Deck 1 Accounting Information Systems Romney and Steinbart
Deck 1 Accounting Information Systems Romney and Steinbart Linda Batch May 2012
Week 1 – Learning Objectives • Introduction to Accounting Information Systems • Business Exchanges • Tour of Access North Wind Database • Overview of assignments Chapter 1 • Characteristics of useful information • Transactions and processing • Business Processes • Common Cycle Activities • Adding value to the organization • Role of the AIS in the value chain • Understand the difference between master data and transactional data Chapter 2 • The data processing cycle • Database types • Relating the data processing cycle to database objects • ERP systems – general overview, advantages, disadvantages
Characteristics of Useful Information • Data are facts that are recorded and stored. – Insufficient for decision making. • Information is processed data used in decision making. – Too much information however, will make it more, not less, difficult to make decisions. This is known as Information Overload. data Information
Value of Information Benefit $’s > Cost $’s Benefits • • Reduce Uncertainty Improve Decisions Improve Planning Improve Scheduling Costs • Time & Resources • Produce Information • Distribute Information Designers use information technology to help decision makers more effectively filter and condense information.
Characteristics of Useful Information • • Relevant Reliable Complete Timely Understandable Verifiable Accessible • Reduces uncertainty, improves decision making, confirms or corrects prior expectations • Predict future performance
Business Process (transactional) Cycles • The revenue cycle, where goods and services are sold for cash or a future promise to receive cash. Order to Cash • The expenditure cycle, where companies purchase inventory for resale or raw materials to use in producing products in exchange for cash or a future promise to pay cash. Procure to Pay • The production or conversion cycle, where raw materials are transformed into finished goods. Manufacturing Give-Get Exchanges
Business Process (transactional) Cycles • The human resources/payroll cycle, where employees are hired, trained, compensated, evaluated, promoted, and terminated. Hire to Retire • The financing cycle, where companies sell shares in the company to investors and borrow money and where investors are paid dividends and interest is paid on loans. • Book to Report refers to the accounting team Give-Get Exchanges
Common Cycle Activities • Revenue Cycle (Sales) – Customer orders – Check inventory – Bill customers – Receive payments – Send info to other cycles • Expenditure Cycle – Request that goods be purchased – Send purchase orders to vendors – Receive vendor invoices – Pay vendor invoices – Send info to other cycles • Production Cycle – Schedule production – Request raw materials for production – Manufacture products – Store finished products – Send info. to other cycles • Human Resources/Payroll Cycle – Hire new employees – Update payroll records – Pay employees – Calculate and disburse taxes and benefits payments – Send info. to other cycles
Common Cycle Activities Con’t. • Financing Cycle – Borrow money – Pay dividends – Sell stock – Retire debt – Send info. to other cycles • Are accountants involved in each of these cycles? • What are the key components of an AIS? • What are the key reasons these cycles operate effectively? Tip: Know 5 common activities for each cycle.
Six Components of an AIS • People or “Users” • Procedures and instructions used to collect process and store data • The data about the organization (master data) and its business activities (transactions) • Software used to capture and process data • IT infrastructure such as servers and communications (Basis team) • Internal Controls and Security Measures
Master Data – Does not change regularly • Customers Master data • • • Customer name head office address ship-to locations payment terms and conditions business segment sales office sales district sales person general ledger accounts to which the sales will attribute • Material Master Data • Material category (Purchased raw material, semi-finished, finished products) • Material valuation (standard, moving average, LCM, non valuated stock), • storage locations • restricted stock or available
Master Data – Does not change regularly • Manufacturing Master Data Recipes plant resources plant number plant location business segment in which the plant operates • Area of the plant in which the resources are located • • • Finance Master Data • Chart of Accounts • general ledger account types (B/S, I/S, C/F elimination accounts) • company hierarchy (legal and managerial) • plant locations (sales and use taxability) • responsible individuals • intercompany relationships
Master Data – Does not change regularly • Employee Master Data • • Name Address pay rate marital status Dependents work location payment method • Vendor Master Data • • Vendor name Address payment information payment terms and conditions • Tip: Important to segregate master data update capability from transaction processing capability • Tip: Master data is complicated but it makes your ERP system powerful
Transactional Data – changes each time a business transaction occurs • Customer Sale: • • Transaction number, transaction date, sold to, ship to, volume purchased, supply location, mode of transportation, delivered, FOB. • Material purchase: • Type purchased, purchase price, • method of purchase (purchase order or FI invoice), • purchase quantity, • delivery terms and conditions, • delivery location, • timing of delivery
AIS Value Add • • • Improve Quality and Reduce Costs Improve Efficiency Improve Sharing Knowledge Improve Supply Chain Improve Internal Control Improve Decision Making
Value Chain • For the value chain • The set of activities a to work, it must product or service have support moves along before it is activities sold to a customer – At each activity the • Using IT to redesign product or service gains the supply chain yields value tremendous benefits – The value chain is part of and cost savings a larger system called a supply chain
Value Chain has primary and support activities
Chapter 1 Quiz Questions
Data Processing Cycle – Four Step Process Input Process Output Storage Operations Performed on data to transform it into meaningful and relevant information. In Access Terms • Storage = tables • Input = forms • Output = reports • Process = database
Database Types • Hierarchical – Need to know top level information to be able to drill down to lower level information – Hardcopy telephone book • Need to know the city, then the name to search for the telephone number or address • Relational – Fragments the storage of information to allow the search to start at different points of the information – Internet telephone directory • Search on name, or telephone number, or address to get to any other piece of information
Data Input • Data capture is triggered by a business activity – Capture the activity of interest – The resources affected by the activity – The people who participated in the activity Input • Ensure all information is capture accurately and completely by having well defined screens • Control can be improved by having the system assign sequential numbers to each new transaction
Data Storage • Data is a critical resource of the organization – Data must be easily accessed – If you understand how the data is organized it makes it easier to access Storage • General Ledger contains summary – level data for every asset, liability, equity, revenue, and expense account • Subsidiary Ledger contains detailed data for any general ledger account with many individual subaccounts
Data Processing • Once the business activity has been captured in the system they must be processed to keep the database current Process • CRUD – Creating new data records – Reading, retrieving or viewing existing data – Updating previously stored data – Deleting data • Batch processing or online, real-time processing
Information Output • Documents, Reports, and Queries Output • Documents are records of transactions or other company records, • Reports summarize information for decision making • Queries are used to provide information that need rapid action or answers.
Enterprise Resource Planning Systems (ERP) • Integrate all aspects of a companies operations with a traditional AIS system • ERP systems are modular with each module using best business practices to automate standard business processes • ERP systems use a centralized database to share information across business processes and coordinate activities • Example: – Sales are related to inventory, which is related to manufacturing, which is related to procurement – All is related to finance
Chapter 2 Quiz Questions
Week 1 – Learning Objectives • Introduction to Accounting Information Systems • Business Exchanges • Tour of Access North Wind Database • Overview of assignments Chapter 1 • Characteristics of useful information • Transactions and processing • Business Processes • Common Cycle Activities • Adding value to the organization • Role of the AIS in the value chain • Understand the difference between master data and transactional data Chapter 2 • The data processing cycle • Database types • Relating the data processing cycle to database objects • ERP systems – general overview, advantages, disadvantages
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