Accounting Information Systems: an overview

Accounting Information Systems: An Overview

Chapter 1

Learning Objectives

• Distinguish between data and information:
• Understand the characteristics of useful information.
• Explain how to determine the value of information.
• Explain fundamental decisions an organization makes:
• Understand basic information needed to make them.
• Identify the transactional information that passes between internal and external parties and an AIS.
• Describe the major business processes present in most companies.
• Explain what an accounting information system (AIS) is and describe its basic functions.
• Discuss how an AIS can add value to an organization.
• Explain how an AIS and corporate strategy affect each other.
• Explain the role an AIS plays in a company’s value chain.

Data vs. Information

• Data are facts stored in the system
• A fact could be a number, date, name, and so on.

For example:

2/22/14

ABC Company, 123,

99, 3, 20, 60

Data vs. Information

The previous slide just showed facts, if we put those facts within a context of a sales invoice, for example, it is meaningful and considered information.

Invoice Date : 2/22/14 Invoice #: 123

Customer: ABC company

Item # Qty Price

99 3 $20

Total Invoice Amount $60

Value of Information

• Information is valuable when the benefits exceed the costs of gathering, maintaining, and storing the data.

Benefit (i.e., improved decision making)

> Cost (i.e., time and resources used to get the information)

What Makes Information Useful?

There are seven general characteristics that make information useful:

• Relevant: information needed to make a decision (e.g., the decision to extend customer credit would need relevant information on customer balance from an A/R aging report)
• Reliable: information free from bias
• Complete: does not omit important aspects of events or activities
• Timely: information needs to be provided in time to make the decision

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