University of Luzon are captured, processed, stored, and reported by the accounting system and that

COLLEGE OF ACCOUNTANCY represent information used for decision making by managers.

2nd
Semester 2023-2024
IT22 Accounting Information Systems What Is An AIS?
�
ACCOUNTING INFORMATION SYSTEMS (AIS): AN
A system is a set of two or more interrelated components that interact to achieve a
INTRODUCTION
goal.
Learning Objectives � Systems are almost always composed of smaller subsystems, each performing a
1. Explain what an accounting information system (AIS) is and describe the basic
functions it performs. specific function supportive of the larger system.
2. Discuss why studying the design and management of AIS is important. � An accounting information system (AIS) consists of:
3. Explain the role played by the AIS in a company’s value chain and discuss ways
that the AIS can add value to a business. ● People
4. Describe and contrast the basic strategies and strategic positions that a business can
adopt. ● Procedures

● Data
The Information Environment
� We begin the study of AIS with the recognition that information is a business ● Software
resource. ● Information technology infrastructure
� Every business day, vast quantities of information flow to decision makers and other
users to meet a variety of internal needs. � What important functions does the AIS perform in an organization?
1 It collects and stores data about activities and transactions.
2 It processes data into information that is useful for making decisions.
3 It provides adequate controls to safeguard the organization’s assets.

Why Study AIS?

� In Statement of Financial Accounting Concepts No. 2, The FASB...
– defined accounting as an information system.
– stated that the primary objective of accounting is to provide information useful to
decision makers.
– The Accounting Education Change Commission recommended that the accounting
curriculum should provide students with a solid understanding of three essential
concepts:
– The use of information in decision making
– The nature, design, use and implementation of an AIS
– Financial information reporting
Accounting Information – To understand how the accounting system works.
– How to collect data about an organization’s activities and transactions
� While most of the information is expressed in traditional monetary terms, some is – How to transform that data into information that management can use to
run the organization
expressed as ratios, percentages, or units. Traditionally, accountants have limited
– How to ensure the availability, reliability, and accuracy of that
their concern to monetary amounts. This was understandable for the era of manual
information
accounting systems because the cost of capturing and processing data was far more
– Auditors need to understand the systems that are used to produce a company’s
expensive than is the case today.
financial statements.
� But a contemporary view of accounting must expand to include any data that are – Tax professionals need to understand enough about the client’s AIS to be confident
either directly or indirectly reflected in the financial statements whether in this or in that the information used for tax planning and compliance work is complete and
the future accounting periods. Thus, hours worked, units processed or even planned, accurate.
employee vacation days earned, and customer telephone numbers are all data that
 – One of the fastest growing types of consulting services entails the design, selection,
and implementation of new Accounting Information Systems. The Value Chain
�
– A survey conducted by the Institute of Management Accountants (IMA) indicates
The ultimate goal of any business is to provide value to its customers.
that work relating to accounting systems was the single most important activity
performed by corporate accountants. � A business will be profitable if the value it creates is greater than the cost of
producing its products or services.
� An organization’s value chain consists of nine interrelated activities that collectively
Information Technology and Corporate Strategy describe everything it does.
● The same survey conducted by the Institute of Management Accountants (IMA) � The five primary activities consist of the activities performed in order to create,
also indicates that the second most important job activity of corporate accountants is market, and deliver products and services to customers and also to provide post-
long-term strategic planning. sales services and support.
The CITP Designation
� CITP: certified information technology professional

� Identifies CPAs who possess a broad range of technological knowledge and the
manner in which information technology (IT) can be used to achieve business
objectives
� Reflects the AICPA’s recognition of the importance and interrelationship of IT with
accounting

Ten Most Important Activities Performed By Accountants

1. Accounting systems and financial reporting
2. Long-term strategic planning
3. Managing the accounting and finance function
4. Internal Consulting
5. Short-term budgeting
6. Financial and economic analyses
7. Process improvement
8. Computer systems and operations
9. Performance evaluation Support Activities
10. Customer and product profitability analyses 1. Infrastructure
2. Technology
Factors Influencing Design of the AIS 3. Human Resources
4. Purchasing

� The value chain concept can be extended by recognizing that organizations must
interact with suppliers, distributors, and customers.
� An organization’s value chain and the value chains of its suppliers, distributors, and
customers collectively form a value system.

How An AIS Can Add Value to An Organization

� An AIS adds value...
– by providing accurate and timely information so that five primary value chain
activities can be performed more effectively and efficiently.
 – An AIS adds value by:
– improving the quality and reducing the costs of products or services.
– improving efficiency. What is decision making? Decision making involves the following steps:
– Improving decision making capabilities. 1. Identify the problem.
– increasing the sharing of knowledge. 2. Select a method for solving the problem.
A well-designed AIS can also help an organization profit by improving the 3. Collect data needed to execute the decision model.
efficiency and effectiveness of its supply chain. 4. Interpret the outputs of the model.
5. Evaluate the merits of each alternative.
Information and Decision Making 6. Choose and execute the preferred solution.
� What is information?
Management Decision Making (Summary)
� The term data refers to any and all of the facts that are collected, stored, and 1. Intelligence: Searching the environment for conditions calling for a decision.
2. Design: Inventing, developing, and analyzing possible courses of action.
processed by an information system. 3. Choice: Selecting a course of action.
� Information is data that has been organized and processed so that it is meaningful.
Information and Decision Making
� Data are facts, which may or may not be processed (edited, summarized, or refined) Decisions can be categorized as follows:
and have no direct effect on the user. – in terms of the degree of structure that exists
– by the scope of the decision
The Information System (IS)
� An information system (IS) or management information system (MIS) is a � Structured decisions are repetitive, routine, and understood well enough that they
manmade system that consists of an integrated set of computer-based and manual can be delegated to lower-level employees in the organization.
components established to collect, store, and manage data and to provide output � An example is:
information to users.
● Extending credit to customers.
Transforming Data into Information
� Semi structured decisions are characterized by incomplete rules for making the
decision and the need for subjective assessments and judgments to supplement
formal data analysis.
� An example is:

● Setting a marketing budget for a new product.

� Unstructured decisions are nonrecurring and nonroutine.

� An example is:

● Choosing the cover for a magazine.

Decision Scope
� Decisions vary in terms of the scope of their effect.

� Operational control is concerned with the effective and efficient performance of

Data Needs for Activities specific tasks.
Characteristics of Useful Information � Management control is concerned with the effective and efficient use of resources
Relevant Timely
for accomplishing organizational objectives.
Reliable Understandable
Complete Verifiable � Strategic planning is concerned with establishing organizational objectives and
policies for accomplishing those objectives.
Information Technology and Corporate Strategy
� New developments in IT affect the design of AIS.

� What basic requirements are needed to evaluate the costs and benefits of new IT
developments?
� Develop a basic understanding of…
– corporate strategies.
– how IT developments can be used to implement existing organizational strategies.
– how IT developments can be used to create an opportunity to modify existing
strategies.
– Because an AIS functions within an organization, it should be designed to reflect the
values of that organizational culture.

Strategy and Strategic Positions

Two Basic Strategies
1. To be a lower-cost producer than competitors
2. To differentiate products and services from competitors

Strategy and Strategic Positions

Three Basic Strategic Positions
1. Variety-based strategic position
2. Need-based strategic position
3. Access-based strategic position

� What role does the AIS play in helping organizations adopt and maintain a strategic
position?
– Data collection about each activity
– Transforming data into information that can be used by management to coordinate
those activities

What is the Value of Information?

� The value of information is the benefit produced by the information minus the cost
of producing it.

The Role of the AIS

� The Internet makes strategy more important than ever

� Enterprise resource planning (ERP) systems integrate all aspects of a company’s

operations with its traditional AIS.
� The key feature of ERP systems is the integration of financial data and other
nonfinancial operating data.