectiveness
 Improved interpersonal communication
 Increased competitive advantage
 Reduced costs
 Increased decision-maker satisfaction
 Promotes learning
 Improved personal efficiency

The following are the disadvantages of using a DSS:

 Monetary cost
 Overemphasized decision-making
 Assumption of relevance
 Transfer of power
 Unanticipated effects
 Obscuring responsibility
 False belief in objectivity
 Status reduction
 Information overload

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

Applications of Decision Support System

A DSS can be applied in the following disciplines:
 Medical diagnoses
 Business and management
 Agricultural production
 Forest management

5.5 STRATEGIC INFORMATION SYSTEM (SIS)

In 1982, Dr. Charles Wiseman introduced the SIS, which had the primary purpose
of gaining competitive advantage for businesses. An SIS uses an IS that analyzes business
initiatives to create strategies. These systems are used by companies for more efficient,
effective, and controlled operations.

Types of Strategic Information System

SIS may be categorized into the following types:
1. Financial systems. These computerize the operations of a business relating to
finance, such as accounting and budgeting.
2. Operational systems. Also known as service systems, these control the business.
3. Strategic systems. These combine business strategies with computer strategies.

Characteristics of a Strategic Information System

The following are some of the characteristics of an SIS:
 Main task. It should use business strategies to gain competitive advantage.
 Key objective. It must aim to maximize opportunities with the integration of IS and
business strategies.
 Direction. The direction should come from the command of executives and
employees and should reinforce the integration of the management with IS.
 Main approach. The SIS should be entrepreneurial and multiple.

5.6 VENDOR MANAGEMENT SYSTEM (VMS)

A vendor management system (VMS) is defined as the web - based procurement
application that allows business organizations to directly manage the process of
procurement for both temporary and permanent staff and contract and contingent
staff.
A VMS includes:
 Job requisition
 Tracking services
 Billing automation
 Functionalities of business intelligence (BI)
 Management reporting
 Approval of procedures and processes

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

 Workflow engine

Advantages of Using a Vendor Management System

 The hiring of staff is only applicable if selected from the list of approved staff.
 Competitive bidding will arise if the vendors will bid for their staff to be hired.
 Standard job descriptions are created by the purchaser.
 All staff information and specific details are available in one particular system.
 A workflow engine is centralized.
 A tracking system is available.
 Most staff rates are low.
 The entire process is faster.

Management of Staff with the Use of a Vendor Management System

1. All staff use the same time cards, and they are being hired with the same rates
and expenses.
2. The reporting schedules and time for all consultants are the same.
3. Staff utilization is being observed. The system maintains accurate data for staff
utilization, such as the loss of staff.
4. Time sheets or time records are available in one particular place.
5. Overtime can be checked, capped, and approved.

Benefits of Vendors
1. Staff approval is easy and fast.
2. Invoices are accurate and presented faster in a standardized manner.
3. Errors found in reports are minimized.
4. They can access staffing requirements faster at any time.

5.7 ACCOUNTING INFORMATION SYSTEM (AIS)

Computers have become very useful for business and accounting purposes. A
computerized accounting system is a software that helps maintain account records,
automatically generate financial statements, calculate billing amounts, and more.
Decades ago, the most popular method of accounting was manual accounting. Many
business organizations hired accountants or bookkeepers only for the purpose of
manually recording all transactions using genera preparing financial statements. All the
work was done manually on paper.
After some time, manual accounting processes transformed into computerized
systems with the use of machines such as typewriters and calculators. With the advent of
technology, computerized accounting systems made accounting much easier. System
users are allowed to enter relevant accounting data into the system in real time. These
technological innovations helped transform accounting into sophisticated transactions.

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

The use of an accounting information system (AIS) in business organizations is not

only for accounting but also for improving management control. The AIS architectural
model simply shows that it focuses on both financial and management accounting and
connects them with each other.
AIS is sometimes regarded as a machine that can transform inputs into a high
volume of outputs. However, AIS can provide more Information; it can also process,
organize, retrieve, and huge amounts of data to meet the needs of managers.

AIS is organized into three levels or subsystems:

1. Basic level. It refers to elementary data that are produced by business processes
related to simple daily business operations. This level is for operational accounting
systems or transaction processing systems.
2. Intermediate level. It refers to elementary data that are reorganized in order to
respond to the standards set by financial accounting to produce financial
statements and other related financial reports, balance sheet, statement of cash
flows, and so on. This level basically refers to financial accounting systems,
financial reporting systems, or general ledgers.
3. Top level. It refers to both operational and financial data that are processed in
order to produce relevant information and knowledge to support either
managerial or strategic management decisions such as budgeting. This level
basically refers to management accounting systems.

General Model of an Accounting Information System

https://i0.wp.com/theiteducation.com/wp-content/uploads/2016/01/General-Model-of-an-AIS.png

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

The figure above illustrates the general model of an AIS application, along with its
elements. The model includes elements that are actively involved in business
organizations, such as internal and external users, internal sources of data, and feedback.
Furthermore, AISs actively support data management, data collection, data processing,
and information generation.
1. End users. AISs have end users that are typically divided into two types: internal
and external users. External users are those who are not part of a business
organization but have a huge part in an AIS; they are the stockholders, suppliers,
customers, investors, and so on. Internal users are those within a business
organization such as management and operation staff
2. Data sources. AISs allow data to enter the system through data sources such as
financial transaction. These data coming from financial transactions could either
be from internal or external sources.
3. Data collection. The first operational level of an AIS collects data from various
sources and ensures that these data are accurate, valid, complete, and free from
any errors. This is also the most crucial stage of an AIS because of the concept of
garbage-in, garbage-out(GIGO). If users enter the wrong data, expect that the
output will be wrong as well. If transactions with errors are undetected after data
collection, the system will simply generate unreliable reports or outputs.
4. Data processing. Data must be processed to be transformed into useful
information. Tasks that are involved in the data processing phase range from
simple to complex data.
5. Data management. The database is the main repository of any IS of a business
organization. An AIS has a repository that would store financial and non-financial
data. The AIS database should perform the three essential tasks of storage,
retrieval, and deletion.
 Storage allows users to add new records in an AIS and store them in a
certain place in a database.
 Retrieval allows users to locate and extract existing records from a
database and process them accordingly. Once the process is complete,
users can store the records in a specific place in a database.
 Deletion allows users to permanently delete records from a database.
6. Information generation. This is a process where relevant information is compiled,
arranged, formatted, and presented to users. The information should be
summarized, accurate, relevant, and complete and should always be related to
the transactions done in the AIS.

Using Accounting Information System Processes

AISs capture, record, process, and maintain financial transactions within a business
organization. An AIS must identify the business transactions that are considered relevant
and record and capture important transaction details.

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

Business processes refer to the sequence of performed tasks that produces a

desired output for a business organization. It is an event that has a beginning and an end.
For example, in fast-food chains, business processes include customers taking orders in-
store or through drive-thru payment for orders.
Many organizations have different business processes: for example, for purchasing
raw materials. Every business process can directly or indirectly affect the financial status
of a business organization.

The following are some examples of business processes:

 revenue process - sales processes, sales return processes, and cash collection
processes
 expenditure process - purchasing processes and purchase return processes
 conversion process - planning processes
 administrative process - investment processes

Functions of an Accounting Information System

The following are the functions of an AIS:
1. Identify business processes and capture relevant accounting data
2. Record accounting data whether from manual or computer-based records
3. Observe internal control processes
4. Process, classify, summarize, and consolidate raw accounting data
5. Generate internal and external reports

Importance of an Accounting Information System to Accountants

Accountants play a vital role in using AISs. They can serve, the following:
1. Users of AISs
The users of AISs must fully understand the functions, concepts, and purpose
of AISs in order to perform accounting - related tasks properly. Accountants in
business organizations must use an AIS to accomplish accounting functions, use
relevant accounting data, and generate accounting reports.
2. Members of the AIS Design and Implementation Team
An AIS is not only designed by programmers, system analysts, or software
engineers, but a large portion of it is designed by accountants.
3. AIS Auditors
The role of an auditor in business organizations is to conduct assurance
services and ensure that proper procedures have been followed in the
performance of tasks. To be able to successfully conduct an audit, an auditor must
collect pieces of evidence regarding the accuracy, reliability, and completeness
of the accounting information that would eventually support his/her judgements.
The auditor must fully understand the AIS and the way data are entered,
processed, and reported before he/she can make informed decisions.

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

Types of Accounting Information System

AISs have different types that are commonly used by business organizations. Business
organizations can choose the appropriate AIS they want to implement depending on
the following:
 The size of the business organization
 The nature of its business processes
 The extent of computerization
 The management's philosophy

There are three (3) types of AIS:

1. Manual System
Some small - and medium-sized enterprises still use a manual accounting
system to record and maintain their accounting records. In addition, there are
large business organizations that use AISs but still use a manual process of
recording for certain activities. For example, employee time cards can still be
manual.
Manual accounting systems require the use of source documents and
paper-based ledgers and journals. Source documents refer to records that entirely
capture the key data of every business transaction. This document normally
includes the date, entity, quantity, amount, and so on. Examples of source
documents are receipts and employee time cards.

Source documents are useful because:

 They provide data as inputs necessary record business transactions.
 They activate business processes for their initial start.

On the other hand, turnaround documents refer to the outputs of the

accounting system that can serve as inputs to another part of the accounting
system. For example, a bank account statement contains a name and an
account number. The account number can be used by an accounting system to
view other statements in the system. This document improves efficiency, reduces
data redundancy, and eliminates human error.

Other documents required for this type of system are the following:
 General ledger - This provides complete details of all the accounts used by
a business organization.
 General journal - The original entries for business transactions are done in
this journal.
 Special journal - This records special types of transactions.
 Subsidiary journal - This maintains accounting information.

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

IT plays a significant role in an AIS. It must be understood that an AIS is

composed of hardware, software, people, and information.
2. Legacy System
A legacy system refers to an existing system of business operations in a
business organization. This system uses old versions of technology which business
organizations may consider as investments. Many legacy systems are still in place
for years and business organizations still enhance them by customizing the systems.

The following are the advantages of legacy systems:

 Customizable, thereby meeting the needs of business organizations
 Can support unique business processes that can be supported by
accounting systems
 Can contain significant and invaluable old or historic data that are difficult
to migrate to a new system
 Can be understood by old employees who are trained to use the system

3. Modern and Integrated IT Systems

In today's modern world of business, AISs are readily available in the market
to easily integrate the business processes of an organization.

5.8 HUMAN RESOURCE MANAGEMENT SYSTEM (HRMS)

A human resource management system (HRMS) is a human resource software that
handles various human resource modules, binding human resource management and
technology together. Human resource management (HRM) is a discipline that merges
technology with its HR processes.
An HRMS is a system that combines HRM and IT processes to automate human
resource activities within a business organization One of the many tasks of HRMS is to keep
track of all business organizations' employees and their information. It helps a business
organization transform its workplace. The system has interrelated databases that connect
to each other in order to produce a relevant output. The automation of human resource
management tasks and processes keeps valuable employees focused on their core
functions in the organization.

Advantages of Human Resource Management System

1. Paperless HR department.
2. Efficient HR department.
3. Less task performance time.
4. Simple performance management.
5. Planning and analysis.
6. Quick analysis of HR issues.
7. Quick and accurate retrieval of information.

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

Examples of Human Resource Functions Integrated into a Human Resource Management

System
 Employees' record management
 Keeping employees' attendance records and tracking absences
 Self-service portal for employees
 Managing payroll
 Employees' leave and absence management
 Employees' performance management
 Employees' appraisal management
 Employees' scheduling
 HR analytics and decision-making

Human Resource Management System as a Tool for Business Organizations

An HRMS is the best tool for business organizations that plan to shift from traditional
to automated HR management. In the selection of an HRMS, business organizations
should form a team, with the involvement of HR professionals, that would identify the
needs of their company in relation to HR processes and activities. The team should also
assess if the implementation of the system should be temporary or permanent.
Security is a main concern for business organizations. The implementation of an
HRMS requires high levels of security as information stored in the system are confidential
and highly sensitive because of the employees' personal information. Business
organizations should also choose the appropriate security solution that would utilize
certain methods of secure transmission, for example, Secure Sockets Layer (SSL). Users
should have the privilege to design their levels of passwords (weak to strong) for them to
access the system. Most business organizations allow their employees to access portions
of their HRMS; however, employees must understand the value of keeping and
maintaining the integrity of the HRMS, as well as protecting and securing confidential
information

Features of a Human Resource Management System:

Most HRMSs contain the following:
1. History of transactions
2. Employees’ personal information, such as name, gender, date of birth, and
qualifications
3. Employment information such as salary, position, and employment status
4. Work experience
5. Appraisal information
6. Professional development record such as trainings, seminars, and workshops
attended (internal and external)
7. Career plans

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

In addition, HRMSs can also be run in various web-based methods such as the
following:
 Intranet. An HRMS could use an intranet where in the business system operation is
limited only with organization.
 Extranet. An HRMS could use an extranet where system operation could be shared
outside the business
 organization.
 Portals. They offer various links to business internal information and can also access
the internet.

5.9 ENTERPRISE RESOURCE PLANNING (ERP)

Enterprise resource planning or ERP is an integrated

software tool that uses, maintains, and manages enterprise
data. It helps business organizations manage the supply
chain, production, human resources, customer orders,
and other important business functions.
The ERP system is a package business software
that allows business organizations to automate and
integrate business processes. It allows information to be
shared across an enterprise and produce relevant output
in a real-time environment. The main purpose of ERP is to
integrate enterprise-wide business information that would
support business processes related to finance, human resources,
production, logistics, manufacturing, sales, and so on. It provides a strong enterprise
database where data in all business transactions are entered, processed, monitored,
and reported.
ERP uses an integrated approach to establish a common se#, of instructions and
applications to support business processes and operations. Most successful
implementations of ERP in business organizations require the re-engineering of their
current business processes in order to align with the functionalities that are being offered
to the ERR system. ERP integrates functionalities of many systems such as accounting, IS,
manufacturing, production, and others.

Benefits of Enterprise Resource Planning in a Business Organization

The following are some benefits of ERP:
1. Faster response time
2. Improved interaction in every corner of the enterprise
3. Improved order management
4. Improved interaction with clients and customers
5. Reduced operating costs and financial responsibilities

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

6. Reduced IT cost
7. Improved productivity
8. Improved standardized processes and systems

Re-engineering with Enterprise Resource Planning

ERP relies on the use of IT such as client-server applications and computing,
databases (shared), and other IT-related tools. Business organizations who have the
intention to re-engineer their business processes must implement IT tools.
ERP provides an integrated database where each functional unit in an
organization can create, maintain, update, and report any business or transaction-
related information to its own database.

The advantages of these integrated databases are:

 Data can be shared anytime.
 Data redundancy is reduced.
 Data consistency is maintained and improved
 Data independence is observed.
 Data integrity is improved.

ERP reduces data redundancy which could contribute to data consistency.

ERP provides business organizations an opportunity redesigns their business
processes. Business processes can be simplified, and their rules and regulations can be
improved. To be successful in re-engineering, employees and other stakeholders must
“buy” into the newly introduced processes and understand their role and contribution to
the success of the new system like e – business. The main goal of this re – engineering is
to enable business organizations to be more responsive to the needs of the market their
changing target markets, and the strategies of their competitors.

Vendors of Enterprise Resource Planning

ERP vendors are classified into Tier I, Tier II, and Tier III. Each tier has its own distinct
size and solution complexity.
1. Tier I. Tier I ERP vendors sell to business organizations or companies that have
annual revenues exceeding 1 billion dollars ($1 billion). These organizations or
companies are multinationals, which are present in various geographic regions.
2. Tier II. Tier II ERP vendors sell to mid-sized business organizations or companies that
have revenues ranging from $50 million to $1 billion. Tier II products are built
specifically to handle and provide multiple or single locations of deployment.
3. Tier III. Tier III ERP vendors sell to business organizations or companies that have
revenues between $10 million and $50 million. The products of Tier III are simple
and easy to implement and have lower costs of ownership.

Downloaded by John Emmanuel Soriano ([email protected])

 lOMoARcPSD|29353944

SAP is the leading software for ERP in various sectors such as manufacturing,
distribution, service, and more.
Systems Applications and Products (SAP) is a German company and market
leader in ERP. It is considered the third largest company in the world. SAP solutions cater
mostly to small – and medium sized enterprises (SMEs).

References:
 Maata, Rolou Lyn R., and Tayuan, Ronina C. 2021. IT Application Tools in Business. C & E
Publishing, Inc.

Downloaded by John Emmanuel Soriano ([email protected])