ch02

Chapter 2-1

Chapter 2-2 Accounting Information Systems, 1st Edition

Foundational Concepts of the AIS

Chapter 2-3

1. The interrelationships of business processes and the AIS

2. Types of accounting information systems

3. Accounting software market segments

4. Input methods used in business processes

5. The processing of accounting data

6. Outputs from the AIS related to business processes

7. Documenting processes and systems

8. Client-server computing

9. Ethical considerations at the foundation of accounting information systems

Study ObjectivesStudy ObjectivesStudy ObjectivesStudy Objectives

Chapter 2-4 SO 1 The interrelationships of business processes and the SO 1 The interrelationships of business processes and the

AISAIS

Business Processes and the AISBusiness Processes and the AISBusiness Processes and the AISBusiness Processes and the 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 2-5

Business Business Processes Processes and the AISand the AIS

Business Business Processes Processes and the AISand the AIS

Exhibit 2-1 Overall View of Transactions, Processes, and Resulting Reports

SO 1 The interrelationships of SO 1 The interrelationships of business processes and the business processes and the AISAIS

Chapter 2-6

b. Business processes may vary from company to company.

1. Which of the following statements is not true?

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.

SO 1 The interrelationships of business processes and the SO 1 The interrelationships of business processes and the AISAIS

Business Processes and the AISBusiness Processes and the AISBusiness Processes and the AISBusiness Processes and the AIS

a. Accounting information systems must maintain both detail and summary information.

Concept CheckConcept Check

Chapter 2-7 SO 2 Types of accounting information systemsSO 2 Types of accounting information systems

Types of Accounting Information Types of Accounting Information SystemsSystemsTypes of Accounting Information Types of Accounting Information SystemsSystems

Three categories of AIS:

1. Manual systems

2. Legacy systems

3. Modern, integrated IT systems


Types of Accounting Information Types of Accounting Information SystemsSystemsTypes of Accounting Information Types of Accounting Information SystemsSystemsManual Systems

Generally used by small organizations. Entirely manual system would require:

Source document

Turnaround document

General ledger

General journal

Special journals

Subsidiary ledgers


Types of Accounting Information Types of Accounting Information SystemsSystemsTypes of Accounting Information Types of Accounting Information SystemsSystemsLegacy 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.



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.



Decision whether to replace or update legacy systems.

1. Screen scrapers

2. Enterprise application integration

3. Complete replacement of legacy systems


Types of Accounting Information Types of Accounting Information SystemsSystemsTypes of Accounting Information Types of Accounting Information SystemsSystemsModern, 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 2-13

b. subsidiary ledger.

2. In a manual system, an adjusting entry would most likely be initially recorded in a

c. general journal.

d. general ledger.

a. special journal.

SO 2 Types of accounting information systemsSO 2 Types of accounting information systems

Types of Accounting Information Types of Accounting Information SystemsSystemsTypes of Accounting Information Types of Accounting Information SystemsSystemsConcept CheckConcept Check

Chapter 2-14

b. They contain invaluable historical data that may be difficult to integrate into newer systems.

3. Which of the following is not a disadvantage of maintaining legacy 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.

a. There are fewer programmers available to support and maintain legacy systems.



Chapter 2-15

b. It is less costly.

4. Which of the following is a disadvantage of purchased accounting software, compared with software developed in-house?

c. The implementation time is shorter.

d. There are fewer bugs.

a. It is custom designed for that company.



Chapter 2-16 SO 3 Accounting software market segmentsSO 3 Accounting software market segments

AccountinAccounting g Software Software Market Market SegmentsSegments

AccountinAccounting g Software Software Market Market SegmentsSegments

Exhibit 2-2Accounting Software Market Segments

Chapter 2-17 SO 3 Accounting software market segmentsSO 3 Accounting software market segments

Accounting Software Market Accounting Software Market SegmentsSegmentsAccounting Software Market Accounting Software Market SegmentsSegments

Exhibit 2-3Popular Accounting Software Programs within the Market Segments

Chapter 2-18

b. Backoffice ware.

5. Which of the following is not a method of updating legacy systems?

c. Screen scraper.

d. Complete replacement.

a. Enterprise application integration.

SO 3 Accounting software market segmentsSO 3 Accounting software market segments

Accounting Software Market Accounting Software Market SegmentsSegmentsAccounting Software Market Accounting Software Market SegmentsSegmentsConcept CheckConcept Check

Chapter 2-19

b. Midmarket.

6. When categorizing the accounting software market, a company with revenue of $8 million would most likely purchase software from which segment?


c. Beginning ERP.

d. Tier 1 ERP.

a. Small company.

SO 3 Accounting software market segmentsSO 3 Accounting software market segments

Accounting Software Market Accounting Software Market SegmentsSegmentsAccounting Software Market Accounting Software Market SegmentsSegments

Chapter 2-20 SO 4 Input methods used in business processesSO 4 Input methods used in business processes

Input Methods for AISInput Methods for AISInput Methods for AISInput Methods for AIS

Input methods used in organizations:

Source documents and keying

Bar coding

Point of sale systems

EDI

E-business

Chapter 2-21

b. E-business.

7. An IT system that uses touch-screen cash registers as an input method is called

c. Point of sale system.

d. Source documents and keying.

a. Electronic data interchange.

SO 4 Input methods used in business processesSO 4 Input methods used in business processes

Input Methods for AISInput Methods for AISInput Methods for AISInput Methods for AIS


Chapter 2-22 SO 5 The processing of accounting dataSO 5 The processing of accounting data

Processing MethodsProcessing MethodsProcessing MethodsProcessing 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.



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.



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.



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 2-26

b. Real-time processing.

8. When similar transactions are grouped together for a specified time for processing, it is called


c. Batch processing.

d. Group processing.

a. Online processing.

SO 5 The processing of accounting dataSO 5 The processing of accounting data


Chapter 2-27 SO 6 Outputs from the AIS related to business processesSO 6 Outputs from the AIS related to business processes

Outputs of the AISOutputs of the AISOutputs of the AISOutputs of the 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 2-28 SO 7 Documenting processes and systemsSO 7 Documenting processes and systems

Documenting SystemsDocumenting SystemsDocumenting SystemsDocumenting Systems

Pictorial Representations of processes and systems include:

1. Process maps

2. System flowcharts

3. Document flowcharts

4. Data flow diagrams

5. Entity relationship diagrams (ER diagrams)

Chapter 2-29

Process Maps

SO 7 Documenting processes and systemsSO 7 Documenting processes and systems


Pictorial representations of business processes in which the actual flow and sequence of events in the process are presented in diagram form.

Exhibit 2-5Process Map Symbols

Chapter 2-30

System Flowcharts


Documenting Documenting SystemsSystemsDocumenting Documenting SystemsSystems

Intended to depict the entire system, including inputs, manual and computerized processes, and outputs.

Exhibit 2-7Common System Flowchart Symbols

Chapter 2-31

Document FlowchartsFlow of documents and information among departments or units within an organization.


Exhibit 2-8Payroll System Flowchart

Chapter 2-32

Documenting SystemsDocumenting SystemsDocumenting SystemsDocumenting Systems Exhibit 2-9Restaurant Process Map

Chapter 2-33

Exhibit 2-10Restaurant Document Flowchart

Chapter 2-34

Exhibit 2-10Restaurant Document Flowchart

Chapter 2-35


Exhibit 2-11Restaurant Data Flow Diagram

Used to show the logical design of a system.

Data Flow Diagrams

Chapter 2-36

Entity Relationship Diagrams



Pictorial representations of the logical structure of databases.

Entities - items in the accounting system, such as employees, customers, vendors, and inventory items.

Each entity has attributes, such as last name, first name, pay rate, and number of withholdings.

Chapter 2-37




Cardinality refers to how many instances of an entity relate to each instance of another entity.

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.

Chapter 2-38



SO 7 Documenting processes and SO 7 Documenting processes and systemssystems

Exhibit 2-11ERD of Internet Sales


Chapter 2-39

b. Process map.

10. In documenting systems, which pictorial method is described as a method that diagrams the actual flow and sequence of events?


c. Data flow diagram.

d. Entity relationship diagram.

a. System flowchart.



Chapter 2-40

Two types of computers are networked together to accomplish the application processing.

Characteristics:

1.Client and server computer are networked together.

2.System appears to users to be one integrated whole.

3.Individual parts of processing are shared between server and client.

4.Client computer participates in processing or data manipulation in some meaningful way.

SO 8 Client-server computingSO 8 Client-server computing

Client–Server ComputingClient–Server ComputingClient–Server ComputingClient–Server Computing

Chapter 2-41

Two Levels of Client-Server Computing:

1. Distributed presentation.

2. Distributed applications.



Chapter 2-42

b. Distributed application.

12. In a client–server system, when the client PC manipulates data for presentation, but does not do any other significant processing, it is called


c. Distributed database.

d. Distributed processing.

a. Distributed presentation.



Chapter 2-43

Accountants should be aware of opportunities for unethical behaviors within the various business processes.

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.

SO 9 Ethical considerations at the SO 9 Ethical considerations at the foundation of accounting foundation of accounting information systemsinformation systems

Ethical Considerations of AISEthical Considerations of AISEthical Considerations of AISEthical Considerations of AIS

Chapter 2-44

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