Md.
Abdul Halim
Lecturer
Department of Accounting
Mawlana Bhashani Science and Technology University
Accounting and Information Systems
Chapter-1
Definition of Accounting:
According to AICPA (American Institute of Certified Public
Accountants)” Accounting is the art of recording, classifying, and
summarizing in a significant manner and in terms of money,
transactions and events which are, in part at least, of financial character,
and interpreting the results thereof”
Accounting consists of three basic activities—it identifies, records, and
communicates the economic events of an organization to interested
users.
Education
Education is concerned about teaching, learning, skills and knowledge. It means
helping people to learn how to do things and support them to think about what
they learn.
Why, we have to learn?
Our resources are limited but they have various alternative uses
We have to choose decisions among the various alternatives
Uncertainty creates problem
Learning is the gateway to face the problem
Learning is the price of survival
University?
Creating Knowledge, Accumulating Knowledge and Disseminating
(Distributing) Knowledge.
How to do it?
By Research
University Student?
To learn concept, Theories
To learn how to conduct research
Why do you study AIS?
The purpose of this course is to provide an introduction to the fundamental of
managing information systems, with a focus on the accountant's perspective.
System:
A system is a set of two or more interrelated components that interact to achieve
a goal. Most systems are composed of smaller subsystems that support the larger
system.
For example-
Department,
Faculty,
University.
Goal conflict:
Goal conflict occurs when a subsystem’s goals are inconsistent with the goals of
another subsystem or with the system as a whole.
Goal congruence:
Goal congruence occurs when a subsystem achieves its goals while contributing to
the organization’s overall goal.
Data:
Data are facts that are collected, recorded, stored, and processed by an information
system.
Information:
Information is data that have been organized and processed to provide meaning
and improve the decision-making process.
BUSINESS PROCESSES:
A business process is an activity or set of activities that accomplish a
specific organizational goal.
Transaction:
A transaction is an agreement between two entities to exchange goods or services
or any other event that can be measured in economic terms by an organization.
Examples-
include selling goods to customers, buying inventory from suppliers, and paying
employees.
Transaction processing:
The process that begins with capturing transaction data and ends with
informational output,
such as the financial statements, is called transaction processing.
Give-get exchange:
Give-get exchange – Transactions that happen a great many times, such as giving up
cash to get inventory from a supplier and giving employees a paycheck in exchange
for their labor.
Business processes or transaction cycles:
Business processes or transaction cycles - The major give-get exchanges that
occur frequently in most companies.
Components/ Elements of Business processes or transaction cycles:
1. The revenue cycle, where goods and services are sold for cash or a future
promise to receive cash.
2. The expenditure cycle, where companies purchase inventory for resale or
raw materials to use in producing products in exchange for cash or a future promise
to pay cash.
[Link] production or conversion cycle, where raw materials are transformed into
finished goods.
[Link] human resources/payroll cycle, where employees are hired, trained,
compensated, evaluated, promoted, and terminated.
5. The financing cycle, where companies sell shares in the company to
investors and borrow money, and where investors are paid dividends and interest is
paid on loans.
Accounting information system:
Accounting information system is a system that collects, records, stores, and
processes data to produce information for decision makers.
Elements/ Components of AIS:
i. People,
ii. Procedures and instructions,
iii. Data,
iv. Software,
v. Information technology infrastructure,
vi. And internal controls and security measures.
There are following six components of an AIS:
i. The people who use the system
ii. The procedures and instructions used to collect, process, and store data
[Link] data about the organization and its business activities
iv. The software used to process the data
v. The information technology infrastructure, including the computers, peripheral
devices, and network communications devices used in the AIS
vi. The internal controls and security measures that safeguard AIS data.
How can AIS fulfill three important business functions?
Above six AIS components can fulfill three important functions.
1. Collect and store data about organizational activities, resources, and personnel.
Organizations have a number of business processes, such as making a sale or
purchasing raw materials, which are repeated frequently.
2. Transform data into information so management can plan, execute, control, and
evaluate activities, resources, and personnel.
3. Provide adequate controls to safeguard the organization’s assets and data.
HOW can AIS add value to an organization?
A well-designed AIS can add value to an organization by the following ways:
1. Improving the quality and reducing the costs of products or services
Example- As an AIS Information system, it gets notified immediately of any kind of
errors. It helps maintain product quality, reduces waste, and lowers costs.
2. Improving efficiency – Example: Just-in-time manufacturing approach possible,
as it requires constant, accurate, up-to-date information about raw materials
inventories and their locations.
3. Sharing knowledge: Sharing knowledge and expertise can improve operations
and provide a competitive advantage.
AIS add value to an organization (Cont.)
4. Improving the efficiency and effectiveness of its supply chain.
Efficiency-minimum cost maximum output. Effectiveness- right time right
decision.
For example, allowing customers to directly access inventory and sales order
entry systems can reduce sales and marketing costs, thereby increasing
customer retention rates.
5. Improving the internal control structure. An AIS with the proper
internal control structure can help protect systems from fraud, errors, system
failures, and disasters.
6. Improving decision making.
How can AIS help improve decision making?
An AIS can help improve decision making in several ways:
It can identify situations requiring management action.
It can reduce uncertainty and thereby provide a basis for choosing among
alternative actions.
It can store information about the results of previous decisions, which provides
valuable feedback that can be used to improve future decisions.
It can provide accurate information in a timely manner.
It can analyze sales data to
THE ROLE OF THE AIS IN THE VALUE CHAIN:
Value chain consisting of five primary activities that directly provide value to
customers.
Value chain - Linking together of all the primary and support activities in a
business. Value is added as a product passes through the chain.
Primary activities - Value chain activities that produce, market, and deliver
products and services to customers and provide post-delivery service and support.
Support activities - Value chain activities such as firm infrastructure, technology,
human resources, and purchasing that enable primary activities to be performed
efficiently and effectively.
Primary Activities:
Inbound logistics consists of receiving, storing, and distributing the materials an
organization uses to create the services and products it sells.
Operations activities transform inputs into final products or services.
Outbound logistics activities distribute finished products or services to customers.
Marketing and sales activities help customers buy the organization’s products or
services. Advertising is an example of a marketing and sales activity.
Service activities provide post-sale support to customers. Examples include repair
and maintenance services.
Support activities allow the five primary activities to be performed efficiently and
effectively. They are grouped into four categories:
1. Firm infrastructure is the accounting, finance, legal, and general administration
activities that allow an organization to function. The AIS is part of the firm
infrastructure.
2. Human resources activities include recruiting, hiring, training, and compensating
employees.
3. Technology activities improve a product or service. Examples include research
and development, investments in IT, and product design.
4. Purchasing activities procure raw materials, supplies, machinery, and the
buildings used to carry out the primary activities.
supply chain - An extended system that includes an organization’s value
chain as well as its suppliers, distributors, and customers.
Thanks to All
Best of Luck!