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Impact of Information Age

fewer workers are making products, and

a large segment of the employee

population is involved in producing,

analyzing, and distributing information. Knowledge workers comprise much of

the labor force.

A major contributor to the informationage is the Internet.

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WHAT IS A SYSTEM?

A group of interrelated multiple components or subsystems thatserve a common purpose/ goal

Characteristics of a system

Has parts / subsystem that related

Has goal /purpose

There will be input and output

Has an environment that it resides

Has a boundary that separate it from environment and/or other system

There is limit to what it can accomplish

A system is called a subsystem when it is viewed as a component of

a larger system. A subsystem is considered a system when it is the

focus of attention.

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SYSTEM INTERFACE

Interface occurs at the connecting pointwhere the boundaries of two systems meet.

Interface acting as connecting point for two

systems, it eases the flow of one systemsoutput into another system.

The designers of a system should plan for

an interface which copes with the waitingperiod between two processes

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Definition Information System

An Information system is a set of interrelated

subsystems that work together to collect, process,

store, transform, and distribute information for

planning, decision making, and control.

Firms depend on information systems in order to

stay competitive.

Thus, Information is a business resourcethat:

needs to be appropriately managed

is vital to the survival of contemporary businesses

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TYPES OF SYSTEM

Systems have been classified in different ways.

Common calcification are:-

1) Physical or abstract.

2) Open or closed.

3)Natural or man-made informationsystems

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PHYSICAL VS ABSTRACT

Physical systems tangible entities that may be static ordynamic in operation.

Eg, the physical parts of the computer center are the offices, desks,and chairs that facilitate operation of the computer (static). A

programmed computer is a dynamic system. Data, programs,

output, and applications change as the users demands or thepriority of the information requested changes

Abstract systems

are conceptual or nonphysical entities.

A model is an easier way for the analyst to visualize relationshipsin the system under study.

The objective is to point out the significant elements and the keyinterrelationships of a complex system.

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OPEN OR CLOSED SYSTEMS

systems is based on their degree of independence. An open system

has many interfaces with environment.

It receives inputs from and delivers outputs to the outside.

must adapt to the changing demands of the user.

A closed system

does not interface with its environment, i.e. it has no input oroutput.

more relevant to scientific systems than to social systems.

Completely closed system is very rare. The nearest we can get to aclosed social system would be a completely self-containedcommunity that provides all its own food, materials and power,and that does not trade, communicate or come into contact withother communities.

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Concept of Closed and open System

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Data are raw facts about events

that have no organization ormeaning.

Information is data that have

been processed and ismeaningful and useful to users.

Data versus Information

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CHARACTERISTIC OF USEFUL

INFORMATION

Relevance It reduces uncertainty by helping you predict what will happen or

confirm what already has happened.

Reliability Its dependable, i.e., free from error or bias and faithfully portrays

events and activities.

Completeness It doesnt leave out anything thats important.

Timeliness

You get it in time to make your decision.

Understandability

Its presented in a manner you can comprehend and use Verifiability

A consensus notionnature of the information is such thatdifferent people would tend to produce the same result

Accessibility

You can get to it when you need it and in a format you can use

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AIS: ACCOUNTING AND IS?

Accounting

Information

Systems

AccountingInformation

Systems

Accounting is an information system.

It identifies, collects, processes, and communicates economic

information about a firm using a wide variety of technologies.

It captures and records the financial effects of the firmstransactions.

It distributes transaction information to operations personnel to

coordinate many key tasks.

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Accounting Information Systems

An Accounting Information System (AIS) is the

information subsystem within an organization

that accumulates information from the entitys

various subsystems and communicates it to theorganizations information processing subsystem.

Functions of AIS

To Collect and store data on business activities and

transactions in more efficient & effective

To Provide useful information for decision making

To provide adequate control, data recorded accurately

Well organized business

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An Accounting Information System

Inputs: Data/Information from

Internal/External sources

Processes: Sort, Organize,

Calculate

Outputs: Information for Internal/

External Decision Makers

DataRepository/

Files,

Databases,

Etc.

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VALUES OF AIS

provide accurate and timely information

Improve products or servicesincrease

quality, reduce cost, add special features

Increase efficiencydeliver timelyinformation

Reliable information will improve decision

making capabilities

Improve sharing of knowledge and

expertise

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MIS versus AIS

Management InformationSystem (MIS)

Historically, provided financial and nonfinancial

information to internal users.

e.g., tracking customer complaints

Accounting Information System

Traditionally provided financial information to

both external and internal users. Now, the two systems overlap and provide much

of the same information focusing on

business processes.

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IS

AIS MIS

GLS/

FRS TPS MRS Finance Marketing Production HRS Logistic

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Financial Accounting System

The objective offinancial accounting is to provide

relevant information to individuals and groups

outsidean organizations boundaries.

Mainly to external users include investors, taxagencies, and creditors. Not forgetting to internal

users.

Objectives achieved through preparation of

financial statements by using GAAP.

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Managerial Accounting System

Objective ofManagerial Accounting is to

provide relevant information to a companys

managers, who are internal users.

Main components of managerial accounting

are Cost Accounting, Budgeting, Systems study

whereby using their own guidelines.

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TRANSACTION PROCESSING SYSTEM

incorporated into structure of AIS, records every economic event ortransactions.

1. Revenuetransactions of selling goods and services

2. Expenditure- payments for goods and services received and

procurement system

3. Production- processing data of manufacturing goods.

4. Human resource management- recording personnel

information of an organization such as attendance, award

systems and pay calculation

5. Reporting- cores the maintenance of general ledger andsubsequently, production basic report

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AIS (super system)

1. Transaction processing systemRecord transactions carried out by an organization and provide

information to personnel at various operational levels.

2. Budgeting system

Uses information from the TPS and operational plans of the

organization to produce control, information which will be used

by the management of an organization.

3. Responsibility reporting systemSummarizes historical data and provides reports comparing

these data with the budget or target set for managers.

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AIS HELPS ACCOUNTANTS?

As UsersAccountants must be able to clearly convey their needs to

the systems professionals who design the system.

The accountant should actively participate in systems

development projects to ensure appropriate systemsdesign.

As System Auditors

External Auditors - attest to fairness of financial

statements, assurance service: broader in scope thantraditional attestation audit

IT Auditors - evaluate IT, often as part of external audit

Internal Auditors - in-house IS and IT appraisal services

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AIS AND DECISION MAKINGVarious activities in the decision-making1. Strategic planning activities (Senior management)

2. Management control activities (middle management, sales

manager, production managers)

3. Operational control activities (lower-level management)

Activity levels and decision types

1. Structured decisions ( are repetitive and routine for lowest

management level)

2. Unstructured decision (are non recurring and non-routine forhigher level management)

3. Semistructured decision (combine the characteristics of both

structured and unstructured decision)

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AIS and Value-added activities5 primary business groups1. Inbound logistics

Involves receiving, storing and distributing materials.

2. Operational activities

Convert the material input into a finished product or service.

3. Outbound logistics

Involves distributing finished products or services to customers.

4. Marketing and sales activities

Promote the organization product s or services.

5. ServiceInvolves the provision of after sales repair and maintenance of

products sold.

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AIS and Value-added activities4 support groups of business process1. Human resources

Including of hiring and training employees.

2. Procurement

Including negotiating prices, and ordering and purchasing.

3. Organization infrastructure

General activities such as accounting and legal and finance.

3. Technology

R&D, product design, which are aimed at improving products

or services.

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MAJOR TYPES OF SYSTEM

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TRANSACTION PROCESSINGCYCLES

1. Revenue cycle - deals with the income.2. Expenditure cycle - deals with the expenses.

3. Conversion cycle - deal with converting raw

materials into finished products.

4. Payroll cycle - deal with the human resources.5. Financial cycle - deals with the acquisition and

use of capital.