Accounting Information System
Accounting Information System
SYSTEM
o A system is a set of two or more interrelated components that interact to achieve a goal.
o Systems are almost always composed of smaller subsystems, each performing a specific
function supportive of the larger system.
o When the systems concept is used in systems development, changes in subsystems cannot be made
without considering the effect on other subsystems and the system as a whole.
o Goal conflict occurs when a decision or action of a subsystem is inconsistent with another subsystem or
the system as a whole.
o Goal congruence is achieved when a subsystem achieves its goals while contributing to the
organization’s overall goal.
o The example above shows facts, if we put those facts within a context of a sales invoice, for
example, it is meaningful and considered information.
o Usually, more information and better information translates into better decisions.
o However, when you get more information than you can effectively assimilate, you suffer from
information overload.
o When you’ve reached the overload point, the quality of decisions declines while the costs of
producing the information increases.
VALUE OF INFORMATION
o Information is valuable when the benefits exceed the costs of gathering, maintaining, and
storing the data.
o 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:
1. 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)
2. Reliable: information free from error and bias
3. Complete: does not omit important aspects of events or activities
4. Timely: information needs to be provided in time to make the decision.
5. Understandable: information must be presented in a meaningful manner
6. Verifiable: two independent people can produce the same conclusion
7. Accessible: available when needed.