Chapter 1: Introduction to Accounting Information Systems

Business Processes and Accounting Information Systems • Business Process: sequence of activities performed by a business for acquiring, producing, and selling goods and services o Used by accountants and others • Transaction Cycles: group related events that typically occur in a particular sequence o Acquisition (purchasing) cycle = purchasing and paying for goods or services o Conversion cycle = transforming resources acquired into goods and services o Revenue cycle = providing goods or services to customers and collecting cash • Management Information System (MIS): system that captures data about an organization, stores and maintains the data, and provides meaningful info for management • Accounting Information System (AIS) is a subset of an MIS • Data captured by the MIS are aggregated, summarized, and organized to produce information that helps an organization monitor and control business processes

Scope of an Accounting Information System • AIS provides accounting and financial information, and other information obtained in the routine processing of accounting transactions • It tracks info about sales order, sales in units and dollars, cash collections, etc. • Enterprise Resource Planning System (ERP): business management system that integrates all aspects of a firm’s business process

Uses of AIS • Producing External Reports o These reports satisfy the needs of investors, creditors, tax collectors, etc. o Includes financial statements, tax returns, and reports required by agencies • Supporting Routine Activities o Ex. taking customer orders, delivering goods/services, billing customers, etc. o Computer systems can handle repetitive transactions • Decision Support o Info is needed for non-routine decision support at all levels of the organization o It is used to plan new products, determine which to keep in stock, and marketing products to customers • Planning and Control o Budgets and standard costs information is stored by the IS • Implementing Internal Control o Internal Control: policies, procedures, and IS used to protect a company’s assets from loss or embezzlement and to maintain accurate financial data

Accounting Applications and Softwares • Applications: computer programs used to serve particular purposes (ex. word processing and electronic spreadsheets) • Accounting applications are organized according to transaction cycles • Interaction between an accounting info system and a user consists of: (1) recording events; (2) entering information about suppliers, customers employees, and products; (3) printing documents; (4) printing reports; and (5) conducting ad hoc inquiries • Off-the-shelf software: commercial software that is ready-made and available for sale to the general public o Time and effort to develop an accounting system is low to the consumer

Roles of Accountants in Relation to AIS • Four roles in which accountants use information technology: user, manager, consultant, and evaluator; also provider of accounting and tax services • User – as routine transaction processing becomes automated, accountants are spending less time on routine functions • Manager – they are responsible for managing employees and resources to help an organization achieve its objectives o To increase their value, accounting managers must know how the business operates and how the information system helps achieve these objectives • Consultant – experienced accountants can provide consulting services in many areas o Gives them a competitive advantage in consulting about the acquisition, design, installation, and modification of accounting systems o They understand how information supports business processes and financial reporting requirements and internal control risks • Evaluator – internal auditors evaluate various units within an organization to determine which units are efficiently and effectively pursuing their missions o They can audit the effectiveness of a wide range of the company’s operations o External auditors are certified public accountants paid by corporations to audit to meet legal requirements and add credibility to financial statements o Accountants expand roles as evaluators by providing assurance services • Provider of Accounting and Tax Services – use accounting software to provide financial statements and tax software to provide tax services