Week 3 – Lecture #1
Foundational concepts of AIS
Chapter
2-1
Business
Business Processes
Processes and
and the
the AIS
AIS
Accounting Information System - a system that
captures, records, processes, and reports accounting
information.
Business Process - a prescribed sequence of work
steps completed in order to produce a desired result.
Chapter
2-2 SO 1 The interrelationships of business processes and the AIS
Business
Business
Processes
Processes
and
and the
the AIS
AIS
Exhibit 2-1
Overall View of Transactions,
Processes, and Resulting Reports
Chapter SO 1 The interrelationships of business
2-3
processes and the AIS
AIS, 5 work steps & Business Processes
Accounting Information System Processes (5 processes):
Input – keying, punching data, entering transaction using POS
Processing – recording, classifying, summarising, consolidating.
Output – cheques, reports, documents
Data storage – backups and references
Feedback & control – use of reports for monitoring
Accounting Information System must identify these 5 work steps:
Capture all details at point of sale,
Transactions to record accounting data in computer system,
Internal controls, security & reconciliation.
Properly process into correct accounts and summarise data, and
Provide reports externally and internally.
Business Processes - Sequence of these work steps are used in
various business processes such as the 4 general types of business
processes:
revenue processes,
expenditure processes,
conversion processes and
Chapter
2-4 administrative processes.
Business
Business Processes
Processes and
and the
the AIS
AIS
Concept Check
1. Which of the following statements is not true?
a. Accounting information systems must maintain both
detail and summary information.
b. Business processes may vary from company to company.
c. Regardless of the extent of computerization, all
accounting information systems must capture data from
the transactions within business processes.
d. Business processes categorized as expenditure processes
are not intended to be processes that serve customers.
Chapter
2-5 SO 1 The interrelationships of business processes and the AIS
Types
Types of
of Accounting
Accounting Information
Information Systems
Systems
Three categories of AIS:
1. Manual systems
2. Legacy systems
3. Modern, integrated IT systems
Chapter
2-6 SO 2 Types of accounting information systems
Types
Types of
of Accounting
Accounting Information
Information Systems
Systems
Manual Systems
Generally used by small organizations. Entirely
manual system would require:
Source document General journal
Turnaround document Special journals
General ledger Subsidiary ledgers
Chapter
2-7 SO 2 Types of accounting information systems
Types
Types of
of Accounting
Accounting Information
Information Systems
Systems
Legacy Systems
Existing system, often based on old technology.
Advantages are that legacy systems:
1. Customized to specific needs.
2. Support unique business processes not inherent in
generic accounting software.
3. Contain invaluable historical data that may be difficult
to integrate into a new system.
4. Well supported and understood by existing personnel.
Chapter
2-8 SO 2 Types of accounting information systems
Types
Types of
of Accounting
Accounting Information
Information Systems
Systems
Legacy Systems
Disadvantages are that legacy systems:
1. Costly to maintain.
2. Often lack adequate supporting documentation.
3. Hardware needed to maintain may become obsolete.
4. Not usually based on user-friendly interfaces.
5. Tends to use software written in older computer
languages.
6. Often difficult to modify to make user friendly.
7. Difficult to integrate when companies merge.
Chapter
2-9 SO 2 Types of accounting information systems
Types
Types of
of Accounting
Accounting Information
Information Systems
Systems
Modern, Integrated Systems
New programs sold by software development companies
are more user friendly than legacy accounting systems.
Advantages to purchasing accounting software:
Lower cost
Shorter implementation time
Fewer bugs
Chapter
2-10 SO 2 Types of accounting information systems
Types
Types of
of Accounting
Accounting Information
Information Systems
Systems
Concept Check
2. In a manual system, an adjusting entry would most
likely be initially recorded in a
a. special journal.
b. subsidiary ledger.
c. general journal.
d. general ledger.
Chapter
2-11 SO 2 Types of accounting information systems
Types
Types of
of Accounting
Accounting Information
Information Systems
Systems
Concept Check
3. Which of the following is not a disadvantage of
maintaining legacy systems?
a. There are fewer programmers available to support and
maintain legacy systems.
b. They contain invaluable historical data that may be
difficult to integrate into newer systems.
c. Hardware or hardware parts may be unavailable for
legacy systems.
d. It can be difficult to integrate various legacy systems
into an integrated whole.
Chapter
2-12 SO 2 Types of accounting information systems
Types
Types of
of Accounting
Accounting Information
Information Systems
Systems
Concept Check
4. Which of the following is a disadvantage of
purchased accounting software, compared with
software developed in-house?
a. It is custom designed for that company.
b. It is less costly.
c. The implementation time is shorter.
d. There are fewer bugs.
Chapter
2-13 SO 2 Types of accounting information systems
Accounting
Accounting
Software
Software
Market
Market
Segments
Segments
Exhibit 2-2
Accounting Software
Market Segments
Chapter
2-14 SO 3 Accounting software market segments
Accounting
Accounting Software
Software Market
Market Segments
Segments
MYOB
MYOB
Exhibit 2-3
Popular Accounting Software Programs
within the Market Segments
Chapter
2-15 SO 3 Accounting software market segments
Accounting
Accounting Software
Software Market
Market Segments
Segments
Concept Check
5. Which of the following is not a method of
updating legacy systems?
a. Enterprise application integration.
b. Backoffice ware.
c. Screen scraper.
d. Complete replacement.
Chapter
2-16 SO 3 Accounting software market segments
Accounting
Accounting Software
Software Market
Market Segments
Segments
Concept Check
6. When categorizing the accounting software market,
a company with revenue of $8 million would most likely
purchase software from which segment?
a. Small company.
b. Midmarket.
c. Beginning ERP.
d. Tier 1 ERP.
Chapter
2-17 SO 3 Accounting software market segments
Input
Input Methods
Methods for
for AIS
AIS
Input methods used in organizations:
Source documents and keying
Bar coding
Point of sale systems
EDI
E-business
Chapter
2-18 SO 4 Input methods used in business processes
Input
Input Methods
Methods for
for AIS
AIS
Concept Check
7. An IT system that uses touch-screen cash registers
as an input method is called
a. Electronic data interchange.
b. E-business.
c. Point of sale system.
d. Source documents and keying.
Chapter
2-19 SO 4 Input methods used in business processes
Processing
Processing Methods
Methods
Batch Processing -Transactions are grouped.
Advantages
1. Efficient for large volumes of like transactions.
2. Audit trail is maintained.
3. Generally use less costly hardware and software.
4. Hardware and software systems are not as complicated
as on-line systems.
5. Generally easier to control than other types of
computerized systems.
6. Personnel become specialized and efficient in processing
routine transactions.
Chapter
2-20 SO 5 The processing of accounting data
Processing
Processing Methods
Methods
Batch Processing -Transactions are grouped.
Disadvantages
1. Processing can take longer
2. Adding or deleting records takes much computer
maintenance time.
3. Some data duplication is likely.
4. Integration across business processes is difficult in
legacy systems that are batch oriented.
5. Lag while all transactions in a batch are collected.
6. May require that transaction and master files be sorted
in the same sequential order.
Chapter
2-21 SO 5 The processing of accounting data
Processing
Processing Methods
Methods
Online and Real-Time Processing
Advantages
1. System checks for input errors.
2. Information provided on a timely basis.
3. All files are constantly up to date.
4. The business processes are integrated into a single
database so that a single system is achieved.
Chapter
2-22 SO 5 The processing of accounting data
Processing
Processing Methods
Methods
Online and Real-Time Processing
Disadvantages
1. Hardware and software are more expensive than a
batch systems.
2. A single database that is shared is more susceptible
to unauthorized access of data.
3. Real-time systems can be difficult to audit.
Chapter
2-23 SO 5 The processing of accounting data
Processing
Processing Methods
Methods
Concept Check
8. When similar transactions are grouped together for
a specified time for processing, it is called
a. Online processing.
b. Real-time processing.
c. Batch processing.
d. Group processing.
Chapter
2-24 SO 5 The processing of accounting data
Outputs
Outputs of
of the
the AIS
AIS
General Categories of Outputs
1. Trading partner documents such as checks, invoices,
and statements
2. Internal documents
3. Internal reports
4. External reports
Chapter
2-25 SO 6 Outputs from the AIS related to business processes
