PART I

1. What is system and subsystem? What is its relationship?

 A system is a set of interrelated components that interact to achieve a goal Or a
set of elements which operate together to attain a goal. Generally a system has
three activities – input, processing of input, and output. Similarly, accounting
comprises a series of activities that are linked together from the ‘stage of
observation to the stage of communication’. The activities include collecting,
recording, analyzing the data to formulate into information to be communicated to
the users. The output is in the form of financial statements which the users need to
know for decision making.
 A sub system is a system that exists within a large system .It is the set of
components interrelating for a purpose of larger system or is the parts that make
up the whole of the system.

 The relationship between system and subsystem is each system may be a subsystem of
a still larger whole until we reach the larger supra system. Or the group of
subsystem creates system.

2. Explain the 5 basic subsystems of AIS and its relationship?

Five basic subsystems of AIS

 Production cycle – consists of the activities involved in converting raw materials, labors
and overhead costs into finished goods. (applicable only for manufacturing companies) In
the production cycle, raw materials and labor are transformed into finished goods.

 Human resource / Payroll Cycle – consist of the activities involved in recruiting, hiring,
training, placing, promoting and firing an employee or the human resources cycle
involves interactions with your employees. Employees are hired, trained, paid, evaluated,
promoted, and terminated.

 Revenue cycle - The revenue cycle involves interactions with your customers. You sell
goods or services and get cash.

 Expenditure Cycle- consists of the activities involved in buying and paying for goods
and services used by the organization. The expenditure cycle involves interactions with
your suppliers. You buy goods or services and pay cash.
 Financial Cycle – consists of the activities involved in obtaining the necessary funds to
run the organization and in paying creditors and distributing profit to investors
(shareholders) or the financing cycle involves interactions with investors and creditors.
 You raise capital (through stock or debt), repay the capital, and pay a return on it (interest
or dividends).

3. What is the system advantage?

 System advantage is the ability to build and maintain a system of companies

whose high collective adaptability enables them to perform together more
successfully and sustainably than their competitors. It encourages integration and
it reduces the cost and administrative workload.

4. Regarding what organization collect data, explain with examples?

 Data collection is defined as the procedure of collecting, measuring and analyzing

accurate insights for research using standard validated techniques.
 Organizations collect data about:
 Events that occur
 Resources that are affected by those events
 Agents who participate in the events
Example
 Example of a mobile manufacturer, company X, which is launching a new
product variant. To conduct research about features, price range, target market,
competitor analysis etc. data has to be collected from appropriate sources. The
marketing team can conduct various data collection activities such as online
surveys or focus groups.
 The survey should have all the right questions about features and pricing such as
“What are the top 3 features expected from an upcoming product?” or “How
much are your likely to spend on this product?” or “Which competitors provide
similar products?” etc.
 For conducting a focus group, the marketing team should decide the participants
as well as the mediator. The topic of discussion and objective behind conducting a
focus group should be made clear beforehand so that a conclusive discussion can
be conducted.
 Data collection methods are chosen depending on the available resources. For
example, conducting questionnaires and surveys would require the least resources
while focus groups require moderately high resources.
5. Explain the difference between information and data?

 Information is a set of data which is processed in a meaningful way according to

the given requirement. Information is processed, structured, or presented in a
given context to make it meaningful and useful. It is processed data which
includes data that possess context, relevance, and purpose.
 It also involves manipulation of raw data. Information assigns meaning
and improves the reliability of the data. It helps to ensure undesirability
and reduces uncertainty. So, when the data is transformed into
information, it never has any useless details.
  Data are facts that are collected, recorded, stored, and processed by an
information system. Or Data is a raw and unorganized fact that required to be
processed to make it meaningful. Data can be simple at the same time
unorganized unless it is organized.
 Generally, data comprises facts, observations, perceptions numbers,
characters, symbols, image, etc. Data is always interpreted, by a human or
machine, to derive meaning. So, data is meaningless. Data contains
numbers, statements, and characters in a raw form.
6. When accounting information is useful, explain the characteristics of useful
information
a. Relevance: It reduces uncertainty by helping you predict what will happen or confirm
what already has happened.
b. Reliability: It’s dependable, i.e., free from error or bias and faithfully portrays events
and activities.
c. Completeness : It doesn’t leave out anything that’s important
d. Timeliness: You get it in time to make your decision.
e. Understandability: It’s presented in a manner you can comprehend and use.
f. Verifiability: A consensus notion—the nature of the information is such that different
people would tend to produce the same result.
g. Accessibility: You can get to it when you need it and in a format you can use.

7. Explain the role of AIS in organization?

 Improving efficiency : timely information requires constant ,accurate , up to date
so AIS increases the power of information in the organization
 Sharing Knowledge: sharing knowledge and expertise can improve operation and
provide competitive advantage.
 Improving the internal control of structure: AIS can protect systems from fraud,
errors, system failures and disasters .
 Improving the quality and reducing the costs of products or services: like an AIS
can monitor machinery so operators are notified immediately when performance
falls outside acceptable quality limits. This helps maintain product quality,
reduces waste, and lowers costs .
 Improving the efficiency and effectives of its supply chain: For example, allowing
customers to directly access inventory and sales order entry systems can reduce
sales and marketing costs, thereby increasing customer retention rates.
 Improving decision making: improved decision making is vitally important.
8. What is adding value? Explain how companies add value to their
product/service?

 Adding value is it means making the value of the finished component

greater than the sum of its parts.
 Companies added values by launch a series activities that implies value
chain and it consists two things
a. Primary activities ( Line ) : It includes
 Inbound logistics ; Receiving, storing, and distributing the materials that
are inputs to the organization’s product or service
 Operations; transforming those inputs into products or services.
 Outbound logistics; Distributing products or services to customers.
 Marketing and sales; Helping customers to buy the organization’s products or
services.
 Service; Post-sale support provided to customers such as repair and maintenance
function.

b. Support activities ( Staff ) : It includes

 Firm infrastructure; Accountants, lawyers, and administration. Includes the
company’s accounting information system.
 Human resources; Involves recruiting and hiring new employees, training
employees, paying employees, and handling employee benefits.
 Technology ; Activities to improve the products or services like website
development
 Purchasing; buying the resources (e.g., materials, inventory, fixed assets)
needed to carry out the entity’s primary activities.
 9. Explain the three type’s structure decision and scope of decision?

Structure decision
a. Structured decisions; Repetitive and routine and can be delegated to lower-level
employees.
E.g.: Deciding whether to write an auto insurance policy for a customer with
a clean driving history.

b. Semi structured decisions; Incomplete rules and require subjective assessments.

E.g.: Deciding whether to sell auto insurance to a customer with
a tainted driving history

c. Unstructured decisions; Non-recurring and non-routine and require a great deal of

subjective assessment.
E.g.: Deciding whether to begin selling a new type of insurance policy

Scope of decision
a. Occupational control decisions; Relate to performance of specific tasks Often of a
day-to-day nature.
– E.g. : Deciding whether to order inventory
b. Management control decisions; Relate to utilizing resources to accomplish
organizational objectives.
– E.g. : Budgeting
c. Strategic planning decisions ; The “what do we want to be when we grow up” types
of questions Involves establishing Organizational objectives Policies to achieve
those objectives
– .E.g. : Deciding whether to diversify the company into other product line.
10. Explain the difference between Product-differentiation strategy and Low-
cost strategy

 Product differentiation is strategy that strives to distinguish a company's

products or services from the competition. i.e., building a “better” mousetrap by
offering one that’s faster has enhanced features, etc. Successful product
differentiation involves identifying and communicating the unique qualities of a
company's offerings while highlighting the distinct differences between those
offerings and others on the market. Product differentiation goes hand-in-hand
with developing a strong value proposition to make a product or service attractive
to a target market or audience.
 For example, product differentiation is vividly on display among
the many coffee maker brands on today's market. Kitchen Aid
 coffee makers have a hefty, substantial feel, and a premium price
to match. Keurig differentiates itself with the ease of use of
coffee pods.

 The low cost strategy; a company must have a thorough understanding of costs
and how to continually reduce them. The company must be willing to standardize
its offerings in order to manage costs, which implies that exceptions requested by
prospective customers must be limited or excluded in order to keep costs down.
The low cost is made possible by operating more efficiently.
 For example, if two companies make essentially identical
products that sell at the same price in the market place, the one
with the lower costs has the advantage of a higher level of profit
per sale.