Acc451 Chapter 1 Note ‫العلــــــيــــوي‬

Accounting Information Systems AIS: An Overview

SYSTEMS, DATA, AND INFORMATION
SYSTEMS
A system is a set of interrelated components that interact to
achieve a goal
Most systems are composed of smaller subsystems
The systems concept encourages integration
Example: minimizing the duplication of recording, storing,
reporting and processing
The subsystems should be designed to maximize
achievement of the organization’s goals, even to the harm
(loss) of the subsystem itself.
Example: The production department (a subsystem) of a company might have to decline its
goal of staying within its budget in order to meet the organization’s goal of delivering product
on time.

Goal conflict occurs when the activity of a subsystem is not consistent

with another subsystem or with the larger system.
Goal congruence (similarity) occurs when the subsystem’s goals are
in a line with the organization’s goals.

The (1) larger and (2) more complicated a system, the more difficult it is to achieve goal
congruence.

DATA
Data are Facts that are collected, recorded, stored, and processed
by an information system.
Organizations collect data about:
1 -Events that occur
2- Resources that are affected by those events
3 -Agents who participate in the events

Page 1 of 8 ‫يحرم على أي شخص بيعها أو تصويرها أو استخدامها بأي شكل من األشكال أو إنسابها لنفسه دون‬
‫أخذ إذن مسبق‬
35547435 ‫للتواصل‬
 Acc451 Chapter 1 Note ‫العلــــــيــــوي‬

INFORMATION
Information is different from data.
➢ Information is data that have been organized and
processed to provide meaning to a user.
➢ more information and better information translates into
better decisions.

when you get more information than you can effectively assimilate (adapt), you suffer from
information overload.

Example: Taking investment decision! Or When you’ve reached the overload point, the
quality of decisions declines while the costs of producing the information increases.

Value of Information= Benefits of information − Cost of producing information

• Reduction of uncertainty • Collecting data
• Improved decisions • Processing data
• Improved ability to plan and • Storing data
schedule activities
• Distributing information to users

Value of Information: Is the benefit produced by the information minus the costs of
producing. (Should be Positive Value)

However, Costs and benefits of information are often difficult to quantify, but you need to try
when you’re making decisions about whether to provide information or not.

Users of Information

Information is provided to both: External Users & Internal Users

External Users
External Users: primarily use information that is either:
1- Mandatory information: Required by a governmental entity
Example: income information for tax authority
2- Essential information: Required to conduct business with
external parties
Example: information about financial position when the company apply for a loan.
In providing mandatory or essential information, the focus should be on:
1 Minimizing costs.
2 Meeting regulatory requirements.
3 Meeting minimum standards of reliability and usefulness.

Page 2 of 8 ‫يحرم على أي شخص بيعها أو تصويرها أو استخدامها بأي شكل من األشكال أو إنسابها لنفسه دون‬
‫أخذ إذن مسبق‬
35547435 ‫للتواصل‬
Acc451 Chapter 1 Note ‫العلــــــيــــوي‬

Internal Users

Internal Users primarily use optional (discretionary) information.

The primary focus in producing this information is ensuring that benefits

exceed costs.
(the information has positive value)

Characteristics of Useful Information:

➢ Relevance: It reduces uncertainty by helping you predict what will happen or confirm
what already has happened. (Affect decision making process)
>> information is related to decision, will reduces uncertainty
➢ Reliability: It’s dependable
>> free from error or bias and faithfully portrays events and activities.
➢ Completeness: It doesn’t leave out anything that’s important.
>> we have all information that we need.
➢ Timeliness: You get it in time to make your decision.
>> we have information on the time we need it.
➢ Understandability: It’s presented in a manner you can comprehend and use.
>> information given to users in understandable way.
➢ Verifiability: the nature of the information is such that different people would tend to
produce the same result.
➢ Accessibility: You can get to it when you need it and in a format you can use.

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.

AIS Components:
1- The people who operate the system.
2 -The procedures and instructions use to operate the system
whatever it is manual or automated.
3 -The data about the organization.
4 -The software used to process the data.
5 -The information technology infrastructure (communication), roads and networks.
6 -The internal control and security measures.

Page 3 of 8 ‫يحرم على أي شخص بيعها أو تصويرها أو استخدامها بأي شكل من األشكال أو إنسابها لنفسه دون‬
‫أخذ إذن مسبق‬
35547435 ‫للتواصل‬
Acc451 Chapter 1 Note ‫العلــــــيــــوي‬

What are functions of an AIS?

➢ 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 System

1- Study AIS is fundamental to Accounting.
Accounting is an information-providing activity, so accountants need to understand:
• How the system that provides that information is designed,
implemented and used.
• How financial information is reported
• How information is used to make decisions

2- The skills are critical to career success.

• Auditors need to evaluate the accuracy and reliability of information

produced by the AIS.
• Tax Accountants must understand the client’s AIS adequately to be
confident that it is providing complete and accurate information for
tax planning and compliance work.
• In private industry and not-for-profits, systems work is
considered the most important activity performed by
accountants.
• In management consulting, the design, selection, and
implementation of accounting systems is a rapid growth area.

3- The AIS course complements other systems courses.

- Other systems courses focus on design and implementation of information systems,
databases, expert systems, and telecommunications.
- AIS courses focus on accountability and control.

4- AIS topics are tested on the new CPA exam.

Makes up about 25% of the Business Environment & Concepts section of the CPA exam.

5- AIS topics impact corporate (organizational) strategy and culture.

Page 4 of 8 ‫يحرم على أي شخص بيعها أو تصويرها أو استخدامها بأي شكل من األشكال أو إنسابها لنفسه دون‬
‫أخذ إذن مسبق‬
35547435 ‫للتواصل‬
Acc451 Chapter 1 Note ‫العلــــــيــــوي‬

Why study AIS?

AIS design is affected by:
- information technology
- organizational strategy
- organizational culture.

AIS plays an important role in adopting a strategic

position by achieving a close fit among activities. It
requires that data be collected about each activity. AIS
integrates both financial and nonfinancial data about
activities.

While organizational strategy affects the design of the AIS, it’s also true that the AIS affects
organizational strategy.

An AIS can influence an organization’s culture by controlling the flow of information within an
organization. For example, an AIS that makes information easily accessible and widely
available

Role of the AIS in the value chain

Adding Value: making the value of the finished component greater than the
sum of its parts.
It may mean:

Example
1. Making it faster Delivery Services
2. Making it more reliable Broadband Services
3. Providing better service or advice Airline
4. Providing limited supply Bentley & Porsche
5. Providing enhanced features Apple Laptops
6 .Customizing your product Wedding Party Planer
7. Providing something in limited supply O-negative blood

How can AIS Add Value to the Organization ?

4. Improving quality of products and services.
2 .Reducing cost of products and services.
3. Improving efficiency of its value chain.” Timely
information help to apply just in time “
4. Improving effectiveness of its value chain.
5. Sharing knowledge.
6. Improving internal control system.
7. Improving decision making process .
Page 5 of 8 ‫يحرم على أي شخص بيعها أو تصويرها أو استخدامها بأي شكل من األشكال أو إنسابها لنفسه دون‬
‫أخذ إذن مسبق‬
35547435 ‫للتواصل‬
Acc451 Chapter 1 Note ‫العلــــــيــــوي‬

Role of the AIS in the value chain

Value is provided by performing a series of activities referred to as the value chain. These
include:

Primary activities

• Inbound logistics (Incoming Tasks):

Receiving, storing, and distributing the
materials that are inputs to the organization’s product or service.

For Example: a medicinal company, this activity might involve handling incoming chemicals
and elements that will be used to make their drugs.

• Operations: Transforming those inputs into products or services

For Example: the medicinal company, this step involves combining the
raw chemicals and elements with the work of people and equipment to
produce the finished drug product that will be sold to customers.

• Outbound logistics (Outgoing Tasks): Ready products or

services to customers.

For Example: the medicinal company, this step involves packaging and
shipping the goods to drug stores, doctors, and hospitals.

• Marketing & sales: Helping customers to buy the organization’s

products or services.

For example :A pharmacy representative may visit with drug stores, doctors,
etc. to inform them about their products and take orders.

• Services: Post-sale support provided to customers such as repair and maintenance

function.

For Example: The pharmaceutical company is more likely to be providing advisory services
to pharmacists.

Support activities
4- Firm Infrastructure (Services): Accountants, lawyers, and
administration. Includes the company’s accounting
information system.

2- Human resources: recruiting and hiring new employees,

training employees, paying employees, and handling employee benefits.

3- Technology: Activities to improve the products or services >> R&D, website

development

For example: the medicinal company, these activities would include research and
development to create new drugs and modify existing ones.

Page 6 of 8 ‫يحرم على أي شخص بيعها أو تصويرها أو استخدامها بأي شكل من األشكال أو إنسابها لنفسه دون‬
‫أخذ إذن مسبق‬
35547435 ‫للتواصل‬
Acc451 Chapter 1 Note ‫العلــــــيــــوي‬

4- Purchasing: Buying the resources >> materials, inventory, fixed

assets) needed to carry out the entity’s primary activities.
For example: In the medicinal company, the purchasing people are trying to
get the best combination of cost and quality in buying chemicals, supplies, and
other assets the company needs to run its operations.

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.

‫مصنع االدوية‬ ‫صيدلية‬ ‫المريض‬

supplier Distribution Customer

For Example
The inbound logistics of Medicinal, Inc., links to the outbound logistics of its suppliers.
The outbound logistics of Medicinal, Inc., links to the inbound logistics of its customers.

The linking of these separate value chains creates a larger system known as a Supply
Chain.

Information technology and these linkages can facilitate improve the performance of each
company’s value chain.

AIS & Providing Information for Decision Making:

Degree of Structure used to make decisions:

1. Structured decisions
- Repetitive and routine
- Can be delegated to lower-level employees

Example: issue purchase order if the inventory reaches specific amount. Deciding
whether to write an auto insurance policy for a customer with a clean driving history

2. Semi-structured decisions
- Incomplete rules
- Require subjective assessments

Example: adding more features to the product.

‫مبطل الوندوز‬ ‫كمبيوتر بردان ليش ؟؟؟‬

Page 7 of 8 ‫يحرم على أي شخص بيعها أو تصويرها أو استخدامها بأي شكل من األشكال أو إنسابها لنفسه دون‬
‫أخذ إذن مسبق‬
35547435 ‫للتواصل‬
Acc451 Chapter 1 Note ‫العلــــــيــــوي‬

3. Non-Structured decisions
- Non-repetitive and non-routine
- Require a great deal of subjective assessment
Example: Deciding whether to begin selling a new type of insurance policy or
products.
The scope of a decision effect:
- Occupational control decisions (operational)
• Relate to performance of specific tasks
• Often of a day-to-day nature

Example: Deciding whether to order inventory, approve off day to a worker

- Management control decisions

• Relate to utilizing resources to accomplish organizational current objectives

Example: Budgeting

- Strategic planning decisions: The “what do we want to be when we grow up” look
at the future
Involves establishing
o Organizational objectives
o Policies to achieve those objectives

Example: Deciding whether to diversify the company into other product lines

higher a manager is in the organization:

- Less structured decisions
- Broader scope: strategic planning

Page 8 of 8 ‫يحرم على أي شخص بيعها أو تصويرها أو استخدامها بأي شكل من األشكال أو إنسابها لنفسه دون‬
‫أخذ إذن مسبق‬
35547435 ‫للتواصل‬