Accounting Information Systems

Learning Objectives

Explain what an accounting
information system (AIS) is and
describe the basic functions it
performs.

Discuss why studying the design and
management of an AIS is important.

1-1 1-2

Learning Objectives What Is An AIS?

Explain the role played by the AIS in a
A system is a set of two or more
company’s value chain and discuss ways interrelated components that interact to
that the AIS can add value to a business. achieve a goal.

Describe and contrast the basic strategies
Systems are almost always composed of
and strategic positions that a business can smaller subsystems, each performing a
adopt. specific function supportive of the larger
system.

1-3 1-4

What is an AIS? What is an AIS?

An AIS is an information system
An Accounting Information System is a

which identifies, collects, processes, and unified structure that employs physical
communicates economic information about resources and components to
an entity to a wide variety of people
regardless of the technology transform economic data into

captures and records the financial effects of accounting information for external
the firm’s transactions and internal users.

distributes transaction information to
operations personnel to coordinate many key
tasks

1
What Is An AIS? What Is An AIS?

An accounting information system (AIS)
What important functions does the
consists of: AIS perform in an organization?

People
It collects and stores data about

Procedures activities and transactions.

Data
It processes data into information that is

Software useful for making decisions.

Information technology infrastructure
It provides adequate controls to
safeguard the organization’s assets.

1-7 1-8

AIS vs. MIS?

AIS vs. MIS

Accounting Information Systems (AISs) process
financial (e.g., sale of goods) and nonfinancial IS

transactions (e.g., addition of newly approved

vendor) that directly affect the processing of
financial transactions. AIS MIS

Management Information Systems (MISs)

process nonfinancial transactions that are not
normally processed by traditional AISs (e.g., GLS/FRS TPS MRS Finance Marketing Production HRS Distribution

tracking customer complaints).

AIS Subsystems The General AIS Model

Transaction processing system (TPS)

supports daily business operations

General Ledger/ Financial Reporting System
(GL/FRS)

produces financial statements and reports

Management Reporting System (MRS)

produces special-purpose reports for internal
use

2
 Data Sources Data Sources

Data sources are financial transactions that
Internal financial transactions involve the
enter the information system from internal exchange or movement of resources
and external sources. within the organization.

External financial transactions are the
E.g., movement of raw materials into
most common source of data for most work-in-process (WIP), application of
organizations. labor and overhead to WIP, transfer of

E.g., sale of goods and services, purchase WIP into finished goods inventory, and
of inventory, receipt of cash, and depreciation of equipment
disbursement of cash (including payroll)

13 14

Transforming the Data into Information

Functions for transforming data into
1. Data Collection
information according to the general AIS
Capturing transaction data

Recording data onto forms
model:

Validating and editing the data
1. data Collection
2. data Processing
3. data Management
4. information Generation

2. Data Processing 3. Data Management

Classifying

Storing

Transcribing

Retrieving

Sorting

Deleting

Batching

Merging

Calculating

Summarizing

Comparing

3
4. Information Generation Organizational Structure

Compiling
The structure of an organization helps to

Arranging allocate

Formatting
responsibility

Presenting
authority

accountability

Segmenting by business function is a very
common method of organizing.

Accounting Independence
Functional Areas
Information reliability requires accounting

Inventory/Materials Management

purchasing, receiving and stores
independence:

Production
Accounting activities must be separate and

production planning, quality control, and independent of the functional areas maintaining
maintenance resources.

Marketing

Accounting supports these functions with

Distribution
information but does not actively participate.

Personnel

Finance
Decisions-makers in these functions require that

Accounting such vital information be supplied by an

Computer Services independent source to ensure its integrity.

WHY STUDY ACCOUNTING INFORMATION

SYSTEMS?
Why Study AIS?

To understand how the accounting

It’s fundamental to accounting. system works.

Accounting is an information-providing
How to collect data about an organization’s
activity, so accountants need to understand: activities and transactions

How the system that provides that
How to transform that data into
information is designed, implemented, information that management can use to
and used. run the organization

How to ensure the availability, reliability,

How financial information is reported.
and accuracy of that information

How information is used to make
decisions.
1-23 1-24

4
Why Study AIS? Why Study AIS?

Auditors need to understand the

The AIS course complements other systems
systems that are used to produce a
courses.
company’s financial statements.
• Other systems courses focus on design and

Tax professionals need to understand implementation of information systems,
enough about the client’s AIS to be databases, expert systems, and
confident that the information used for telecommunications.
tax planning and compliance work is • AIS courses focus on accountability and
complete and accurate. control.

1-25 1-26