Chapter 1 - Accounting Information Systems: An Overview
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, a college of business is a system composed of various departments, each of which is a subsystem. Moreover, the college itself is a subsystem of the university.
Each subsystem is designed to achieve one or more organizational goals. Changes in subsystems cannot be made without considering the effect on other subsystems and on the system as a whole. Goal conflict occurs when a subsystem is inconsistent with the goals of another subsystem or with the system ...view middle of the document...
Characteristics of Useful Information
• Relevant- reduces uncertainty, improves decision making, or confirms or corrects prior expectations.
• Reliable – free from error or bias; accurately represents organization events or activities.
• Complete – does not omit important aspects of the events or activities it measures.
• Timely – provide in time for decision makers to make decisions.
• Understandable – presented in a useful and intelligible format.
• Verifiable – two independent, knowledgeable people produce the same information.
• Accessible – available to users when they need it and in a format they can use.
Information Needs and Business Processes
A business process is a set of related, coordinated, and structured activities and tasks that are performed by a person or by a computer or a machine, and that help accomplish a specific organizational goal. To make effective decisions, organizations must decide what decisions they need to make, what information they need to make the decisions, and how to gather and process the data needed to produce the information.
Scott and Susan decide they must understand how S&S functions before they can identify the information they need to manage S&S effectively. They they can determine the types of data and procedure they will need to collect and produce that information, they created Table 1-2 to summarize part of their analysis.
Scott decides to reorganize the business processes listed in Table 1-2 into groups of related transactions. 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. The process that beings with capturing transaction data and ends with informational output, such as the financial statements, is called transaction processing.
Many business activities are pairs of events involved in a give-get exchange. These exchanges can be grouped into five major business processes or transaction cycles:
• The revenue cycle, where goods and services are sold for cash or a future promise to receive cash.
• 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.
• The production or conversion cycle, where raw materials are transformed into finished goods.
• The human resources/payroll cycle, where employees are hired, trained, compensated, evaluated, promoted, and terminated.
• 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.
These cycles process a few related transactions repeatedly. For example, most revenue cycle transactions are either selling goods or services to customers or collecting cash for those sales. ...