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Accountinginformation

system

A Business process approach

FREDERICK L. JONESDASARATHA V. RAMA

Jones Rama

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INTRODUCTION TO ACCOUNTING INFORMATION SYSTEMS

King Saud University

Hanan H. Almarhabi

Contents

Business processes and (AIS)

Scope of an accounting information system (AIS)

Accounting Applications and Software

Role of Accountants in Relation to (AIS)

Business Processes and (AIS)

Two terms are central here

(1) BUSINESS PROCESS (2) INFORMATION SYSTEMS

Business Processes and (AIS)

BUSINESS PROCESS1

• business process isa sequence of activities performed by a business for acquiring, producing, and

selling goods and services.There are several models of business process have been developed, the

useful model is that which views a company’s business process in terms of its transaction cycles.

There are three main transaction cycles: (1) An acquisition cycle.

(2) A conversion cycle. (3) A revenue cycle.

Business Processes and (AIS)

• Accounting Information system (AIS) isA subsystem of an organization’s management information system (MIS).

An organization’s business process and its (MIS) are closely related. Data are captured by (MIS) from the organization’s business process

to produce information that help the organization monitor and control its business process.

2INFORMATION SYSTEMS

• Management Information System (MIS) isa set of subsystems that captures data about an organization, stores, and

maintains the data, and provides meaningful information for management.

Scope of an (AIS)

ProductionMarketing

Accounting& Finance

HumanResources

Figure demonstrates the substantial overlap in the information system requirements of these four

subsystems.

Overlap of SubsystemsOverlap of Subsystems

All subsystems of (MIS) are important and different information is needed to carry out their respective function, And substantial overlaps in the information system requirements have arose between these subsystems because they use data about the same underlying business processes.

(AIS) is a subsystem that provides accounting and financial information, as well as other information obtained in the routine processing of accounting transaction.

Scope of an (AIS)Scope of an (AIS)

Uses of (AIS)

Producing External Reports

Supporting Routine Activities

Businesses use (AIS) to produce special reports that follow a required structure established by organizations such as (FASB). These reports include financial statements, tax returns, etc

Managers need an (AIS) for handling routine operating activities during the firm’s operating cycle. Computer systems excel at handling repetitive transaction by many accounting software support these routine functions.

Producing External Reports

Decision Support

Supporting Routine Activities

Planning and ControlDecision Support

Information is needed for nonroutine decision support at all levels of an organization. Some information are critical for planning, deciding, marketing functions.

Planning and Control

An information system is required for planning and control activities as well. Historical data can be extracted from the database and used to forecast growth and cash flows. Planners can use data mining to reveal long-term trends and relationships.

Uses of (AIS)

Implementing Internal Control Internal control includes the policies, procedures, and information system used to protect a company’s assets from loss and to maintain accurate financial data. It is possible to build controls into a computerized accounting information system to help reach these goals.

Producing External Reports

Decision Support

Supporting Routine Activities

Planning and Control

Implementing Internal Control

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Accounting Applications and Software

Accounting Applications

Applications are computer programs that are used to serve particular purpose. Accounting applications provide the information needed for the five uses mentioned. Accounting applications are organized according to transaction cycles.

Interaction between (AIS) and a user consists primarily of

(1) Recording events(1) Recording events

(2) Intering Information(2) Intering Information

(4) Printing reports(4) Printing reports

(3) Printing documents(3) Printing documents

About suppliers, customers, employees, and product.

Often using on-screen forms.

(5) Conducting ad hoc inquiries(5) Conducting ad hoc inquiries

Such as purchase orders and sales invoices.

Such as financial statement and sales analyses. Conducting special inquiries

Accounting Applications and Software

Commercial software that is ready made

and available for sale to the general public.

Applications developed using database

management system software.

(2)Developed using (DBMS)(2)Developed using (DBMS)

(1) Off-the-shelf

(1) Off-the-shelf

Role of Accountants in Relation to (AIS)A

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UserUser

Role ofRole ofaccountantsaccountants

ManagerManager

ConsultantConsultant

As routine transaction processing becomes automated, accountants are spending less time on routine functions (such as producing external reports, decision support, etc). Instead, they are leveraging their understanding for strategic decision making and planning.

Accounting managers in the larger firms work closely with the chief information officer and they understand the content of the database, the information needs of many users, and techniques for internal control. This understanding make them a valuable member of executive committees.

Experience can give accounting professionals a competitive advantages in consulting about the acquisition, design, installation, and modification of accounting systems. They understand how information systems support business processes and they know about financial reporting requirement and internal control risk.

The relation to the (AIS)The relation to the (AIS)

Role of Accountants in Relation to (AIS)A

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Role ofRole ofaccountantsaccountants

We consider the accountant as an

Accountant s use accounting software to provide financial statements for small clients and tax software to provide tax services for their clients.

The relation to the (AIS)The relation to the (AIS)

EvaluatorEvaluator

Provider of Provider of Accounting and Accounting and

Tax ServicesTax Services

• Internal Auditors They evaluate various units within an organization to determine whether those units are effectively pursuing their mission. Internal auditors must understand the business processes and the information system itself to retrieve data needed for their audits and evaluate internal control.

• External Auditors They audits financial statements to meet legal requirements. They must evaluate the reliability of the (AIS) that used to prepare these financial statement.

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