Lecture 5- The Information System: an Accountant’s Prospective: A General Model of AIS :A General Model is described for AIS which may be considered for any Information System. Key Elements are Data Sources, End Users, Data Collection, Data Processing, Database Management, Information generation and feedback.
The information system (General model) ,e commerce and accounting information system case study solutions course is being taught in many university at undergraduate level to BBA.BCOM. MCOM, MIT, and many other classes.
Similarly In this category we will provide you best handouts of AIS course , AIS and E commerce from best recommend books like James Hall, and Daniel.
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There are mainly two general groups of end users are found in AIS model. External users include creditors, stockholders, potential investors, regulatory agencies, tax authorities, suppliers, and customers. Institutional users such as banks, and the Internal Revenue Service (IRS) receive information in the form of financial statements, tax returns.Trading partners (customers and suppliers) receive transaction-oriented information, including purchase orders, billing statements, and shipping documents.
Internal users include management and operations personnel. Organization has a great deal of freedom in the way it meets the needs of internal users as compared to External users but still in a well-accepted conventions and practices. Internal reporting is governed primarily by what gets the job done by system designers including accountants.
Data vs Information
There must be given an importance for distinction between the terms data and information. Data are facts, which may or may not be processed (edited, summarized, or refined) and have no direct effect on the user. By contrast, information causes the user to take an action. Information is often defined simply as processed data. But in some cases this processed form of data might be data for someone. For example, a purchasing agent receives a daily report listing raw material inventory items that are at low levels. This report causes the agent to place orders for more inventories. The facts in this report have information content for the purchasing agent. However, this same report in the hands of the personnel manager is a mere collection of facts, or data, causing no action and having no information content.
The Data sources are financial transactions that enter the information system from both internal and external sources. External financial transactions are the most common source of data for most organizations. These are economic exchanges with other business entities and individuals outside the firm. Examples include the sale of goods and services, the purchase of inventory, the receipt of cash etc. Internal financial transactions involve the exchange or movement of resources within the organization. Examples include the movement of raw materials into work-in-process (WIP), the application of labor and overhead to WIP, the transfer of WIP into finished goods inventory, and the depreciation of plant and equipment.
The Data Collection
This is the very first operational Stage in An AIS from where we can start our functions. However Data must be entered or collected complete, correct and valid. Moreover Incorrect data (erroneous data) will lead to miss reporting and false information generation which will be a loss of cost and effort for any organization.
Two key rules must be Followed while we are involved in data collection.
- Relevancy: Only relevance data must be collected about any process or entity in the system.
- Efficiency: Data must be collected timely with no redundancy and no inconsistency
Process of transferring data into information is called data processing. It may include all mathematical or logical tasks ranging from simple to complex nature.Moreover Examples include mathematical algorithms used for production scheduling applications. Statistical techniques for sales forecasting, posting and summarizing procedures used for accounting applications.
The organization’s database is its physical repository/warehouse for storing financial and nonfinancial data. However It can be a filing cabinet or a database on a computer disk. Moreover Regardless of the database’s physical form, we can represent its contents in a logical hierarchy. The levels in the data hierarchy—attribute, record, and file.
The process of compiling, arranging, formatting, and presenting information for endusers of an AIS is called information generation. However Information can be an operational document such as a sales order, a structured report, or a message on a computer screen. Moreover Every kind of information must have following key qualities
- Relevance: must contain relative data and facts for mangers to decide. Irrelevant data waste time.
- The age of information is a critical factor in determining its usefulness. However Information must be no older than the time period of the action it supports.
- Accurate : Similarly the information must be accurate
- Completeness. No piece of information essential to a decision or task should be missing.
- Summarization. Information should be aggregated in accordance with the user’s needs. However Lower-level managers tend to need information that is highly detailed. As information flows upward through the organization to top management, it becomes more summarized.
Feedback is a form of output that is sent back to the system as a source of data. However Feedback may be internal or external and is used to initiate or alter a process.
Acquisition of Information Systems
Acquisition means how an organization can attain an Information System. However there are two ways to get an information system; customized systems from scratch through in-house systems development activities. Similarly Commercially purchase preprogrammed commercial systems from software vendors. In house development goes though a complete System development life cycle (SDLC) of software. While purchasing a commercial an organization will have to see the following alternatives.
- Turnkey systems are that class of commercial software that is general-purpose, completely finished and tested systems. It might be customized system for a specific industry. The better turnkey systems, however, have built-in software options that allow the user to customize input, output, and processing through menu choices. However, configuring the systems to meet user needs can be a difficult task. Enterprise resource planning (ERP) systems such as Oracle, Peachtree and SAP are examples.
- Backbone systems have a basic system structure. The primary processing logic is preprogrammed. The vendor then designs the user interfaces to suit the client’s unique needs. A backbone system is a compromise between a custom system and a turnkey system. This approach can produce satisfactory results, but customizing the system is costly.
- Customized systems that client organizations purchase commercially order to develop. Software firms designs, implements, and maintains the system as per its client’s need. Healthcare and legal services organizations that have complex systems requirements but are not of sufficient magnitude to justify retaining an in-house systems development staff. Trends of in-house developments
Objective of an IS
- To support the stewardship function of management. Stewardship refers to management’s responsibility to properly manage the resources of the firm. The information system provides information about resource utilization to external users and internal users.
- Support management decision making. The information system supplies managers with the information they need to carry out their decision making responsibilities.
- To support the firm’s day-to-day operations by providing information to operations personnel to assist them in the efficient and effective execution of their daily tasks.
There are many functions of accounting information system . Similarly The functions offered by accounting information system are now available in many accounting information system software. Moreover You can use accounting information system software to accomplish or to complete your different accounting information system projects.
Recommended Books/resources by theITeducation.com :
- Accounting information system by James Hall