CHAPTER 1

CHAPTER 1
Accounting Information
Systems: An Overview
INTRODUCTION
• Questions to be addressed in this chapter
include:
– What is the meaning of system, data, and
information?
– What is an accounting information system (AIS)?
– Why is the AIS an important topic to study?
– What is the role of the AIS in the value chain?
– How does the AIS provide information for decision
making?
– What are the basic strategies and strategic positions
an organization can pursue?
SYSTEMS, DATA, AND INFORMATION
• A system is:
– A set of interrelated components
– That interact
– To achieve a goal
• Most systems are composed of smaller

subsystems . . .
• . . . And vice versa!
• Every organization has goals.

– The susbsystems should be designed to
maximize achievement of the organization’s
goals
– Even to the detriment of the subsystem itself
– EXAMPLE: The production department (a
subsystem) of a company might have to
forego its goal of staying within its budget in
order to meet the organization’s goal of
delivering product on time.
• The systems concept encourages integration

(i.e., minimizing the duplication of recording,
storing, reporting and processing).
• Data are facts that are collected, recorded,
stored, and processed by an information system.
• Organizations collect data about:
– Events that occur
– Resources that are affected by those events
– Agents who participate in the events
• Information is different from data.

• Information is data that have been
organized and processed to provide
meaning to a user.
• Usually, more information and better
information translates into better
decisions.
• Characteristics that make information

useful:
– Relevance
– Reliability
– Completeness
– Timeliness
– Understandability
– Verifiability
– Accessibility
• Information is provided to both:

– External users
– Internal Users
WHAT IS AN AIS?
• An AIS is a system that collects, records,

stores, and processes data to produce
information for decision makers.
• It can:
– Use advanced technology; or
– Be a simple paper-and-pencil system; or
– Be something in between.
• Technology is simply a tool to create,
maintain, or improve a system.
WHAT IS AN AIS?
• The functions of an AIS are to:

– Collect and store data about events,
resources, and agents.
– Transform that data into information that
management can use to make decisions
about events, resources, and agents.
– Provide adequate controls to ensure that the
entity’s resources (including data) are:
• Available when needed
• Accurate and reliable
WHY STUDY ACCOUNTING
INFORMATION SYSTEMS?
Occupational
Culture Strategy
AIS design is
affected by AIS
information
technology, the
organization’s
strategy, and the
organization’s Information
culture. Technology
ROLE OF THE AIS IN THE VALUE CHAIN
• The objective of most organizations is to

provide value to their customers.
• What does it mean to deliver value?
• Let’s peek in on a conversation at Joe’s
pharmacy . . .
• Value is provided by performing a series of

activities referred to as the value chain.
These include:
– Primary activities
– Support activities
• These activities are sometimes referred to
as “line” and “staff” activities respectively.
• Primary activities include:

– Inbound logistics
– Operations
– Outbound logistics
– Marketing and sales
– Service
• Support activities include:

– Firm infrastructure
– Human resources
– Technology
– Purchasing
• Information technology can significantly

impact the efficiency and effectiveness
with which the preceding activities are
carried out.
• An organization’s value chain can be
connected with the value chains of its
customers, suppliers, and distributors.
THE AIS AND CORPORATE STRATEGY
• Michael Porter suggests that there are two

basic business strategies companies can
follow:
– Product-differentiation strategy
– Low-cost strategy
• A product differentiation strategy involves

setting your product apart from those of
your competitors, i.e., building a “better”
mousetrap by offering one that’s faster,
has enhanced features, etc.
• A low-cost strategy involves offering a

cheaper mousetrap than your competitors.
The low cost is made possible by
operating more efficiently.
• The growth of the Internet has profoundly

affected the way value chain activities are
performed:
– Inbound and outbound logistics can be streamlined
for products that can be digitized, like books and
music.
– The Internet allows companies to cut costs, which
impacts strategy and strategic position.
– Because the Internet is available to everyone, intense
price competition can result. The outcome may be
that many companies shift from low-cost to product-
differentiation strategies.
– The Internet may impede access-based strategic
positions.
• The AIS should help a company adopt and

maintain its strategic position.
– Requires that data be collected about each
activity.
– Requires the collection and integration of both
financial and nonfinancial data.
• The authors believe:

– Accounting and information systems should
be closely integrated.
– The AIS should be the primary information
system to provide users with information they
need to perform their jobs.
SUMMARY
• What we’ve learned so far:

– The meaning of system, data, and
information
– What an AIS is
• Why it’s an important topic to stody
• What its role is in the value chain
• How it provides information for decision making
– What are the basic strategies and strategic
positions an organization can pursue
• How these interact with the AIS

CHAPTER 1

Uploaded by

Copyright:

Available Formats

CHAPTER 1

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

CHAPTER 1

Uploaded by

Copyright:

Available Formats

CHAPTER 1

• Most systems are composed of smaller

• Every organization has goals.

• The systems concept encourages integration

• Information is different from data.

• Characteristics that make information

• Information is provided to both:

• An AIS is a system that collects, records,

• The functions of an AIS are to:

• The objective of most organizations is to

• Value is provided by performing a series of

• Primary activities include:

• Support activities include:

• Information technology can significantly

• Michael Porter suggests that there are two

• A product differentiation strategy involves

• A low-cost strategy involves offering a

• The growth of the Internet has profoundly

• The AIS should help a company adopt and

• The authors believe:

• What we’ve learned so far:

You might also like