Components Of The Study Of AIS:

depicts the elements central to our study of AIS. Many should be familiar to you, and many were part of our modern accounting scenarios. Let’s briefly discuss each element, with special emphasis on how the accountant is affected. Later in the chapter, we provide a roadmap showing you where each component is covered in this textbook. Before beginning, let us tell you two things. First, the study of AIS, is our broad view, while the accounting information system itself, is our narrow view of an AIS. Second, you shouldn’t assign any meaning to the placements of the elements in figure 1.1. The figure just tells you that there are ten elements. 1. Business Operations: An AIS operates in concert with business operations. Many AIS inputs are prepared by operating departments, the action or work centers of the organization; and many AIS outputs are used to manage these operations. Therefore, we must analyze and manage an AIS in light of the work being performed by the organization. For example, to advise his management and to prepare reports for management decision making, a management accountant must understand his organization’s business. In our scenarios, Jill had to understand corporate takeovers to prepare the relevant analysis. 2. Transaction Processing: An organization Processes Transactions, such as sales and purchase; these Transactions mirror and monitor and business operations. these Transactions have operational, management information system(MIS), and AIS aspects. To design and use the MIS and the AIS, an accountant must know what the Transactions are how they are processed, and how each transaction is recorded. For example, Jill used data collected for fixed asset transactions as input for the analysis she performed. 3. Management Decision Making: Both our CPA and Jill knew the decision models appropriate for their analysis, and their reports reflected this knowledge. Naturally, the information used for a decision must be tailored to the type of decision under consideration. Furthermore, the information is more useful if it recognizes the personal management styles and preferences of the decision maker. For instance, the manager of department A prefers to receive a monthly cash flow statement that groups receipts and payments into broad categories. The manager of department B, on the other hand, wants to see more detailed information in the form of an analysis of payments by vendors. Beyond the information available to managers, many decision makers now use expert systems to help them make decisions. In chapter 2 we examine decision-making and expert systems. 4. Reporting: To design reports generated by an information system, the accountant must know what outputs are required or are desirable. Often, the user herself will prepare a report on an ad hoc basis using powerful report-generating tools. These reports often support management decisions as well as fulfill certain reporting obligations. GAAP-based financial statements are but one example of reporting that will be considered in our study of AIS.

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5. Systems Development and Operation: The information systems that process transactions and provide information for management decision making must be designed, implemented and effectively operated. An accountant often participates in systems development projects. He may be a user contributing request for certain functions, or he may be an auditor advancing controls for the new system. Choosing the data for a report and designing that report are but two examples of system development tasks that can be accomplished by an accountant during the development process. In chapter 16 through 20 we examine systems development and operation and the accountant’s role in those processes. 6. Data Bases: Your other accounting courses have emphasized accounting cycle, however, includes data collection and storage, and these aspects must become part of your knowledge base. In addition, important to a complete understanding of AIS are the variety of data bases, both private and public; the quantity and type of data available in these data bases; and methods of retrieving that data. To perform analysis, to prepare information for management decision making, and to audit a firm’s financial records, an accountant must be able to access and utilize data from public and private data bases.2 7. Technology: Our ability to plan and manage business operations depends partly on our knowledge of the technology available. For instance, can we manage production without knowledge of robotics? it goes without saying that technological developments have a profound effect on information systems; microcomputers, databases, and expert systems are but a few examples. Technology provides the foundation on which MIS, AIS and business operations rest, and knowledge of Technology is critically important to our complete understanding of the AIS discipline. 8. Control: Traditionally, accountants have been experts on controlling business operations and information processing. As a practicing accountant, you will probably spend much of your time providing such expertise. Consider how much more difficult it will be control modern, complex information systems. You must develop an understanding of control that is specific to the situation at hand, yet is adaptable for the future. Control- the means by which we make sure the intended actually happens- will be introduced in chapter 5 and explored in detail in chapter 6, 7 and the application chapter 9 through 15. 9. Communications: To present the results of their endeavors effectively, accountants must possess strong oral and written communications skills. Have your professors been drumming this message into you? If not, you’ll become acutely aware of its importance when you enter the job market. Unlike in other accounting courses, there are few right or wrong answers in the study of AIS. Throughout this course, you will be required to evaluate alternatives, to choose a solution, and to defend your choice. Technical knowledge won’t be enough for the last task. 10. Accounting and Auditing Principles: To design and operate the accounting system, an accountant must know the proper accounting procedures and must understand the audits to which the accounting information will be subjected. As an illustration, suppose you were designing an AIS for the billing function at XYZ, Inc. would you invoice customers at the time the customer’s purchase order was received, or would you wait until XYZ’s shipping department notified you that the goods had been shipped? We’re confident that you chose the second alternative.

Decision Makers And Kinds Of Decisions: Let’s look at one brief example of the decisions marketing managers must confront. Put yourself in the position of the advertising manager A few representative questions for which you might answers are: • Where is sales volume concentrated? • Where are the specific major customers, both present and potential? • What kinds of advertising have the greatest influence on customers?
Could the OE/S system help you to obtain the answers? Certainly, at least to the extent that it has captured and stored historical data related to sales transactions. To answer the first question, you might find a sales report by region helpful. A sales report by customer class could provide some answers to the second question. However, you know that the OE/S system is transactions- oriented. Therefore, you’d be look beyond the OE/S system for some answers. Where might you find those answers? Sources such as census reports, market research questionnaires, and trade journals often are included in the broader “marketing information system” to which we referred. In certain industries, the mechanisms to collect data regarding customers, their buying habits, and other demographics have become quite sophisticated. For instance, the trend in retail trade is to single source systems that are designed to capture and trace how various market “signals” (i.e., price, advertising, promotion, display, and the like) individually and collectively influence the consumption patterns of households with particular geo- demographic attributes. The name, single-source, devices from the fact that the data is no longer scattered among several disconnected databases but, rather, is collected in one, fully integrated, marketing research system. The core of the data-collection system is in-store scanners that monitor prices and price promotions for all uniform product code (UPC) scannable items. In addition, single source systems employ in-store audits to examine product placements and merchanding displays, in-home meters to monitor viewing patterns in certain survey households, and audits to observe magazine and newspaper advertising in panel cities. Technology Expert 9.1 relates the experience of one single source vendor, NPD/Nielson, to refine its data-collection efforts through the use of in-home bar code readers. Armed with these brief examples and a little imagination, you probably could assume the roles of the other managers in figure 9.2, and you could speculate on the following: • Kinds of decisions (questions) that managers face • Ability (or inability) of the OE/System to provide the information to support those decisions.

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Business operations

Transaction processing

Management Decision making

Technology

Control

Data bases

Communications

AIS

Reporting

Systems Development and operation

Accounting and auditing principles