Foundational

Concepts of
The AIs
 Accounting Information System
Is a system that captures, records, processes, and
reports accounting information.
.
• Business Process- is a prescribed sequence
of work steps completed in order to produce a
desired result for the organization.
Types of Accounting Information System
• Manual System
• Legacy System
• Modern Integrated System
 Manual System
• Generally used by small organizations. Entirely
manual system would require

Entirely manual system would require

• Source Document
• Turnaround Document
 Manual System

● A Source document is a record that

captures the key data of a transaction. The
data on a source document usually include
the date, purpose, entity, quantities, and
dollar amount of a transaction.
A source document usually serves three important
functions in the accounting system:

• Provides the input data necessary for the accounting

system to record the transaction.
• Triggers business processes to begin.
• Serves as part of the permanent audit trail.
● Turnaround Document is an output of the accounting system
that can be used as an input in a different part of the accounting
system.

An example is your credit card statement, which is a computer

output of the system your credit card company uses.

● The turnaround document improves input efficiency and accuracy

by eliminating human error
 Legacy System
● Exis system, often based on old technology

● In large companies, many legacy systems run

on host-based mainframe computers.

● “Host-based” means that all significant

computer processing takes place on the
mainframe host computer.
 There are both advantages and disadvantages to maintaining
these older systems.
• The advantages are that legacy systems
1. Customized to meet specific needs in the organization
2. Often support unique business processes
3. Contain invaluable historical data that may be difficult to
integrate into a new system
4. Are well supported and understood by existing personnel
who are already trained to use the system
• The dis-advantages are:
1. Are costly to maintain in both dollars and time
2. Often lack adequate, up-to-date supporting documentation
3. May not easily run on new hardware, and the old hardware and parts
needed for maintenance may become obsolete
4. Are not usually based on user-friendly interfaces such as Microsoft
Windows or Apple’s Mac OS
5. Tend to use software written in older computer languages
6. Are often difficult to modify to make them Web-based or user-friendly
7. Become difficult to integrate when companies merge
● Organizations do not always completely
replace legacy systems with newer
hardware and software systems, but they

MISSION
often try to use new technology to
enhanceOurthe mission
existing systems.
is to empower

organizations to thrive through

strategic guidance, innovative

solutions, and unparalleled

● Screen scrapers
expertise.
● Enterprise application integration

VISION
● Complete replacement of legacy
We aim to push boundaries
system
using advanced tech for
 Modern Integrated System
● The new programs sold by software
development companies are more user
friendly than legacy accounting systems

Advantages of purchasing accounting software:

1. Lower cost
2. Shorter implementation time
3. Fewer Bugs
 Client- Server Computing

● Since the mid-to-late 1980s, the client–

server model of networks has been
commonly used.
● Client–server computing means that
there are two types of computers
networked together to accomplish the
application processing
Client- Server Computing

● Server is usually a large computer that

contains the database and many of the
application programs

● Client computers, usually PC-type

computers, are networked to the server
and work with the server in such a way
that the network appears to be one
integrated system for users
 Client- Server Computing

Characteristic of client- server

1. Client and server computer are networked

together.
2. The system appears to users to be one
integrated whole.
3. Individual parts of processing are shared
between the server and client.
4. The client computer participates in the
processing or data manipulation in some
meaningful way.
Accounting Market Segment

Whoa!
This can be the part of the presentation where
you introduce yourself, write your email…
INPUT METHODS USED IN BUSINESS PROCESSES
• Inputs used in organization

• SOURCE DOCUMENTS AND KEYING

• BAR CODING
• POINT OF SALE SYSTEM
• EDI
• E-BUSINESS
INPUT METHODS USED IN BUSINESS PROCESSES
SOURCE DOCUMENTS AND KEYING

• Within business processes, the accounting data are often initially

captured and recorded on a source document.
 One example of capturing data on a source document is the use of an
employee time card

• In a computerized system, the start and end work times are keyed into
the software, meaning that the payroll employee uses a keyboard to
input the data
INPUT METHODS USED IN BUSINESS PROCESSES
BAR CODES

• Is a printed code consisting of a series of vertical, machine-readable,

rectangular bars and spaces that vary in width and are arranged in a
specific way to represent letters, numbers

• Are used to identify retail sales products, identification cards, and other
items.
INPUT METHODS USED IN BUSINESS PROCESSES
POINT OF SALE SYSTEMS

• Is a method of using hardware and software that captures retail sales

transactions by standard bar coding.

• POS hardware and software automatically inputs the data when the bar
code is read as the product passes over the scanner.
INPUT METHODS USED IN BUSINESS PROCESSES
ELECTRONIC DATA INTERCHANGE

• Is the intercompany, computer-to-computer transfer of business

documents in a standard business format. It transmits purchase orders,
invoices, and payments electronically between trading partners

For example, if Company A plans to purchase from Company B via EDI,

Company A transmits a purchase order electronically to Company B.
Company B’s computer system receives and processes the order
electronically. The mailing of a paper purchase order and the keying of
that order by Company B has been eliminated. Therefore, we can see
that EDI is a method of electronically inputting data into the accounting
system.
INPUT METHODS USED IN BUSINESS PROCESSES
E-BUSINESS AND E-COMMERCE

• E-business relates to all forms of online electronic business transactions

and processing. Whereas e-commerce is a type of e-business that is
specific to consumer online buying and selling

A major difference between EDI and e-business (including e-commerce)

is that EDI uses dedicated networks, while e-business uses the Internet.
 PROCESSING ACCOUNTING
DATA
Processing accounting data involves
calculations, classification,
summarization, and consolidation. In
manual accounting systems, this
processing occurs through the
established manual methods and the
recording, posting, and closing steps in
the journals and ledgers.
PROCESSING ACCOUNTING DATA
BATCH PROCESSING
-all similar transaction 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
system
5 Generally easier to control than other types of computerized system
6. Personnel become specialized and efficient in processing routine
transaction
PROCESSING ACCOUNTING DATA
BATCH PROCESSING
-all similar transaction are grouped
Disdvantages
1. Processing can take longer
2. Adding or deleting records take 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. Log while all transaction in a batch are collected
6. May require that transaction and master files be sorted in the same
sequential order.
 ONLINE AND REAL-TIME
PROCESSING

• Online processing- transactions

are not grouped into batches;
rather, each transaction is entered
and processed individually

• Real-time processing- means

that the transaction is processed
immediately, and in real time, so
that the output is available
immediately.
ONLINE AND REAL-TIME PROCESSING

The advantages to real-time processing are as follows:

1. System check 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
ONLINE AND REAL-TIME PROCESSING

The disadvantages to real-time processing are as follows:

1. The hardware and software are more expensive than those used for
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 because of the complexity
of the system.
OUTPUTS FROM THE AIS RELATED TO
BUSINESS PROCESSES

General categories of outputs

● Trading partner documents such as checks,

invoices, and statements
● Internal documents
● Internal reports
● External reports
OUTPUTS FROM THE AIS RELATED TO BUSINESS PROCESSES

Trading partner documents such as checks, invoices, and

statement

• Some of the outputs of the accounting information system are

documents exchanged with trading partners such as customers and
vendors. Invoices and statements are examples of documents sent to
customers. Checks are outputs sent to vendors.
OUTPUTS FROM THE AIS RELATED TO BUSINESS PROCESSES

Internal Documents

• Internal documents are another form of output from an accounting

information system. Examples of internal documents include credit
memorandums, receiving reports, production routing documents, and
production scheduling documents.
OUTPUTS FROM THE AIS RELATED TO BUSINESS PROCESSES

Internal Reports

• Internal reports vary by process, by manager level, and by the type of

organization. They are designed specifically for the function that is
the subject of the report.

External Reports

• External reports are usually financial statements that include a

balance sheet, income statement,and statement of cash flows.
 DOCUMENTING PROCESSES AND
SYSTEMS
• Systems professionals and accountants
must understand the documentation
and charts that describe accounting
systems. Such documentation allows
the accountant to analyze and
understand the procedures and
processes of a business process and
the systems that capture and record
accounting data.
DOCUMENTING PROCESSES AND SYSTEMS

The various types of popular pictorial representations of processes

and systems used in businesses today include the following:

1. Process Maps
2. System Flowchart
3. Documents Flowcharts
4. Data Flow Diagram
5. Entity relationship diagrams (ER diagrams)
DOCUMENTING PROCESSES AND SYSTEMS

Process Maps

• are pictorial representations of business processes in which the actual

flow and sequence of events in the process are presented in diagram
DOCUMENTING PROCESSES AND SYSTEMS

System Flowcharts

• Is intended to depict the entire system, including inputs, manual and

computerized processes, and outputs.
DOCUMENTING PROCESSES AND SYSTEMS

Document Flowcharts

• Shows the flow of documents and information among departments or

units within an organization. Document flowcharts are usually divided
into columns, each representing a department or unit of the
organization.
DOCUMENTING PROCESSES AND SYSTEMS

Data Flow Diagram

• Is used by systems professionals to show the logical design of a

system. The advantage of DFDs is that they use only four symbols
and are simple to read and understand
DOCUMENTING PROCESSES AND SYSTEMS

Entity Relationship Diagram

• The relationships between entities in ER diagrams are depicted by a

concept called cardinality.
• Cardinality refers to how many instances of an entity relate to
each instance of another entity
DOCUMENTING PROCESSES AND SYSTEMS

Entity Relationship Diagram

• Cardinality describes each of the following three manners in which

entities relate to each other:
1. One to one: Each employee has one personnel file

2. One to many: One supervisor has many employees.

3. Many to many: Each vendor can sell many items, and each
item can be purchased from many vendors.
ETHICAL CONSIDERATIONS AT THE FOUNDATION OF
ACCOUNTING INFORMATION SYSTEMS

Accountants should be aware of

opportunities for unethical behaviors
within the various business processes. If
accountants are well informed about these
risks, they can be better prepared to
control such exposure.
ETHICAL CONSIDERATIONS AT THE FOUNDATION OF ACCOUNTING
INFORMATION SYSTEMS

As a company chooses features and options for its accounting

information systems, the importance of monitoring those systems
should not be overlooked as a factor in decision making
 GO SEICHO
ARIGATO
GOZAIMASHITA